Guide To Trading

1. Set a Stop Loss: Before entering any trade, decide beforehand the amount you are willing to lose and stick to it, set a stop loss on the trade before you enter. Do not fluctuate your stop loss if you are in a losing trade.

2. Let your profits run: Do not be emotional about a trade, you will lose some and win some – just know it. Know the reason why you entered a trade and stick to those reasons. The less emotional you are the more successful you will be. Stick to your game plan, move your stop loss as the market moves in your favor and let your profits run.

3. Don't be influenced: You have your own game plan stick to it. If you are influenced by others you will constantly be changing your mind, learn to insulate external sources once you have made up your mind. You will always find someone who will give you a logical reason to do the opposite.

4. Keep your position sizes within your limitations: Successful traders know that in order to profit you trade for the long term. Trading is a game of probabilities, and over the long run as long as you stick and implement sound strategies and stay consistent – success is much more likely to come. To be a successful trader you should never take a position that puts substantial capital in jeopardy. In actuality you will rarely find successful traders who risk more than 10% of their account in any trade. For instance, if you deposit USD 25,000 your maximum loss should be USD 2,500 on a margin of 5% and a EUR 100,000 minimum trade that works out at about 2.5 figures or 250 pips (on a EUR/USD trade) as a maximum. Normally trade with a stop loss of under 50 pips and a maximum stop loss of one-figure or 100 pips and trade sizes of 100,000 to 200,000 base units (the leading currency), thereby risking substantially less then 10% and more like 2-5% of the deposit on hand. You might want to start small and increase your trade sizes as your confidence grows.

5. Know your risk vs. reward ratio: The minimum ratio you should be using is 2:1, so if you are successful on 50% of your trades you are doing well. For instance, if you are long GBP/USD and you want to earn 30 pips you should not risk more than 15 pips. You should never risk 30 pips in order to make 10 pips, For if you do you’ll make more a lot more successful deals then unsuccessful ones, but the poor ones will ruin any your chances for profit. Your risk vs. reward analysis is extremely important to trading successfully.

6. Have adequate capital: You should never trade with money that you cannot afford to lose. Always make sure that you have enough credit, for example you should can ask yourself the following question: “if I were to lose 50% of my opening balance in 6 months will I still be able to afford to trade?” Only if the answer is yes should you start trading. One of the keys to successful trading is mental independence, which means your trading freedom must not be influenced by your fear of losing.

7. Trending or Neutral: Learn to analyze the market; is it a trending market or a neutral market? In a trending market then follow the trend in a neutral market buy on lows and sell on highs as long as you use stop-losses you are controlling your risk.

8. Don’t fight the trend: Don’t try to buy on dips and sell on highs on a trending market. The old saying "the trend is your friend" is a good one, why fight it go with it!

9. Averaging – don’t do it: One of the most common mistakes traders make is the continuing adding of a losing position. Averaging will be the death of short-term trades. For short-term trades, preserving capital is the most important thing, and putting too much capital at risk will jeopardize success. In short term trading, if a strategy is right the market should move in the correct direction within a relatively short period of time, however if it's wrong, the short-term traders should realize that they traded incorrectly, they should take the loss and move on. There is not much room for pride in short term trading. You should never add to a losing position.

10. Chasing a bad idea: Happens all the time, you see a potential trade - decide to wait till the next day to see if it sets up, when you see that it did exactly what you thought it may be too late. Review your reasoning for the trade, make sure your initial reason is still there if not forget about the trade. There will always be trading opportunities be patient and strike.

11. Understand the way the market thinks: You should understand that all the information (except for newly released information which the market adjusts too within a short moment) is already built into the price of the cross. You should know what indicators are coming; particularly the majors and you should know what is already anticipation by the market. There are many publication of market anticipation for major indicators.

12. Trading - a game of probabilities: You will not be correct 100% of the time, it’s a fact. Good experienced traders roll know this, it’s a numbers game, and you’ll make some and lose some the idea is simply to win more than you lose, not to catch all the fish in the pond. Understand trading is a game of probabilities and if you do the right thing in the long run, you will come out ahead. Learn from mistakes, when you start trading you may well lose more in the beginning than you make, think about what you did wrong, try not to be emotional about the trades, if you stick to your game plan and learn hopefully your profits will out weight your losses.

13. Know why you are in the trade: Keep a trading log, and write down why you entered a trade. Don’t be impulsive have a plan, this way you will learn which strategies work for you in the long run and which don’t. If trading before or after releases work for you, look for them and trade those.

14. If the logic goes you go: If the reason you entered the trade disappears then so does your reason to remain in the trade. If you think you’re at a low and it breaks through, get out, then reevaluate and decide once more.

15. Have a maximum run: If you have 4 or 5 bad trades in a row, take a break, something isn’t working, go away regroup, don’t be afraid to take a break.

16. Study: Learn new ideas, keep up to date, and don’t trade other people’s ideas, you should always know why your in the trade.

17. Have Fun: Enjoy what you do, keep calm, stay as unemotional as possible - you will be more successful.