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26.08.2021

Rules for Successful Forex Trading 

Internet is filled with eye-catching ads of earnings in the Forex market. Therefore, the market annually attracts millions of newcomers worldwide, planning to try their hands as traders. 

Creating educational materials for amateur traders is an effective way for a brokerage to engage new clients, especially newbies. 

Today, we will try to figure out the following:  

⚪ What is the Forex market?  

⚪ Rules of successful trading 

⚪ Risk management 

⚪ Methodology of trading strategies and so on 

What is Forex Market? 

The Forex market is an electronic currency trading system that unites the world’s largest banks and financial institutions. Unlike traditional stock exchanges, Forex trading is conducted around the clock, five days a week (except holidays), and is not subject to national legislation. 

The foreign exchange market’s capitalization level is higher than the capitalization of stock and commodity markets. Meanwhile, trading transactions exceed five trillion US dollars a day. 

Since the late 90s, with the advent and development of ECN technology, FOREX trading has become available to tens of millions of retail traders.  What is the secret of Forex’s market success? 

Basic Rules for Successful Trading 

When they come to a brokerage company, novice traders consider themselves “chosen ones.” Most of them do not want to waste time studying other people’s bad experiences. Newcomers usually demonstrate high self-esteem and self-confidence. As a result, over 95% of them blow the money right after making a deposit.  

We have collected the experience of one hundred of the most successful traders and investors in the Forex market, who shared some of their secrets with us. If you want to build a successful brokerage business, understanding customer behaviors must be considered. 

Psychology of Trading 

The most common enemies of a trader are:  

⚪ Fear 

⚪ Greed 

⚪ Euphoria from temporary success 

⚪ Indecision 

If a user cannot control emotions, Forex trading can be very costly. 

One can find several simple but effective techniques that will help develop the necessary psychological qualities. Still, they must be practiced regularly and over a long period. 

Learn from Mistakes 

Hundreds of successful traders have already shared their experiences in memoirs, manuals, and books. It’s worth spending time studying their mistakes so as not to lose money by making them yourself. 

Trading Strategy 

A unique Forex trading strategy is the alpha and omega of success. A trader should always consider trading rules for opening and closing orders and rules for controlling the market position. 

The three main approaches to creating a trading strategy: 

Fundamental analysis – uses a comparison of macroeconomic indicators of development of different countries of the world. It includes interest rates, gross domestic and national product, inflation and unemployment, industrial production, money supply, and more. 

Statistical analysis – uses methods and models of mathematical statistics and probability theory, including linear and nonlinear regression analysis, neural networks, discriminant, and factor analysis. 

Technical analysis – a set of graphical methods of analytics. 

Suppose the first two types of analysis are difficult and time-consuming for an ordinary trader. In that case, the technical analysis is a simple and effective way to build a profitable trading strategy. It is based on the use of price and market volumes to predict the dynamics of quotations. 

Risk Management 

The proper management might help increase the likelihood of profit and reduce potential losses while trading Forex. Beginners should adhere to the most general rules that help survive even severe turbulence in financial markets: 

  1. Limit the size of positions. Never risk more than 5% of a deposit for opening a new deal. 
  2. Limit the number of simultaneously opened orders. Experts recommend not holding more than 3-5 orders at once. 
  3. Limit the amount of daily loss. For example, set a rule that if the amount of loss exceeds 15% of your trading account size per day, you must immediately exit the market and stop trading.  
  4. Apply several strategies, not one. No method gives 100% positive results. Therefore, use 2-3 trading strategies and keep your eye on a balance of profit and loss results. 

Suppose you want to open a brokerage company and specialize in servicing traders. In that case, contact Profit Center FX – developer and integrator of professional software for Forex brokers. Profit Center FX will help you start with a high-margin business project in just three weeks!    

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