5 Forex Pointers a Forex Trader Can Use

By: Kelvin Chan

Today I'll like to talk and give you 5 forex pointers that you can really use (assuming you don't know them yet). Ok, if you've brought on the popcorn, I'll start the show.

#1 - Forex has a volatile nature and you must cater for that

We all know that the forex market is the most volatile and active out of all the trading markets in the world, be it futures, equities, etc. With that said, you need to cater your trading around that. By that, I mean you have to practically bend your rules to fit the market you're trading in. And that means not having very tight stop losses for one as you have the odds against you even when you have a very good setup. Make sense?

#2 - Not more than 7% drawdown in a month (I use 5% currently)

Be sure to set a limit on the maximum monthly drawdown you'll allow yourself to get into by calendar month. Drawdown meaning your losses. Set it as a percentage % of your total equity balance. So if you've got $10,000 at the start of the month and if you decide to set 7% as your max drawdown, you need to jolly well stop trading when you hit a loss of $700. Personally I use 5% as my max drawdown per month (i'm conservative).

#3 - Learn to stop trading when I'm ahead (...risk of overtrading)

When you're ahead of the game, learn to control your emotions and get away from it all otherwise you might risk losing your profits and even your pants. By getting away from the terminal, you allow yourself to stay rock steady and not get your heads in the cloud. This is the mark of a true and good trader.

#4 - Market gives clues ... It usually tells you quickly when you're wrong (it's up to you to listen and obey the signal)

Out of 100 trades that I take, there's seldom a time when the market doesn't give you any warning that it's about to turn its tide on you. It's one of those things where you just know it when it happens and when it happens, you should take heed and just obey and follow the market. No one is stronger than the market itself.

#5 - Do not bet on a reversal ... Bet on the trend to continue instead

Finally, more often than not, market will always continue doing what it has always been doing. Can't remember which Newton's law which says that something in motion will remain in motion until an opposite force acts upon it. The forex trending market is not an exception.

Okie dokey ... I had fun writing this for you. Use these tips to your own trading advantage and be sure to come out ahead of the game. Good trading!

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