In order to be a successful trader you need to follow a demarcated set of rules. These could be stringent rules in your trading plan or a completely separate list of guidelines. Irrespective of the format, these rules are required to ensure order and control over your trading. The rules are similar for each trader but the method in which they are carried out will vary.
1. Keep your eye on the target
The majority of new traders believe that foreign exchange trading is all about immediate gratification. While making an immediate profit is important, you must identify your overall trading target – who you want to be as a trader. Your first step should look at how all the profits and losses influence your overall, long-term aspiration. This long-term goal is significant as it impacts on your smaller short-term goals. When you develop your goals you must focus on consistency and look at how they are working towards the bigger picture. Of course, they should also aim to earn you profits instead of losses.
2. Building a trading system on facts
Setting up an effective trading system can be cumbersome and will require a great deal of patience. Regardless of whether you choose to use fundamental or technical analysis, you will need to go through a great deal of information to develop a trading system. Once you have all the data available you will have to determine what is accurate and relevant to your trading style. Many new traders find this difficult and will often refer to forex forums for advice, but you should always take another traders word with a pinch of salt. If you do not have accurate data to support your trading system there is a great chance you will not experience profitable trades.
3. Trading on the foreign exchange Melbourne market
One of the most attractive features of the forex market is the 24-hour trading times. As a trader can trade at any time night or day for 5 days per week, they may feel the need to take any opportunity available. This is a sure-fire way of losing all your capital very quickly. When trading the foreign exchange Melbourne market you must understand the different market conditions and how they influence your currency pair. If you trade at the wrong time you could experience detrimental losses. When setting up your trading rules you should state the best times you should trade and the market conditions you should trade in. These times will be when your currency pair is most liquid and the market movements are most conducive to your system.
4. Always prepare for a loss
Risk management is an essential aspect of trading and must be acknowledged when executing a trade. By using a stop loss you will reduce the amount of capital you could lose on a trade. This is particularly important when using leverage as a bad trade with leverage can cause a greater loss than you would have originally incurred. By having a stop loss in place you will not experience such a great loss.