Provided by GVI
Common Sense Guidelines for the Average
Trader
Look for a reputable broker
- Ability to trade effectively depends on consistent spreads and ample
liquidity
- Anyone can establish a position
- Ability to close out a position at a fair market price is more important
Live to trade another day
- Apply prudent money management skills
- Avoid using excessive leverage that puts your investment capital
at risk
- Always trade with a stop!
Don’t trade emotionally, stick to your plan and maintain
discipline
- Establish a trading plan before initiating a trade
- Set reasonable risk/reward parameters
- Don’t override your stops for emotional reasons
- Don’t react to price action – means don’t buy just because it
looks cheap or sell because it looks too high, Have supporting evidence
to back up your trade
Don’t punt
- Don't punt( Punting is trading for trading sake without
a view)
Don’t leave stops at obvious levels such as “big figures”
(e.g. eur/usd 1.20, usd/jpy 110)
- i.e. JUBBS stops = stops at obvious levels and thus are more likely
triggered
Don’t add to a losing position in unless it is part
of a strategy to scale into a position
- In other words, don’t double up in the hope of recouping losses unless
it is part of a broader trading strategy
Trading with and against the trend
- When trading with a trend, consider the use of trailing stops.
- When trading against the trend, be disciplined taking profits and don’t
hold out for the last pip
Treat trading as a continuum
- Don’t base success on one trade
- Avoid emotional highs or lows on individual trades
- Consistency should be an objective
Forex trading is multi-currency
- Watch crosses as they are key influences on spot trading
- Crosses are one currency vs. another, such as eur/jpy (euro vs. jpy)
or eur/gbp (eur vs. gbp)
-
Crosses can be used as clues for direction for spot currencies
even if you are not trading them
Be cognizant of what news is coming out each day so
you don’t get blindsided
- Be cognizant of what news is coming out each day so you don’t get blindsided
- Beware of trading just ahead of an economic number and be wary of volatility
following key releases
Beware of illiquid markets
- Beware of illiquid markets
- Adjust strategies during holiday or pre-holiday periods to take into
account thin liquidity
-
Beware of central bank intervention in illiquid markets
Jay Meisler, a partner in
Global-View.com, says one problem of trading with too-high leverage is that
one piece of surprise news can wipe out one's capital. "Those who treat forex
trading as if they were in a casino will see the same long-term results as
when they go to Las Vegas," he says, adding: "If you treat forex trading like
a business, including proper money management, you have a better chance of
success." …Newsweek International, March 15, 2004
Treat this business as a marathon and not
a sprint so you avoid burnout and maintain stamina for the long haul.
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