There are also some rules that are common to the entire market and you can definitely borrow some inspiration from these general rules. Most of the principles that apply to the market as a whole are a reflection of the nature of forex trade. Here are some of the best rules and principles of trading on forex you should know about. It is important to keep an account of what is happening in the market. The best way to do this is through an analysis of forex indicators. These indicators give a real perspective of the economic situation of the currency market.

Indicators help you identify the best times to enter and exit the market. This, in turn, saves you from losses and maximizes your profits. Personal daily, weekly and even hourly records are crucial in the forex business. These records not only keep an account of your successes but also of your mistakes. You can thus use them in future to develop better strategies and to identify possible problem areas.

Personal records also allow you to identify particular patterns in the trade which can help you follow a certain trend or quit early enough. Market signals provided by charts and indicators are the key to a successful trading.

There are many kinds of signals that the market gives and indicators are the only way to understand them. Market signals in forex can provide a window to understanding support and resistance, volatility in the market and other vital signs that can protect your assets. Another key rule in the forex business is to always control emotions. Emotions are bad in the forex business because the market is quite disappointing most times. If you are someone who reacts passionately when hit by disappointment thus, you can easily lose track and lose your money.

In the forex trading business , you need to be always pragmatic and ready to follow the logic. One of the best principles you will have in forex is deciding to work independently.

You will be required to think independently, to analyze the market independently and to trade independently. Forex is not like other businesses where you can utilize the power of collaboration in monitoring your assets. The dynamic nature of the business makes it impossible to work with teams. Another great rule you should have when trading is to ensure that your trades are always timed correctly. The difference between a profit-making move and a loss-making move is very small in the forex market.

This is why the business relies on a great deal of market data. Make sure that you have followed all the insights before venturing into any trade. The ultimate business move in most trading industries is to have trading limits. Limits are important for mitigating risks and securing a long for those involve in the trade.

You should be able to establish your limits for every single trade you make. Any forex system that uses rules with technical indicators at the foundation will almost always fail, except for making a few pips here and there.

Setting up good quality trading rules includes eliminating rules that are not providing results. Every forex trader knows technical indicators provide thousands of combinations but the pips are simply not there.

When you enter a forex trade you should always follow a set of rules, these rules should be simple, not complicated. Anyone should be able to easily explain their rules to another trader. Here is an example of a basic set of five entry rules for any trade for use in the main forex trading session. Rule 2 — Only enter trades with no nearby resistance on buys or no nearby support on sells, at least pips, and at least pips on some highly volatile pairs.

Rule 3 — Trade only if one currency is strong or the other one weak or both, see an example of consistent Euro EUR currency strength in the example below using our real time trading tool called The Forex Heatmap®. You can see the movement was very strong, pips in one trading session on just one pair. Rule 5 — Demo trade first, then move to micro lot trading , then continue to scale up to mini lots over time.

Build your experience base. Using these five simple rules we lay out in here should result in significant positive pips for any forex trader, without relying on any technical indicators whatsoever.

This way you can make sure your system is valid before committing any real money and going to live trading. The above five rules are based on the Forexearlywarning system, and can be used to validate the system fairly quickly with demo trading. These are five very simple forex trading rules that any forex trader can implement almost immediately across many pairs, with no reliance on technical indicators or complicated systems.

Anyone can understand and use these rules. A trader can use some easy to set up, free exponential moving averages to determine the primary trend.

Real time, consistent currency strength or weakness can be easily measured on entry using live tools like The Forex Heatmap®. Start testing these rules first by demo trading. Trading results should improve immediately for any trader who has been struggling by implementing these five basic rules.

These five basic rules can get you started trading with the Forexearlywarning system. Now we can start to investigate some additional rules you can add depending on how strict you want to be.

Any good rules based forex trading system will also have rules for money management. Along with the five forex trading rules for trade entries listed above you can also have rules for money management.

Money Management Rule 3 — Do not enter a trade unless you can possibly get at least 3 pips for each pip you risk. For example, if you start your trade with a 30 pip stop you must be trying to get at least pips from that trade potential reward. Better risk management , trade after trade, is what forex traders want more of. The list of 5 rules above are for trading in the main forex trading session. These 5 rules are great for the main forex session because the liquidity and market participation is very high.

Most great trades occur in the main trading session. But occasionally some trades occur outside the main session boundaries, so lets modify the rules slightly for trading outside the main session.

Lets set up some rules for trading in the Asian session now. We would keep the original five rules in place for the main session then add one more.

