Forex trading rules

If you are a novice you may want to utilize a Forex EA since even the most experienced traders can make errors when the market goes against common wisdom. In 2004/2005 The USD/ EUR kept rallying, going up from a low of 1.2000 to 1.3600 in a two month period. Experienced traders using the fundamentals couldn’t understand it, because all the signals pointed to a strong dollar. Some of them saw the coming shift but they reacted too early. In Forex trading even if you have the best fundamentals in the world and you miss the timing, your wrong and you lose money.

Because Forex is so heavily leveraged, the people took large hits because they kept thinking the trend would buck. If reality starts to tell you something your analysis is not agreeing with, a modest stop to avoid further losses is preferable.

Even though most people enter these accounts with the benefit of leverage offered by their broker, most people get educated about Forex analysis and hope to get The Big Score as if the analysis itself is a set of magic money making formulas. Say you violate the rule and decide to risk 50%. That particular day you lose $500 dollars, leaving you with $500 dollars in capital. You would have to make %100 return on the next trade just to break even. One more hit, and you’ve lost all your money. By Forex signals, or even by having someone more experienced use a Forex Trade Copier you can make money if you adhere to the 2% rule. Just like a %100 gain is near impossible, it’s also nearly impossible to lose 20 times in a row. However, even if that came true, by sticking to the 2% rule, you still have capital to ride through until the next gain.

While some of the following rules are self-evident with any trading practice it is good to have all ten in a quick list. Some of them are a bit specific to the industry and you need to work on them as try to enter the Forex Market. With all of these, it is a good idea to consult a Forex Broker to have them explained in detail.

Never Risk More Than 2% per Trade