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FX Rates Rules to Trading

FX Rates Rules to Trading

When you trade forex you need to establish a set of rules for your trading.  This could be part of your trading plan if you want or a separate list all together.  Regardless of where you plan them you need to have some rules.  How the rules are carried out will depend on the trader, but there are certain rules that you need to have.

Focus on the Big Picture

When you set up your FX rates rules the first one should be that you have to look at the big picture when you trade.  While it is important to keep track of your individual wins and losses you should always consider how they affect the big picture of your trading.  The big picture is your long-term goal which you should set before you start trading.  These goals should relate to the way to your and the process instead of the amount you have in your account.  When you create goals that keep your trading consistent and above a certain loss level then the profits will come on their own.

Know When to Stop Trading FX Rates

The second rule you should have deals with when you trade and more importantly when you don’t trade.  The long open hours of the forex market tempt many traders to overtrade and keep trading when they should not.  Your rules should state the times you trade and the market conditions you trade in.  The times you trade should be when your currency pair is most liquid and the market conditions should be relative to your trading strategy.  There are certain strategies that require a trend market and will only cause losses in a range market.  Detail all of these points in your rule about when not to trade.

Always Use a Stop Loss

This is possibly one of the most important rules you can have when you trade forex.  Using a stop loss limits the amount you can lose on a single trade.  Not having a stop loss can cause a margin call on your account if a trade turns against you can continues in this direction.  There are a number of different types of stop loss orders that you can place and you should be aware of which ones fit into your trading strategy.  Most traders will use a trailing stop because this moves with your profits to ensure that you retain some profit if the market turns before the position is closed.

Trading Methodology Based on Facts

Setting up your trading methodology requires time and patience.  You need to look at all the information you can find about the type of trading you are looking to complete.  Once you have as much information as you need you have to sort through it to separate the facts from the fiction.  A lot of trading systems state that they are easy to use and require no further investigation.  This is often the line of a scam because all true methodologies are based on facts that you need to know.  It is important that you understand the facts that your trading methodology is based on.  There is no point in having a trading plan that has all the facts if you do not know what the facts mean.

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