So you are looking for a more engaging and interesting method of investing? Look into Forex trading. Why Forex you may wonder? Forex is the world’s most liquid financial market. The Forex market works through the principle that currencies have to be exchanged in different regions of the world for exchange of goods and services. When you go to Germany for that important business trip, you cannot use dollars as the currency. You have to exchange your American dollars for the euro. It is this exchange that keeps the Forex market alive. As a new investor in the market, what are the rules that you need to understand so as to be able to work in the market?

1. Always start with a demo account
As you do not have any prior experience in the trading, it is paramount for you to start with a virtual account in the trade. This allows you to have understood the trade and how it works before investing your hard earned money.

2. Learn management of money
To avoid you losing out early, it is paramount to know of what to buy and when to buy. This will be best learnt by finding out what stocks affect currency fluctuations. Learning of gold, oil and stock market prices are a good starting point.

3. Invest wisely
An investment of 20% maximum should be placed on currency pairs. This helps cover you if you are to make a loss. The market is highly volatile and can change at any time without notice.

4. Patience pays
If you are patient enough, a loss in a market pair will mostly recoup your losses and maybe even make a profit. This should carefully be done by researching your market and predicting the flow that will be taken by the market.

5. Use computer software to help you in your research
Computer software should always be used in Forex trading. The benefit of it is it helps you analyze the risks and losses that can be avoided. The most recommended for use is GFT. This will increase your probability of making a profit.

6. Stick to a currency pair
You reduce your risk of losses and increase your probability of a profit if you stick to a single currency pair. You can go by what currency pairs that the major banks are trading in.

7. Follow Forex information and reports
Be dedicated in searching any available information that you can in the Forex trade. This helps keep you afloat of the trends and changes in the market. There are also software that can indicate to you on when to enter and when to exit a trade. This will help you control risks in trading.

8. How to spot a trend reversal
The most common indicator of a reversal is when a currency pair breaks past 61.8 Fibonacci of the daily or weekly normal is a serious indicator.

9. How much money should be in my account when trading
There is no minimum amount that is set for an operating account. Just to be on the safe side of the harsh market realities, you should start by operating by a modest 20% of your account.

10. Enter and exit with a strategy
As you enter a trade, use reason and fact as when exiting the trade. This will help your trading in viable trades that will earn you money.

11. Pair strong and weak
To receive maximum benefit, always use a pair of a weak currency against a strong currency. This increases chances of making a profit.

12. Consult a trusted broker
In as much as you may want to practice the Forex trade solo, it never hurts to consult or even contract a renowned broker. You can always look up trusted brokers by visiting Visit www.nfa.futures.org/basicnet/ and looking up the practices of the brokers. The broker will help you with investment information as your success in the trade will result in him gaining as they are the market makers.

13. Never let a winner turn into a loser
When trading in Forex, it is very easy to see one currency doing very well and in a few minutes reversing the gains made. It is at such times that you should trade in your stocks and do the best you can to capitalize on currencies that are doing well.

14. Weigh in available logically, not by impulse
You should always let the reason of logic be your main guide. Make logical decisions on whether to trade or not to. Impulse kills, especially when you have a currency pair that is not performing well enough, you most certainly will be hoping for it to bounce back rather than critically examining available options.

15. Don’t risk more than 2% in any trade
This is the most violated rule that leads to the blowing out of most peoples forex accounts. However good a currency pair is doing, don’t risk your hard earned money for the illusion deal of striking the gold and retiring early. This will only amount to senseless gambling. The 2% risk rule is there to enable you that even if you make losses, they are marginal and can be recouped easily.

16. Predict risks
Before moving into a trade, weigh what risks you can take and plan an exit strategy. It saves you pain and money.

17. Befriend trends
Trends can last days, weeks or even months. When you get in one, stick to for as long as is logically possible.

18. The mathematically optimal is mostly psychologically impossible
In as much as the Forex trade uses mathematics, the traders are psychological beings and they trade more emotionally than logically. Rely more on the emotion more and the logic as your back up.

19. The Forex trade is an art
Over the years that the trade has been operational, there have been various methods of trading fronted on the best trading methods. Of these none is 100% definite. The trade should be learnt with time using these methods as a guide as you develop your own unique way of trading.

20. No excuses.
Regardless of the outcome, no excuses should be given. The outcome, profit or loss must logically be explained.

Filed under: How to Invest to Increase your Wealth

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