This article looks at the essential rules that all new FX traders should know about.
There are a number of essential rules that traders new to the FX market should know about. When you know about these rules you will be able to tackle the FX market with greater confidence and success. These essential rules are generally covered in the forex training that all traders will need to complete before they start trading.
How Much You Understand About the Market
The first rule that you have to know about relates to how much you understand about the market. The rule is that you should understand what you are going to be doing on the market and how you are going to be doing this. If you do not understand the trading that you complete then you will not be profitable on the market.
To understand the market and what you are going to be doing you need to understand the drivers of the foreign exchange rates. The drivers of the rates will impact the forex market and the movements that you see. As you are going to be trading on these movements you need to know what causes them.
When you look at the strategies that you will be using you have to consider how much you know about them. You need to know about the movements that the strategy is going to be taking advantage of. You also need to know about the analysis that you have to complete in order to trade. If you do not understand the movements and the analysis that you do then you are not going to be able to trade correctly.
Keeping Your FX Trading Simple
Another rule that all new traders need to know about is keeping your FX trading simple. The simpler your trading is the more success you are going to have on the market. When you have a simple trading system it is easier to understand all the parts that make it up. When you understand all the parts you will be able to determine whether or not you should be trading.
The best way to determine whether or not your trading is simple will be to write out the strategy. You should be able to fit the strategy onto a single post-it note. If you are not able to then you are not going to be using a simple trading system. If you have a complex system you have two options available to you.
You can look at finding a simpler strategy or you can look at simplifying the strategy that you have. Most new traders find it easier to look for a new strategy as they do not know enough about the market to change the strategy that they have.
Always be Sensible When You Trade
The third rule that all new traders need to know about is keeping their trading sensible. When you are sensible with your trading you will limit the risks you take and trade safely. If you are not sensible with your trading then you are going to use high risks that you cannot actually buffer. This will lead to losses on the market that could be avoided.