Three Rules to avoid Over-Trading Your FOREX Account

Three Rules to avoid Over-Trading Your FOREX Account

Almost all new traders that start out trading with little planning or preparation lose money...FAST! I remember my first FOREX account, financed with $800, turned into 400 USD within just two weeks. It was like a snowball rolling down hill, gathering speed and momentum with out any chance of stopping. Actually, there was an end in sight because I decided not to deposit more money into my Forex account until I got a grip on what I was actually doing. So why did my account lose 50 % of its worth in only two weeks? The answer is "Over-Trading". Here are three guidelines that you can apply to reduce your risk and provide yourself a opportunity to start earning profits.

Never Use Any Leverage

If you're wagering more than four percent of your trading on one trade, you are really asking for fast ending to your Forex career. This indicates that your stop-loss (non-negotiable) needs to be close enough to your entry price to guarantee that you will not lose more than 4% of your account. Remember that the market can "gap" every now and then, so your stop-loss most likely ought to be even closer to compensate for unforeseen "slippage". If you don't have the willpower to adhere to your stop-losses, then you should immediately leave Forex now.

Choose One, Prepared, Entry Signal

When getting started, I recommend picking one entry signal and Solely trading on that one technique. You should have a crystal clear description of what it means to consider an trade entry, and you can not make a trade except when you see that trade entry setup. This means that you won't make a trade every time you feel like it. It can be really hard to remain on the side lines when you watch the markets moving up and down, but you must remain faithful to a very simple trading plan that decreases thinking during the early levels of your Trading. While you gain practical experience and see steady earnings, you should be way more equipped to start trading more trade setups.

Recognize When To Stop Trading

Oftentimes your trade entry technique isn't working. I've got a basic principle for day traders - 3 losers in a row and you are finished for the day or you must go to paper trading. When you are ready to start trading again, start scaled-down (maybe half of your typical size) to ease back into a profitable rythm. One of many blunders I made with my first account was over-margining my trades following a string of losing trades ("trying to make it all back"). The best way to steer clear of this habit is to restrain yourself from making trades when your strategy just isn't performing. Simply put, you have to compose your own guideline for when to take a break from your trading account.

There are also other conditions that can adversely have an impact on your trading performance like tiredness, sickness, family issues, and others. You will need to be mindful of your fitness and psychology so you can decide when you are fit for trading and when it is best to go for a walk.

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