1. Find your own way. Every single person has their own set of beliefs, views, and comfort levels. This means that what works for one trader will not necessarily work, or be understood, by another. Learn all you can, practice what you learn, and eventually you will find your own personal set of skills that works for YOU to navigate and adjust to the markets.
2. Plan your trade and trade your plan. Having a plan means being prepared for whatever the market may give you, so that you can execute without stress or hesitation. After coming up with a solid trade plan, stick to it. What’s the point of combing through and carefully piecing together the massive amount of economic information and technical signals only to jump ship in the middle of a trade? Remember, if you fail to plan, then you have already planned to fail!
3. Get stopped out – the right way. A trader shouldn’t set their stop loss levels according to how much of their account they are risking. Rather, stop losses should be set at points where the original trade idea is invalidated, or no longer has the potential to be successful. That means you should set stops well beyond established support/resistance areas, or when you system signals an exit. The market does not know how much you are willing to risk, so why set your stops to that?
4. Don’t forget the fundies. Not every trader or trade requires absolute mastery of economic analysis and forecasting–but that would be nice, wouldn’t it? It’s possible that winning trades can be made on technicals alone, but the astute trader has to be aware of upcoming economic events on the forex calender. These events may have the potential to create an environment that their trading system or method was not designed for. Avoid learning the hard way of not knowing you put a trade on right before a major event and getting blindsided by a Mack truck.
5. Be flexible. The markets are fickle and what catches the markets’ attention today will not necessarily move the price tomorrow. Be ready to move with that next major sentiment change and never be married to a position!
6. Don’t force trades. If your system or trading method does not give you a clear signal to be in the market, then that means there is no edge for you to win in the current environment. Stay out and don’t put a trade on just because you’re bored and itching for some action. No position IS a position.
7. You will have losing trades. Let me say again…YOU WILL HAVE LOSING TRADES. The sooner you accept this, the sooner you are able to remove the emotional stress of losing a trade, and you will have a clearer head for making the right decisions and adjustments.
8. Journal… everything. This doesn’t mean only technical and fundamental analysis. You must also include your thoughts, feelings and what you were doing at that time. With your trading journal, you can look back and say “Oh, apparently I lost ten out of eleven trades when I was playing Halo with my friends at the same time. I better not trade when I’m playing computer games.” Lesson learned and now you’re that much better. Those small lessons can really add up to becoming a better trader, so keep a journal because no else is there to record and teach you those lessons about yourself. How can you know where you are going and what to improve if you don’t know where you have been?
9. Learn to take a break. Like a developing athlete, resting is just as important as the time you are “working it.” Keeping up with markets can get rough, and a trader’s mind and body can get stressed when things aren’t going their way. These are the times when it is necessary to step back, get your mind off forex trading, and recuperate. You will come back stronger and refocused to take better advantage of the next opportunity.
10. And last but not the least, Manage risk CONSISTENTLY! This can’t be stressed enough. There will be times where you feel so strongly about a trade or times where you want to make back your losses that you go beyond your normal risk tolerance. If you won, then all is good… but what if you lost? Then you are that much farther from reaching your trading goals. The secret to trading success in the beginning is to survive. The markets will always be there and opportunities will always be around the corner. Don’t take those opportunities away from yourself by blowing out your account. Live to trade another day….