My foreign exchange trading instructions in this post are pretty simple and clear and may be used by any trader. Still, not everyone benefits from those instructions and fairly often bypassing them becomes the main obstacle for a booming forex experience. One doesn't have to be a genius to see that nearly every ordinary forex trader falls under certain currency trading rules which influence their trading process in one way or another, well, perhaps with the exception of some big banks manipulating the fx market. The question is: why some foreign exchange investors respect and strictly use currency trading rules, no matter what, while others foolishly disregard them? The answer to this issue is quite simple: persons, who already went bankrupt, learned the lesson and will always be much more thorough and cautious. Newcomers often get caught by the greediness and the diamond paved future and they don't understand or pay no attention to the simple and clear principles that are outlined below.
Let us cover just the two basic rules and principles that largely influence any kind of trading.
Rule no. 1
Do not put much on the table. The risk proportion of 1 trade operation in comparison to the total capital is usually nearly one or two percent. It means that two or three successive and losing trades might still be just a 5 - 9 percent loss of the entire capital. Those repetitive loses may take place, and sometimes very repeatedly, and being ready for more than one loss is necessary. Only assume, what would be the outcome, if you were playing with 6 or 10 % of your trading account in just 1 currency pair trade. This kind of currency “trading” will end quite quickly - in a couple of weeks, maybe even sooner. My advice is risking 1 - 3 percent of your trading account money, not more. I, for my part, traded putting 7 % and more and pretty quickly learned that this can be a very foolish thought. First, you never know and you can never tell with a hundred percent precision where the foreign currency market will go. You could make two bad trades consecutively without any room for less possibility of making wrong trades in the future. Your first mistake won't guarantee the next lucky move. My recommendation is to use from 1 to 3 % of the account money for a trade. You have got to cut down the risks to a small number and using this method even a wrong trading plan wouldn't drown your trading account completely. It's particularly true when speaking about numerous currency trades, for example, 15 in a day. Taking into account your forex plan efficiency and profitability, several faulty trades, happening every now and then, need to be tolerated emotionally and from the money management perspective. Burning your account capital within a single day is definitely possible with a 20 % trading account capital risk for a trade. Newcomers in forex investment must be even more cautious, because of their fresh and vulnerable trading strategies. I could personally recommend making trades in some forex demo account with a suitable forex program - just to check your forex techniques.
Rule no. 2
As I remember my first trading months I would use just one position of any currency pair. After the trade was being opened and was moving in a profitable direction, I was quite confused with my further decisions. The most "exciting" part of my "forex trading" was to see my pending profit disappearing right in front of my eyes and touching my stops. Or the contrary - I would lock my position too quickly and bite my nails as the currency pair trend continued, only without me in it. Well, seeing the pair move another 200 or 300 pips more without much resistance and being aware that so much more could be earned was quite unpleasant. That is when I learned about a trade management with multiple pair entries. Let's say, I would enter a forex currency pair trade with 3 - 4 equal size positions. The positions were being closed at several target levels, from forty pips to one hundred and more. This system made it easy to close even the smallest profit, also giving an opportunity for further profit extension. I didn't forget to move my stop losses, after the first profits were closed. I would suggest making similar trades.
Those are basic principles and instructions from my experience which, I hope, will make your trading enjoyable and happy experience. If you need more guidance in your forex trading, I would recommend reading more information about the forex money management, leading forex indicators and trading strategies on forexsignals24.