What should a novice trader look after?

Keep on reading to learn how to avoid mistakes that can be devastating for your account.

First of all, you should learn to apply money management in you trading. But what is money management? It is a set of rules that when applied correctly help you to manage your trading account and minimize the possible losses of your trading decisions.

Let’s take a look at these rules:

1)Never risk more than 10% of your account’s balance per trade. For example if you have 3000$ balance in your account you should never risk more than 300$ per trade. This is only 30 pips in a standard account! Be careful because Forex is a fast moving market.

2)Use reward to risk ratio of 2:1.
This means that if you risk 20 pips your take profit position should be at least 40 pips. Apply this rule and you will find out that you will have to be correct only in 1 out of 3 trades and still you will not lose any money. Even the most experienced traders are not always right in their trading. Nevertheless, they know that they do not have to be always right in order to realize profit in Forex.

3) Always use stop loss orders. Never leave your trades unprotected. Do not wait for the market to save you if your are positioned wrong. Forex market can very cruel to a trader that does not use stop losses.

The money management rules may seem easy to learn but when your emotions get involved, money management rules become difficult to apply. The trader has to remove the emotions of his trading decisions and stick to the rules above in a mechanical way.

Let’s take a look now at another common trap in Forex trading. You surely have heard of fundamental announcements. Novice traders that do not understand fundamentals should avoid to trade during major announcements. Market is moving fast during these announcements and sometimes unexpected moves take place. The experienced trader has it’s technical plan ready before a fundamental announcement and chooses to trade before the announcement with tight stop losses. Nevertheless this is an aggressive way of trading because he can be caught wrong and his stop losses can not be fulfilled due to loss of liquidity during these fast market movements. Whatever you choose just be careful!

Maybe now understand how money management is the key to success in trading. You could learn more about trading by visiting my site at http://www.easytradeforex.com.

Thank you for sharing your interest in Forex with me.

Sincerely yours,

Louizos Alexander Louizos

For more information please visit my site at http://www.easytradeforex.com