6 Do’s and Don'ts When Trading Forex

Trading forex is all about statistics. If you ever decided to bank on a newspaper clipping or a passing comment on the news, then you will never make any money as a trader. Do not favor emotions or opinions over strategy just because you “heard about it”. Trading forex can be a complicated process but with the right mindset, you can generate a lot of profit from it. Below are 6 do’s and don’ts you should always remember when trading forex:

1. Don’t Overcomplicate Your Strategy

There is no one-size-fits-all strategy when it comes to trading. You might have a series of busts before you find a trading strategy that works for you. When it comes to trading forex, the most important part is that you find a system that works specifically for you. Stop copying other peoples’ strategy and stick to what works with you best.

When you do find a system, stick to it. There is no point to hopping on from one procedure to another. Treat your working system like a friend: nurture it and it will make you more money; ignore and replace it and your plan might just backfire. Practice each strategy on demo and when you’re sure about it, go live. Stick to one strategy at a time.

2. Do Set Realistic Expectations

Are you trading to save up for your education? Hospital bills? Retirement? A house? Or maybe you just want to get rich? Whatever it is, you must allow yourself to set realistic expectations. Whatever your goals are, always remember that the best way to earn money is to go slow. You can’t be a millionaire in 3 months just because you do one successful trade.

3. Don’t be Greedy

This ties in perfectly with the previous point. Your number one goal in trading forex should always be to break even. Become aggressive, sure, but only until you reach a certain point. Trade forex safely and don’t commit yourself into risks you can’t afford to take. Remember that it’s better to break even and make a little bit of profit that to see negative losses in your account.

4. Don’t Listen To Rumours

This is one of the most important parts of trading forex. Because it’s hard to know everything that’s going on about a certain country, predicting their currency’s movement isn’t always an easy task. When you feel overwhelmed with all the information around you, listening to a rumor might feel like a more comfortable solutions, especially when you feel like you’ve been stagnant for a while.

While financial experts from the news and online do have credible sources, remember that these sources can’t be treated as the end-all and be-all of trading. More or less, these people are also banking on assumptions. There is never any certainty when it comes to trading forex, so stop basing your decisions on rumours and hearsay.

5. Do Use Your Own Money

You’d think that this would be one of the most obvious things in the world but it’s not. Other traders used borrow money as their capital. The trading 101 of forex is to always, always use money you can afford to lose. As with any other investment, once you put your capital into an asset, you should already consider your money gone. Using borrowed money as your capital is pretty much the same as gambling, so invest at your own risk.

6. Don’t Perform “Revenge Trading”

Don’t be the kind of trader who does transactions according to his or her emotions. If you’ve lost a huge amount of money, you might feel greedy and start trading again so you can “take it back”. Chances are, when you’re deciding a trade while you’re emotional, you’re going to end up with your impulses clouding your judgment, thus resulting to more loss.

Know that you can’t ever fight the market into submitting to you. After a loss, simply walk away from the portal for a while by closing down your browser. When you’re feeling stable, think back to that experience and reflect on what went wrong. Use that information as leverage, not revenge, on your next trade.