Forex Trading - The Fundamental Principles

Having a set of rules to follow can help you become successful in forex trading. These rules should be simple enough to follow and very easy to remember. It should be formulated to guide you to become a discipline trader.

Cut your losses quick

Remember that the first cut loss point is always the smallest loss, it is when you hold to that losing trade that worsen the situation and the time you cut your losses you already lost more than what you should be. While it seems that you cannot go wrong taking profits, taking them to early could sometime cost you 50 pips or more. The physiological effect of going against this rules can be very devastating to your trading account. Usually a trade driven by fear or greed is most of the time the turning point of the market that is the time you sell the price moves up or when the time you buy the price goes down. It is like the market is conspiring and trading against you all together.

Place your Stop loss as soon as you enter a trade

Before you even push that buy button or sell short a currency, you should already have your cut loss point. Having to follow this rule can save you a lot and if stop loss is set correctly the market will reward you accordingly. You should not in any way chase prices because of your emotion particularly the feeling of being left out. This rule will help you preserve your capital to enable you to survive longer the market.

Capital Preservation first before profit

It is common for new traders to aim for the big bucks forex trading has to offer. It is very different for the successful traders their primary goal is not to get those big and quick pips but first and foremost preserve their capital at all cost. In the long term having to preserve your capital rather than earning more can help you survive the market recklessness and wide volatility swing. Forex can actually offer that stable source of income everyone dreams of if you can stay long enough in the market.

Patience is the key

Money Management is the most important factor in your trading rules. You should always incorporate patience in your trading rules, it is having the market goes to you rather than you being persuaded by the market. Having a bag full of patience is vital in entering good profitable trades. A good trading strategy set up let price comes to you and not the other way around where you chase the price. It is like snipping for that profitable trade when it is on target all you have to do is pull the trigger.

These are just the basic overview of what you should have on your trading rules that will guide you in each trade you will enter. You will have to update your strategies as new studies becomes available that is more suitable to your style but keeping your focus on these simple rules will help you formulate a truly winning trading strategy.