Rules for successful forex trading

There are some rules that all successful forex traders seem to follow, consciously or otherwise.

Be prepared

It’s not enough to simply log onto the online trading platform and glance at the charts. Successful traders know what’s on the schedule that can affect currency movements, such as:

• fundamental data releases;
• central bank or government speakers;
• liquidity conditions;
• scheduled central bank rate setting meetings; or
• scheduled meetings of regulatory or financial bodies, such as the G7 or Eurozone finance ministers.

Have a plan

Successful forex traders attempt to peer into the future and predict the outcomes of those scheduled risk events. If a central banker is speaking, what’s she likely to say? If she’s previously shown herself bullish on her domestic economy, has her opinion possibly been weakened lately by mixed fundamental data? If so, and if she voices a less bullish or even bearish position, that could cause negative fluctuations for her currency.

Successful forex traders are aware of these possibilities, and have trading plans in place in advance to profit from the opportunities so presented.

Be flexible

Of course, those strategies are only as successful as the predictions made. If the central banker has not revised her economic opinion, and instead speaks of the bullish growth she expects domestically, then the successful forex trader would have a hedge trade prepared for that eventuality, as well.

Trade with the market

“The trend is your friend,” the old saying goes, and it’s all too true. Granted there are always a few pips that can be traded in counter-trend retractions. The risk involved in counter-trend trading is always greater than those for trading with the trend, or within the currency pair’s range, as the case may be.

Take profits off the table. Another trader’s saw goes, “You can’t go broke taking profit.” Whether the trader makes the decision to remove all his profits from the market, or whether he merely reduces the size of a profitable position, there’s no sense leaving everything in the market and risking it all, just on the chance of a few pips more.

Successful forex trading is a dynamic process

These traders watch the market, its players and data and stories and trends, and they keep their perspectives fluid. There’s no emotional involvement. If the short-term trend is bearish, they’re short the currency pair, pausing at significant technical levels to take some or all profits off the table. When the trend collapses into a range, they first identify its boundaries, then go short at resistance and long at support, stepping back often to ensure the range doesn’t break without them being aboard for the new trend’s ride.

Successful forex trading, philosophically speaking, is a manner of being. And it can’t be beat.