Achieving success in foreign exchange trading is not easy and even the most successful traders have faced failures. It takes a lot of time and effort to achieve success in this market. Before you start investing your hard-earned money in this volatile market, you need to consider many things. When you start investing in a planned and systematic manner, you may be able to increase the possibility of earning consistent profits.
You need to know that nearly 95% of traders lose money in this market and if you are not careful, you may lose all your investments in the foreign exchange market within a few trades. Irrespective of whether you are a beginner or experienced trader you need to learn and implement some rules so that you are able to minimise losses and maximise gains.
Rules for success in foreign exchange trading
The most important rule that all traders need to follow in foreign exchange trading is that they should never invest more than what they can afford. Most traders tend to get greedy and want to earn big profits within a short period. Due to this, the traders start overtrading and overleveraging. Although leverage is a wonderful tool used by traders to maximise profits, it can also be a double-edged sword and if you are not careful you may lose a lot of money.
Greed compels traders to invest much beyond their means and when the forex market goes against their expectations, they lose big. Before you start investing, you need to know your risk tolerance level so that you can plan your investments in the forex market accordingly. Planning is important to trade in a disciplined manner.
You should avoid investing more than 2% of the capital in your trading account in each trade. You may be able to minimise the risks of trading effectively when you follow this simple rule. Even if the market moves in the opposite direction of the trade you had placed, you may not lose big when you apply these rules. When you start minimising risks, you increase the possibility of making profits consistently.
Emotions and foreign exchange trading
If you take important investment decisions in foreign exchange trading while being swayed by emotions you may not be able to succeed and survive in this market. If you want to succeed as a trader you need to avoid emotional and impulsive trading. When you let emotions such as anger, greed and despair cloud your mind you may not be able to think in a rational manner and this can affect your ability to take good investments decisions.
It is best to trade when you are calm and composed so that you are able to understand the prevailing market conditions and take good investment decisions. You should also avoid placing a trade against the trend prevailing in the market as it can result in losses. It is advisable to trade as per the trends in the market so that you are able to earn regular returns on your investments.