There is lots of “Advice for Traders”, “Golden Rules of Forex” etc. of all kinds. We did not attempt to make a compilation of them in this article. We propose certain general rules to guide a trader and help him/her make their first steps. Unfortunately, our experience shows that you will be breaking rules, but this is a process of education. By breaking rules and making mistakes you will develop trading skills and make your own rules and laws. At the end of the day, they are what will bring you success.
For our part, we offer several general recommendations for you to rely on in order to avoid heavy losses when you begin. Giving recommendations for every occasion is very difficult. Tips provided below may not apply to certain situations or strategies. Therefore, you should not take them as dogmas.
- Deposit and volume of transactions
- To start with, decide on the sum that you could easily afford to lose. Losing such sum should not make a serious impact on your finances.
- Use no more than 10% of the deposit (meaning 10% of all consolidated position at each current time point for all instruments and directions).
- Do not work with borrowed money. Use your own money. If you have received a bonus or a credit from the company, you should still think that you can count only on your own means until the bonus is fully yours.
- Do not make too many transactions at the same time. This increases the risk of making a mistake.
- Do not use averaging (do not add volume to unprofitable position) unless it is a part of your trading tactics.
- Analyze at least two sources of information (for example, graphical analysis + news).
- Do not go against the general trend.
- Analyze the situation BEFORE entering the market. Do not change your opinion influenced by other peoples’ comments or forecasts when your position is already open. If your strategy is based on more or less long-term transactions you can even turn the terminal off after placing positions.
- At a minimum, pay attention to major macroeconomic events in the calendar. Consider the possibility of a sudden price movement when news is released.
- Avoid trading if you are in a very emotional state (excited, enthusiastic, happy, euphoric, or, conversely, depressed, irritated, unsure or worried).
- Take a pause for at least one day if you were able to lock in a large profit or suffered a heavy loss.
- Cultivate discipline and normal stable professional assessment of your capabilities.
- Do not open a transaction if you have no idea when to close it with losses and when to lock in profits.
- Place a Stop Loss order to cut down losses and a Take Profit order to lock in profits. It is recommended to set Take Profit to be at least twice as big as Stop Loss.
- If you know the entry level for sure, use a pending order, rather than a market order. Pending orders are processed more precisely. Fast moving markets can move away from a desirable entry point and opening position with a market order may be challenging.
- If you do not clearly understand what “lock” is do not use it.