Forex Trading Rules Followed By Professional Traders

Day trading on the stock market, buying and selling positions that only last a few hours, minutes, or even a few seconds, is tempting for a neophyte because the number of fluctuations is essential during the day.

However, even if it seems easy at first sight to be into online forex trading, it implies the acquisition of knowledge (therefore a lot of work), but also rigor, under the penalty of transforming this activity into a bet in the casino or even into a pure loss!

Rule 1: Start Trading Slowly

Be patient in looking for the right opportunity and be able to wait for market conditions to be favorable to the strategy applied.

You shouldn’t let yourself be overwhelmed by your emotions and give way to trader stress, but you shouldn’t ignore them. Knowing how to manage your emotions is one of the keys to success for a trader.

Trust your judgment. Many traders do not analyze the markets and have no opinion. They are content to read reports and analyses published by professionals. Is this the right way to learn to trade? No, obviously.

And by following the advice of others, you will be vulnerable because you will not be able to spot their mistakes. Trust your reasoning.

Rule 2: Limit Your Losses

But a beginner in trading is interested in following a single strategy at the beginning with a minimal investment universe: not trying to trade on the equity market, the currency market, and the commodity market simultaneously. Also, avoid investing in many stocks or currency pairs, for example.

Do not try to revolutionize the world of trading either. It is better to use a suitable old method that has proven itself over the last decades rather than looking for a new system that would allow you to earn a lot more.

You will always be very tempted to take prominent positions to make a lot of money, but will you be careful when using your leverage? Generally, no. You will often tend to think only of gains when taking a position. Remember that if you can earn €8,000 by taking a position in the market, you can just as quickly see it increase in smoke.

Rule 3: Don’t Risk Too Much

While trading is an intangible activity leading some traders to lose their sense of reality, it is common to compare trading with a commercial activity such as running a shop, the aim being to reduce trading to something more rational so that the trader adopts good reflexes.

The proper functioning of a shop involves mandatory expenses such as the payment of rent, charges, salary(ies), the purchase of stocks, etc.

For a trader, there are also essential expenses to carry out this activity correctly. These may include subscriptions to news feeds, analysis services, stock media, etc.

It can also be the purchase of hardware and software… or even training to keep your knowledge up to date.

Therefore, the budget for trading is very variable depending on the trading strategy.

Rule 4: Stay Disciplined

The greatest danger of the novice trader is himself. And even if the stock market adage says that a good trader knows how to let his gains slip away and cut his losses quickly, it is often the opposite. Many psychological biases will catch up with him, and we will see some of them.

The market is volatile and versatile, so your winning position can quickly turn into a wrong-way position.

We must not make the mistake of thinking that if we manage to manage our emotions, we will become winning traders. No! You also need to understand the mechanisms.

Therefore, the fundamental error is not associating a stop-loss order with a position entry. This is self-esteem bias. But it will not last very long. Associating the stop-loss order must be linked as soon as the position is entered.

Rule 5: Don’t Give Up When You Encounter A Losing Streak

Often, to help his future client, the broker will advise him and direct him quickly on the technical analysis, that is to say, the analysis of the course graphs, to which indicators will be added.

This surprised me as a market professional, knowing the world of individual traders (“retails”) and institutional traders well. On the one hand, we had the Retails who spoke to me almost only about technical analysis.

On the other hand, the professionals and bankers on the phone all day spoke to me almost only about fundamental analysis, flows, research on central banks, the legal possibilities of a government to pass such and such a measure, etc.

Rule 6: Always Stick To Your Trading Plan

To determine your trading style, you should consider your investment horizon (short, medium, or long term) and the duration of your positions. The position trader will hold his position for a few weeks or months. The swing trader will keep them for a few weeks to a few days, the day trader for a few hours, and the scalper for a few seconds!

To define what type of trader you are, you will also have to consider your investor profile and risk profile, skills, faults, character, and personality to create a trading strategy adapted to your personality.

There are, of course, some skills required to be a trader familiar with all profiles (such as expertise in graphic analysis, in-depth knowledge in indicators and calculation of financial ratios, or even knowing how to show blood-cold).

Still, some qualities are unique to a trading style. For example, it will be challenging to opt for scalping if you are a thoughtful, calm person who takes a long time to think about all his decisions.

Opting for position trading is challenging if you are impulsive, thrives on action, hate procrastination, and always trust your intuition.

Conclusion

Trading is not a hobby to be practiced as a dabbler or a way to get rich quickly without doing much. Remember that you will compete with professional and robot traders in the markets practicing automatic trading. It is, therefore, better to approach stock market trading with seriousness and passion!

You should choose to trade because you like to trade, you are interested in the financial markets and the macroeconomy, and you want to carry out an activity that gives pride of place to analysis, which allows you to take advantage of your great ability to concentrate, your seriousness, and your independence of mind.