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Before we get to the 7 Forex trading rules that have been validated by many full-time and successful traders, let me tell you this story.
There was a lion, a donkey, and a fox who eagerly went on a joint rabbit hunt. After a productive day of hunting, the three of them sit around a pile of rabbits and the lion asks the Donkey, “Mr. Donkey, please divide the pile into equal shares for 3 of us?”. Donkey obliges and counts the rabbits into three equal piles for each of them.
The lion immediately roared and got him. He then stacked all the rabbits on the donkey and asked the Fox: “Mr. Fox, could you divide these rabbits equally among us?” Fox took one skinny rabbit out of the pile and put it on the pile for himself, then said, “Here you go, Mr. Lion, this is your pile,” pointing to a large pile of rabbits. The Lion says “Mr. Fox, where did you learn to share so evenly?” and the Fox replies “Donkey taught me”.
The moral of the story is that you should learn from other people’s mistakes. Now we come to our 7 rules. These are for your benefit as I mentioned earlier, from experienced, successful traders.
Rule #1
Never risk more than you can afford to lose, you will lose money, all traders do it, and make sure you don’t sacrifice anything else important in the process.
Rule #2
Never risk more than 2% of your margin trading account on a simple trade.
For mini account holders, 2% of $300 would be $6, so realistically you would need about $15 for you to earn that 5%. Once your account size is large enough, make that 2%.
Rule #3
Always use a stop-loss order.
If you haven’t figured out where your stop loss order and limit should be at the beginning of a trade, then you shouldn’t be trading.
Rule #4
Know your starting point before you trade.
Rule #5
Trade on demos first: Have success trading on paper when nothing is on the line before you open a real account.
Rule #6
Take a breather when your capital has dived.
Rule #7
Don’t let your emotions take over: Stay cool, calm, and collected. Patience and a clear mind will win the game.
