Rule #1 - Know What You're Doing
In any endeavour, in order to be successful you must know what you're doing. Sounds obvious, but so many people get into currency online trading and get busy risking (and losing) their money before they get a decent handle on what making money as a trader is all about.
Right along with learning what the right things are, you absolutely must know what the mistakes are that can hurt you. If you make money on one trade only to give it all back on the next, then why bother at all? You have to know how to keep from losing it to end the month ahead.
Most importantly, you have to protect the money you started with, as well as any money you make along the way. Knowing the pitfalls, mistakes and the subtle traps is the best safeguard you can have and one of the most important steps for you to take as a trader.
Rule #2 - Get a Handle on Your Emotions
Even after you build some competency with your trading and after you get to know what you're doing, you absolutely must have a good handle on your emotions. Almost all of the big losses and missed profits in trading come from the trader allowing their emotions to interfere with good trading and sound decisions.
Poorly managed emotions can be and usually are the single most costly aspect of day online trading. Ask any veteran that has achieved a consistent level of success and they'll tell you that you have to keep a cool head to make it as a trader.
And that means properly managing your emotions.
Rule #3 - Know Your System
As part of your emotional control and in knowing what you're doing is to have your trading systemized, and then to know that system well. You have to know what your system is capable of in order to have any confidence in it and in yourself.
There are several numbers that are critical to the trader's bottom line, several aspects of your currency forex system trading that make the bottom line what it is.
Critical metrics such as
- Your true winning percentage
- Your true profit-to-loss ratio
- Your average win size
- Your average loss size
- Your average return on the trades your place
- Your return on your trading efforts (both in time and $)
Without keeping a close eye on these metrics, you are playing a guessing game with your trading. You need these numbers to make your trading better than it is and to take it to the level that you and your system are capable of.
Take the time to periodically analyze your trading performance and keep your trading fine-tuned.
Rule #4 - Treat Your Trading Like the Business That It Is
Any activity that you get involved in and expect to make money from should be treated as a business, not just something you do. This requires more than just throwing money at an opportunity to make money. If you truly want to have your trading produce an income stream for you, then treat it like the business that it is.
This means that you need acquire the right resources to ensure that you give yourself the best chances of success. Resources like
- the right broker
- the right strategy
- user-friendly software
- reliable data and information sources
Now you shouldn't just go crazy with your spending, thinking that you can buy your success with a magic pill, but you should also realize that going it alone and not investing in your business is the truly costly and difficult way to reach success as a trader. Budget for and make the investments necessary to grow a solid business.
Rule #5 - Make the Determination That You Are Going to Become a Good (or Great) Trader
Your trading profits and losses over the short and long term will be determined by what you do as a trader. You have to take responsibility for your trading, and by doing this you also take control over your fortunes.
The skills necessary for successful trading are learnable, and you'll find that every long term trader has been a student of trading and most likely they still are, even after achieving the level of success that most traders aspire to reach.
Acquire the tools you need to trade and focus on developing your skills as a trader, along with yourself as the person doing the trading.
Follow the rules above and give yourself the best likelihood of achieving the goals you have in your forex online system trading.
Brian McAboy (aka Trading Self-Defense Instructor) has been featured on the Chicago Board of Trade, in PitNews Magazine and Traders Digest.
For free reports, and for resources to help you incorporate the rules above into your currency forex system trading , go to http://www.insideouttrading.com/