If you have done any research into forex trading then you have probably noticed that there are about as many forex trading strategies as there are fx traders employing those strategies. The great thing is that most, if not all, of these strategies can be used to turn a profit in the forex market. Just as you have your own personality, you can find a trading strategy that is suited to you.
There isn’t one top forex system that you absolutely must follow in order to profit from fx trading. There are guidelines that apply to the way in which you approach your trading and these are just as true for you as they are for just about anybody. I refer to these as the golden rules of trading.
1. Follow The Trends
Most forex trading strategies and systems focus on identifying trends and there is a good reason for that. Whether the trend shows a rise or a fall, get in to go long or short as appropriate and do not go against it. Bucking the trend will see you losing money fast.
2. Safeguard Your Funds
Risking too much on one trade has been the downfall of many a promising trader. Never risk a lot of money on a single trade, however strong your feelings may be that this one cannot go wrong. Every trade carries the possibility of going wrong.
So how much should you risk? It depends on your strategy and how much it matters to you if you lose all of your funds, but never more than 5% of your balance. The safe option is 2% per trade.
Some people maintain the percentage as their funds increase, so that they gradually risk more in real terms on each trade. That is up to you but consider carefully before you do this. When you have more money in your account, you will probably be more unhappy if it is wiped out, so you may want to keep the same position size (reducing your percentage risk) as your funds increase.
3. Set Goals For Each Trade
Have a clear profit goal for each trade, so that before you enter, you have already decided when you will take the profit and close. Don’t be greedy and try to stay in there for more and more.
In the same way, if it turns bad, do not try to hold on in the hope that the market will turn back your way. Cut your losses and get out. Using stop losses to do this automatically is a very wise strategy.
Those are the first three golden rules of currency trading: the guidelines that can help you develop profitable forex trading strategies, whatever your system.
