Before we go into the Seven rules of Forex Trading, which have been approved by several full-time and successful traders, myself included. I’d like to narrate this story.
There was a Lion, a Donkey, and a Fox all keen to go out rabbit hunting. After a productive day of hunting, the three of them sit around the pile of rabbits, and the Lion asks the Donkey, “Mr Donkey, would you please divide the pile into equal shares for the 3 of us?”. The Donkey obliges and counts the rabbits into three equal piles for each of them. The Lion immediately roared and killed him.
He then piled all the rabbits on top of the Donkey and asked the Fox, “Mr. Fox, would you please divide the rabbits up evenly between us?”. The Fox takes out one scrawny rabbit from the pile and puts it in a pile for himself then says, “There you go, Mr. Lion, that’s your pile” pointing to the massive pile of rabbits. The Lion says, “Mr. Fox, where did you learn to divide so equally?” The Fox says, “The Donkey taught me”.
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The moral of the story is to learn from other’s mistakes. Learning from your mistakes is the best rule you should follow (well not just for FOREX). Now we proceed to our Seven rules. These are for your help, as mentioned earlier, from experienced, successful traders. Remember there is much more to successful forex trading than these rules. But this is a good start.
- Rule 1
Never risk any more than you can afford to lose, you will lose money, all traders do, make sure you’re not sacrificing anything else important in the process.
- Rule 2
Never risk more than 2% of your margin trading account on a simple trade. (Let say you have a 300$ account 2% of $300 would be $6, So your max stop loss will be $6.)
- Rule 3
Always use a stop-loss order. If you haven’t figured out where to place stop-loss for your order and limit your order at the start, then you shouldn’t be trading.
- Rule 4
Know your exit points before you enter a trade.
- Rule 5
Always trade first on a Demo Account and Become successful with a demo account.
- Rule 6
Take a break when your equity has taken a dive. Don’t try to cover your loss by risking more.
- Rule 7
Don’t let your emotions call the shots (This is the most Important) Always Stay cool, calm, and collected when trading. Patience and a clear head will win the game.