Forex can be amazingly profitable, but it can also disappoint if you don’t take the necessary precautions in each and every trade. Over the years some aspects of a successful trading career have been clarified by the books and declarations of legendary traders and competent professionals well-known to the trader community. In this article, we’ll take a look at seven of their guidelines in order to give you an idea of what works and what does not in trading forex. Combine these principles with a trustworthy, competent, and reliable one among the best forex brokers
, and only you can decide the limits of your success.
A trader must always be skeptical. Do not believe what others tell you unless you can verify it yourself, or unless your own analysis can independently confirm what you’re being told. Be skeptical, and trust your own judgment. And this is not just a question of profitability. If you want to improve your skills, you must derive lessons from your mistakes, and you’ll never be able to do so unless you make your own choices and know their causes.
Don’t trust rumors or hearsay
Rumors are a constant feature of the market, but they are rarely profitable. In almost 9 our 10 cases relying in rumors results in losses, and that’s not the kind of favorable risk/reward ratio we seek in our trades. As such, it is a good idea to trade as if there were no rumors in the market, and only to take note of them when they confirm a situation that we believe in.
Rely on money management, not technical analysis
Anyone can perform analysis, but not many are successful in money management. The vast majority of beginners fail in their endeavors because they cannot adhere to the principles of money management as strictly as they should. It’s fair to say that the most basic and fundamental requirement of a successful trading career is a workable money management strategy, and traders should always do their best to improve their skills in this field before delving into the depths of technical or fundamental analysis.
Don’t have prejudices in trading
Any method can be successful in forex depending on the time and the market conditions. In a majority of cases success is the result of discipline and rigor in one’s strategy, and not the excellence of an analysis or its intellectual depth. As such, there’s no point in condemning a strategy outright, but it makes sense to approach every idea with a degree of caution and conservativeness.
Be patient and determined in your decisions
Trading is about learning, and learning demands patience. To be successful, you must apply the lessons learned in many failing trades with patience, persistence and determination. In time, success will be yours too, but only after you have made trading a routine where you can take most decisions without a lot of effort and thinking.
Never give up studying
A forex trader is forever a student. The markets change all the time, so must the trader. He has to adjust his practices as market conditions change, and he must make sure that he is always up-to-date with whatever is going on in the markets. Fortunately, forex is also the market that is best suited to a student of trading. Here you have the opportunity of adjusting your risk in accordance with your skill level, and you can also learn a lot more about economics and analysis due to the more basic nature of forex in economic activity in comparison to stocks for example.
Seek confidence through practice
Nothing much can be achieved in forex if theoretical knowledge is not boosted and matured through constant practice of trading. As it is with mathematics, there is no “observer” in trading. You cannot just read and study and claim to be a trader. You must get into the thick of the action, test your perceptions and beliefs, and hopefully come up with a profit to be taken seriously in the trader community. As such practice is the soul of trading, and it is also the only real way in which you can