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3 Important Forex Rules Designed To Keep You in the Game For The Long Haul

February 20, 2012 | Comments: 0 | Views: 134

There is nothing in the Forex market that is certain. Though many people try to make you think they have the magic system that will start the money rolling in immediately, there actually is no such system. This is especially true for those who are trading the Forex market when they have no experience to fall back on.

However, once a person learns the Forex game his chances for success improve considerably. In this article, we will talk about three rules that, if observed, will help you get past the beginning stages of Forex trading and therefore, greatly increase your chances for success.

The three rules Forex trading beginners should observe are:

Don't trade too many different pairs at first - specialize in one or twoStay away from day trading techniques and instead design your trades for longer termsGet out of the losers quickly and let the winners run their course

Let's look into these rules to see why they're important.

Don't Trade Too Many Different Pairs At First - Specialize In One Or Two

A common mistake beginners make is to become enamored by all the many different Forex pairs that exist. There are over 50 different popular Forex currency pairs and when you are unsure of how to make smart trades, this variety only makes things more confusing. Many veteran traders suggest beginners should only trade the EUR/USD. This currency trade is the most popular. However, I believe the best thing about this pair for those who live in the United States is the fact it is bought and sold in American dollars. I believe this is a very solid reason for a beginner to specialize in this currency pair. I believe specializing in the GBP/USP is just as logical. Of course, if you lived in Canada you would be better off trading something that trades Canadian dollars. Such a trade would be the EUR/CAD.

Stay Away From Day trading Techniques And Instead Design Your Trades For Longer Terms

Day traders dedicate their whole day to sitting at their computer overseeing automated trades in their accounts. They are ready to move at any second and live a very hectic existence. Beginners tend to always be on here trigger alert to begin with. Therefore, it is wise for them to adapt a slower, less intense strategy. Such a strategy would be to trade in their chosen currency pair and once the trade is entered set a stop loss on the order.

Then they should let the trade go until either the stop loss takes effect or the trade starts making them money. If it does start to move in the favorable direction, they should move their stop loss closer to where the pair is currently trading. If this strategy sounds simple, that's because it is. However, a lot can be learned from making these types of trades when first starting out.

Get Out Of The Losers Quickly And Let The Winners Run Their Course

If you follow the strategy outlined above, this rule will be easy to implement. However the importance of this rule cannot be overstated. In short, you should never live in hope that a trade moving against you will turn around. If a trade is going in the wrong direction, get out of it! Get back in again when you're comfortable about the direction it is going. However, if it turns on you again, get out of it quickly this time, too. If you are able to lose small amounts of money you only need to make 30 to 40% good trades to more than make up for the bad ones.

While these strategies are not full proof, they will tend to give you staying power. However, ignoring them leaves you vulnerable to losing all your money very quickly and no longer being able to play the Forex trading game.

The author of this article, Ed Lathrop, is a certified commodities futures broker having passed the Series 3 National Commodities Futures Exam in 1993. Visit his Free website, Forex Trading System which has been called the number 1 Forex resource on the net. Also, get free up-to-the-minute Forex quotes, charts and other resources at Daily Forex Signal.

Source: EzineArticles
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