If you want to become a profitable forex trader, one important factor you should remember is that the best traders sharpen their trading skills via discipline and patience. They are constantly waging trying to eradicate fear and greed and carrying out self-analysis to understand what propels them to trade.
For new traders, trading online may be overwhelming, due to the availability of numerous ideas, trading patterns, and skills. However, we have helped you streamline the numerous rules to seven. With these rules, trading online will become much more straightforward and profitable, especially if you stick to them.
Without further ado, here are seven effective rules every new or professional forex trader should follow and practice when trading online:
Rule 1: Plan Your Trade and Trade Your Plan
A trading plan characterizes everything important guidelines you hope to follow before opening a position. It is a set of rules that’s particular to you as a trader. Planning your trade involves pinpointing the exact market you want to concentrate on, what session is most suitable for you, confluences that determine when you enter and exit a trade, and your risk management.
The internet had made online trading easy as investors can test a trade using a demo account before risking real money. This allows you to develop your trading ideas and apply them by backtesting using historical data. Once your ideas have shown to be consistently successful, you can now move to real trading.
The most important key is to always stick to your plan. It’s a very poor strategy for you to jump from one trading plan to another. This does not help you to hone your skills. So once you plan your trade, be certain to trade with such a plan.
Rule 2: Treat Trading Like Your Business
To become a profitable and successful trader, you must approach trading as a part of a full-time business and not as a job or hobby. When you come into trading, it’s mostly not for the short run. It’s something that you can be lifelong.
Hence, when you approach it as a job, it can be frustrating because you won’t make profits regularly, and if approached as a hobby, there will be less commitment to learning. You need to see trading as a business that makes a profit, incurs expenses and losses, and has risk, stress, and uncertainty.
As a trader, you’re an investor or small business owner, and to make your business profitable, you must devote your time to researching and developing strategies.
Rule 3: Make Optimal Use of Available Technology
Trading is not competitive, there are only profitable and non-profitable traders. Profitable traders take full advantage of the technology at their disposal, whereas, non-profitable traders fail to take full advantage of the technologies available.
Trading platforms, such as Olymp Trade have innumerable features that give traders infinite ways to view and analyze the markets. Trading online and on your smartphone is much easier with our trading application. You also get updated information about the market and can monitor your trades anywhere.
Making use of available technology to your advantage can enhance your trading performance, keep you abreast of matter fluctuations, and is ultimately fun.
Rule 4: Become a Student of the Market
Traders need to continually evolve with the intricacies of the market by remaining focused on learning each day. Deep market research gives traders the avenue to understand market facts, and how fundamentals affect the market. Becoming a student of the market is a lifelong process and this allows you to sharpen your market instinct.
There are a lot of factors that affect the market – world politics, economic trends, news events, and even the weather all impact the market. Hence, as the market becomes more dynamic, it’s imperative that you also become dynamic. The more enlightened you are about past and current markets, the more prepared you will be.
Rule 5: Protect Your Trading Capital
Getting trading capital might be easy for some, but to beginner traders, it is mostly from their hard-earned money. Once you lose your trading capital, it can be more difficult for you to get another. Protecting your trading your similar to never having to lose a trade.
While losses are inevitable, protecting your trading capital is vital. This involves following your trading plans to the letter, taking proper risk management, ensuring that each of your trades has a protective stop, and avoiding taking unnecessary risks that can adversely affect your trading capital.
Rule 6: Always Use a Protective Stop
A protective stop or stop loss is the predetermined amount you’re willing to risk or lose, should a trade not go your way. It limits your exposure during a trade. Your stop loss can be a dollar amount or a percentage of your trading capital and it can help you relieve stress and sleep better whenever you have an open trade.
The idea of trading is to exit all your trades with a profit, but this cannot be the case all the time. Hence, exiting a trade at a predetermined loss is more important than placing trades without a stop order. You can lose all your trading capital in a single day when you trade without a protective stop-loss order.
Using a stop order helps you to limit your losses and preserve your capital so you can place another trade when a more clean entry is spotted.
The above rules are essential to helping you stay relevant in the market. Judiciously following them with other factors that are specific to you will help you stay profitable in the market. Recall that becoming profitable is not only about placing winning trades but also about how consistent your wins are, compared to losses.