Forex became very popular lately. The reason is simple: it is accessible to small retail traders, it offers leverage which has the potential of multiplying gains and an electronic platform resembling to video-games. There is no wonder that a lot of people are referring to themselves as Forex players. They play not invest.
Unfortunately in the industry there is a saying: “only 10% of all players are making money. The rest of 90% are blowing their accounts”. One of the reason might coming from the fact that they do not see this as a business where their money are invested but a gambling casino where they play.
Forex is a full time job. The market is ruthless and will wipe you out in an instant if you do not follow some simple rules:
1. When you enter in a trade you need three things:
a. an idea why are you entering (setup, PA, etc.)
b. a SL if your idea is wrong, even if it is a mental one.
c. a TP in order to have a target for the price where you will close the trade. This is not carved in stone since the market is a living body.
2. Enter only if your trading rules are met. Usually if the setup is right I enter a number of lots according to my money management rules. Then at my 1st target I close 2/3 or 1/2 of the position and move the SL to BE. I also watch the market. If the move does not happen during 3 or 4 candles I close the trade.
3. If your setup happens rarely then try another set of rules or watch a bigger number of pairs. Always stick to your rules. Test your new setup and rules on demo before entering live
4. Money management. Before going live, test your setups rules, etc on demo for 1-2 months. If you are consistently profitable then go live. Risk in a trade 1-2% of your equity. This is done by multiplying the size of your lot with the SL for that entry. If you are risk adverse then keep your risk at 1% on a position. A position is a trade in 1 currency pair.
Also, if you trade larger time-frames you can build your positions by starting small and as soon as you have a confirmation that the trade is moving your way add to your position.
5. Your money management is your friend. If you are on the wrong foot and the price moved against you and you failed to close the losing trades and you added to them, then you should always try to light up the position at favorable intervals. By example go long again at a very strong support level. The price will move in waves and you may close your position gradually at a lower loss than the initial dip. This will be painful – I know this from personal experience – but you will preserve your equity.
I trade Forex for a living and what I wrote above is coming from my own experience. Happy trading.