Top 10 Golden Forex Trading Rules

Anyone who has started their journey in Forex trading must know that there is no shortcut in profitable trading. You must trade a proven forex trading strategy over and over so that across a series of trades, the strategies work well enough to produce an overall profit.

Let us show you some important Forex Trading Rules

01. Always use a trading plan

A trading plan is a written set of rules that specifies a trader’s entry, exit, and money management criteria for every purchase.

Trading Plan

Test a trading idea before risking real money. This practice allows you to apply your trading idea using historical data and determine if it is viable. Once a plan has been developed and testing shows good results, the plan can be used in real trading.

02: Do not risk more than 5% of your capital per trade

Having proper risk management means to trade within your account size. A general rule of thumb is to risk not more than 5% of your capital. We cannot win 100% of all our trades as we do not have 100% control of the market.

If you do not limit your risk or keep your trading size consistent, you can lose all your winnings for the past month in a single trade or worse, get margin calls for a single trade that you have over-leveraged.

Though many trading strategies require different risk management, a swing trader may trade smaller lots as compared to a scalper for example. So, it all depends on your trading style.

03: Invest in a solid forex education

Knowledge is power – we all know that. Think of it as continuing education. Traders need to remain focused on learning more each day. It is important to remember that understanding the markets, and all of their intricacies, is an ongoing, lifelong process.

forex education

World politics, news events, economic trends—even the weather—all have an impact on the markets. The market environment is dynamic. The more traders understand the past and current markets, the better prepared they are to face the future.

04: Always use a stop loss

A stop loss is a predetermined amount of risk that a trader is willing to accept with each trade.

Not having a stop loss is bad practice, even if it leads to a winning trade. Exiting with a stop loss, and therefore having a losing trade, is still good trading if it falls within the trading plan’s rules.

The ideal is to exit all trades with a profit, but that is not realistic. Using a protective stop loss helps ensure that losses and risks are limited.

05: Control your emotions

Another key rule in the forex business is to always control emotions. Emotions are bad in the forex business because the market is quite disappointing most times. If you are someone who reacts passionately when hit by disappointment thus, you can easily lose track and lose your money. In the forex trading business, you need to be always pragmatic and ready to follow the logic.

06: Try to learn from your mistakes

It’s easy to feel discouraged when you start losing money and you might even want to throw in the towel. The best traders use their mistakes as teaching moments and move on from them. Trust us, we’ve heard horror stories about billionaire traders losing a ton of money because of a mistake, but they didn’t give up, so neither should you.

07: Practice first


Demo accounts are available with most forex brokers and can be opened for free. If you don’t know what a demo or simulation account is, you should know that these work just like live accounts and will allow you to trade with virtual money so that you can see how you perform in a live market setting. Being that these accounts are free, there’s no reason not to practice on one to test your strategy or just to gain general practice.

08: Keep a trading journal

Traders that keep a trading journal write down everything about the trades they’ve made, not only technical data like entry and exit price but personal reasons why they made the trade and other factors. Over time, this can really give insight into your own personal habits and if there is anything you need to change about yourself or your strategy.

09: Keep the profitability in your favor

Keeping the profitability in your favor is to always ensure your trade has a RRR (Risk-to-Reward Ratio) that is favorable to you. If you have a stop loss of 40 pips but your target is 120 pips, that is a 1:3 risk to reward ratio which gives you the leeway to lose 2 extra trades before you can breakeven. I’ve known a trader who only wins 35% of his trades but has consistent profits monthly. This is because his RRR is always many times more than the risk he takes.

10: Do not overtrade

The most common misconception among new traders is that they have to constantly be in the market. Wrong. Over-trading is a problem caused by a number of different catalysts, however, the main challenge comes from not knowing what your real strategy is, and not being disciplined enough to follow it. Overtrading, directly or indirectly, has the potential for a huge loss though it may result in huge profits too.

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