The rookie traders are always losing money. Even after blowing up the trading account multiple times they don’t know how to protect their trading capital. They are always running after the money to secure their financial stability. This is not how you should trade the market. If you always think about the big profit, you should never trade the currency pairs. Trading should be considered as your alternative source of income for the first few years. Unless you develop the skills to make a consistent profit, you should never try to trade this market with aggression. Though there are many rules, we are going to discuss the top three rules that can save your investment and help you to become a better trader. These are –
- Educate yourself
- Use a trading strategy
- Learn money management
Without having the right education, it’s nearly impossible to make a profit at trading. The naive traders are always losing money since they don’t understand the importance of proper education. Just after having the basic skills, they start trading the real market. Things are not as easy as it seems. Think about doctors and engineers in our society. Do you think they are born talented? They all have worked hard to complete their graduation. Even after having theoretical knowledge, they have to work in real life to start earning some cash. As they gain more experience, the start earning more money.
Just like this, you need to start gaining experience in the currency trading business. Without having the required skills, you should never expect to earn money. Start with the technical parameters and try to find some good trades at the key trading zone. Once you get skilled at the technical details, focus on the news factors. See how it affects the global economy and currency pairs. After that start to deal with the market sentiment. Without mastering these three forms of market analysis, you can’t become a successful trader.
Use a trading strategy
Every rookie traders in the Forex market forget the importance of having a valid trading strategy. Some of the smart traders often buy an expensive system from the professionals and start losing money. You can’t make any real progress in trading business by using other people’s trading strategy. Every trader is different. You have to create a balanced trading strategy using the demo account.
During the development of your trading strategy, try to use the long term or position trading method. Though it will take some time still it’s better to stick to the forex trading demo account in the learning stage. Stop thinking that the market will give you a reward based on your account size. Try to come up with a unique method by which you can find good trades in any market condition. Think conservatively so that you can make a big profit with low risk.
Learn money management
Learning to manage your fund is the most important task for the rookie trades. The rookie traders are always breaking the rules and taking a high risk of trading. They don’t realize the fact, losing orders are very common. If you trade this market for a few months, you will realize losing orders are nothing but a part of this profession. To deal with the consecutive losing trades, you must have a valid money management plan. Focus on the long term goals and try to improve your skills by learning from your mistakes.
Regardless of the size of your trading account, you should never risk more than 1% in one day. If you open two trades, make sure the overall risk exposure never exceed 1% of your account balance. And the amount of money which you will gain from the winners must be twice your risked amount. Follow this unique technique to improve your trade execution process. And always be prepared to deal with such small losses.