When trading in the Asian session you would also want to enter trades only at the beginning of a new movement cycle on the H1, H4, or D1 time frames. So by adding one more rule we can now look to enter trades in the Asian session. Trade at the beginning of the trend cycle on the higher time frames when entering trades in the Asian session. Rules Based Forex Trading — Trend Cycle. Many entries in the Asian session are around AUD, NZD, and JPY news drivers, so keep an eye on the forex news calendar for volatile news drivers for these three currencies.

The forex market is advertised as a 24 hour market. When trading in the Asian session, you can also use rules based money management outlined above. These rules do not change. So now, traders have a set of rules for trade entry and money management for almost all situations. Enter most of your trades in the main forex trading session, which is the best time to trade forex. The main forex session is a 5 hour window of time, where strong movements can occur daily. Plus, traders can also occasionally trades in the Asian trading session a few times per month, when new movement cyces are starting.

When you are monitoring the forex market, if you see a pair that has been moving for a long time on the smaller time frames, you likely missed the movement. The pair could continue moving but you want to catch a fresh movement cycle after consolidation or rest periods.

So traders can set up another rule for these situations. Additional Forex Trading Rule — Only trade a pair when it is starting a new movement after a consolidation or retracement period, or when a non-trending pair starts a new movement or trend breakout.

When you are trading with a trend based system, you would prefer to trade near the beginning of a new movement cycle, so you can sit back and ride the trend for a few days or longer and let the market do the work. Also, news drivers can move markets and cause stop outs, or additional profits.

So you need a set of rules for trading around volatile news drivers. Additional Forex Trading Rule — When entering a trade make sure strong news drivers are at least one hour away to give you time to move your stop to break even on any recently entered trades.

Otherwise exit the trade or wait until after the news to consider a new trade entry. Make sure stops are at break even ahead of any volatile news events on the forex news calendar. Sometimes the entire forex market, or groups of currency pairs are trending and moving with the trends almost every day. Understanding the condition of the market is important to forex traders and can be incorporated into a rules based forex trading system.

Exciting, fast paced, challenging, rewarding. Just a few of the adjectives associated with the world of foreign currency trading, now available to everyday traders like you. The pitfalls are deep. Losing your entire balance overnight, losing more than you deposited and being forced to pay.

With that in mind, we wanted to write up our 3 Golden Rules of Forex Trading to help steer new traders in the right direction and best prepare you for the journey ahead. By no means is this the holy grail. When you trade with a regulated broker, you are dealing with a company who at the very least are monitored by either a government body or an independent organisation depending on the country and must adhere to a code of conduct.

There are regulatory bodies in many countries and our advice here is that you opt for a broker who is regulated in a first world country. For example, the UK Financial Conduct Authority FCA or the Australian Securities and Investments Commission ASIC.

It is more likely that those bodies will take stronger action, maintain a higher code of ethics and generally be interested in protecting customers. I would consider regulatory bodies like CySEC Cyprus Securities and Exchange Commission on the 2nd tier of regulators. Negative Balance Protection is in my opinion an absolute must. A stop loss is a price point which you set where the trading platform will automatically close the trade if it hits the nominated price.

Similarly, a take profit level is the same but in a winning trade. This is also important because trading generally has peaks and troughs. If you had a take profit price, your trade would have closed and you would have had a profit. Both are fundamental skills which are used by traders in various ways. The easiest example is when setting your risk to reward ratio. For example, you might set a stop loss on a trade to be 30 pips, but the take profit at pips which is the same as saying I am willing to risk 30 pips but want to win pips which is a ratio of Anything better than this and you are in profit.

Us humans are greedy by nature. Having said that, does an automated trading system make better trading decisions? So really, a combination of both is probably the best method. You can use automated scripts to help you identify patterns and you can have manual input in assessing the market from a news point of view to confirm your analysis.

Discipline also refers to money management. Of course not. Best Forex Broker FX Trading Guide Rules for FX Trading.

The 3 Golden Rules Of Forex Trading Exciting, fast paced, challenging, rewarding. Golden Rule 1 — Trade with a regulated broker who offer negative balance protection on your account When you trade with a regulated broker, you are dealing with a company who at the very least are monitored by either a government body or an independent organisation depending on the country and must adhere to a code of conduct.

Golden Rule 2 — Trade with stop loss and take profit levels A stop loss is a price point which you set where the trading platform will automatically close the trade if it hits the nominated price. Golden Rule 3 — Trade with discipline, without greed Us humans are greedy by nature.

If you apply the five basic rules your trades will begin to improve, then start experimenting with more rules to incorporate after you become more experienced and successful, based on the market conditions. The Lion immediately roared and pounced him. Read More. Both are fundamental skills which are used by traders in various ways. This is one of the most crucial aspects of forex trading. If you have generated winning trades, be sure to manage your profits.

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