Five Top Forex Trading Rules to Live By

 
 
 

Never underestimate emotion

When you’re devising Forex trading strategies, trading isn’t logical – it’s psychological. Emotion has a way of overtaking intellect during trading. Try to trade with a 2:1 reward to risk ratio – that’ll permit you to be wrong six-and-a-half times out of ten and still earn some money.

Be uncertain about certainty

No matter how certain you feel about the outcome of any trade, you’re actually just relying on an educated guess. One of the foremost Forex training tips to understand is that when it comes to trading, there is no certainty. Know your pain threshold: what’s the worst case scenario you can tolerate? Once you know it, calibrate your stop loss around it. You can calculate risk, but reward is fundamentally unpredictable.

Trade strong against weak

In Forex, you’re always trading currency pairs – i.e., buying one and shorting the other. That’s why it’s wisest to pair a strong currency with a weak one (strength and weakness can last for fair stretches as economic trends evolve). Think of it like positioning a strong force against a weak force. The odds are in favour of strength.

Stick to a 2% stop loss

Stick to the 2 per cent rule: it’s a common rule in trading and the one that’s most easily violated whenever impulse trumps reason. Don’t risk more than 2 per cent per trade, ever. If you’ve set your stop loss at 2 per cent, you’d have to suffer 10 consecutive trading losses to lose 20 per cent of your account.

The twin virtues of fundamental and technical analysis

Use both fundamental and technical analysis. Both impact price action. Fundamental determines broad themes, often lasting months or even years, while technical helps you identify particular entry and exit levels. If the market is, for example, a GBP-positive environment fundamentally, you’d use technical data to identify opportunities to buy on dips as opposed to selling on rallies.

Use both fundamental and technical analysis. Both impact price action. Fundamental determines broad themes, often lasting months or even years, while technical helps you identify particular entry and exit levels. If the market is, for example, a GBP-positive environment fundamentally, you’d use technical data to identify opportunities to buy on dips as opposed to selling on rallies.