Forex trading has become increasingly popular recently, with a lot of people going into it thinking they will come out the other side mega rich, but they soon find out it is a lot harder than first anticipated. That is because most traders start off thinking it is an easy get rich quick scheme. The bitter truth is there is a lot more to it and you need to have strict rules in place to even have a chance of consistently making a profit. I have put together my top 10 rules of trading which have helped me to become a consistently profitable trader.

1. Risk Management

Risk management is very important when trading and without it, you will eventually lose most of or all of your capital. The first trick to this is never risking any more than 2% of your account in a single trade. This will vary for different traders but I have never come across an experienced trader who is risking more than 2%, most will only risk 1% or below. Beginners find this very hard to deal with as most want to jump right in and risk their whole capital on one trade in the hope of doubling their account in a day. The harsh truth is that eventually you will come unstuck and lose the lot.

An additional part of good risk management is to give yourself a good risk vs reward on each trade by using stop losses and take profits. Setting a stop loss of £100 and a take profit of £50. Is quite easily the stupidest thing a trader can do. Why risk a potential £100 when you can only make a potential £50? Giving yourself these odds is like betting someone £100 a coin will land on heads and only being paid £50 if you are right. This is a good example because a coin can only land on heads or tails just like the price of a currency can only go up or down. With this in mind, you should be giving yourself an absolute minimum of 1/1 risk vs reward (risking a potential £100 with the chance of earning a potential £100). Although I personally (and highly recommend) give myself a minimum of 2/1 risk vs reward (Risking a potential £100 with the chance of making a possible £200).

A simple example of how to apply both of these rules to a trade is this:

Account value: £5,000

Opening trade:
Stop loss = £100 (£5,000*2%=£100)
Take profit = £200


2. Always use a stop loss

Like the first rule, without this, you will eventually lose most of or all of your capital. Setting a stop loss for each trade is a must because things happen all over the world which affects the markets and some of it is so significant that if you are on the wrong end of the market, it can wipe out your account in seconds.

The best example of recent times is Brexit. Although this wasn’t a completely unexpected event because the whole world knew the vote was going to happen, the majority of the world’s population believed Britain would vote to remain in the EU, including most traders. Many traders were set up for the GBP to rise against the USD and they would make a nice bit of profit. But the unexpected happened and Britain voted to leave the EU. The GBPUSD pair dropped 10% from $1.50 to $1.33 (1,700 pips) overnight. Most traders will have had their stop losses on in case this happened and they would have exited this market with a small but relieving loss. For the ones that didn’t have their stop losses on will have had an awful night, a  £10 per pip trade will have either wiped their account clean or left you them with a £17,000 loss. A lot of traders will have had a lot more money on this and will have lost £50,000+. All because they didn’t use a stop loss.

3. Learn to control your emotions

Trading is an emotional rollercoaster, anybody who tells you otherwise is simply lying to you or doesn’t have a clue about what they are talking about. When you learn to control and eliminate these emotions is when you will see better results in your trading. Risking your own money will always, to some extent, have an emotional connection to you and that is simply something nobody can eliminate. But teaching yourself to control these emotions is something that can be done very easily.  Simply put, you must teach yourself how to emotionally deal with each loss and win. If you make a losing trade and are still thinking about it the next day when you go to trade again, or you make a winning trade and you are overconfident that you will do the exact same on the next trade. It must stop. Controlling your emotions will mostly come from experience but you must give your brain the training it needs to deal with a loser or a winner in the same way. Although hard to do, the best way is to take each trade as it comes, completely forget you just made £500 or you just lost £500. Once you let the emotional side of trading get the better of you is when things can really turn sour and you begin to make very silly decisions. These silly decisions will be explained more in Rule 6.

4. Only risk what you can afford to lose

Probably the most obvious and important rule there is and not much needs to be said about it. If you break this rule it simply means you are gambling. Only risk money that if you were to lose it all, it would make no difference to your life. If you fail to understand this rule, then trading most definitely isn’t for you.

5. Patience

This is something that many people, including myself, struggle with. To most people, trading is an extremely fast-paced and exciting business. Beginners tend to think that they are in and out of a market within a day, and will be mega rich at the end of it. But in fact, it can actually be quite slow and boring. Depending on what type of trader you are, things can be very slow and it requires a lot of patience. Like myself, most of my trades tend to stay open for at least a week but most are 2 weeks +. This can, of course, become quite frustrating because you just want to see your end result right away.

As an example, you could open a trade where your stop loss is set at -200 pips and a take profit set at +500 pips. After 24 hours your trade is showing a loss of -50 pips. Many people will want to instantly exit the trade. This is failing to see the bigger picture. You SHOULD have opened this trade for a reason and there SHOULD have been a reason why your stop loss is set at -200 pips. So why would you exit the trade so soon? It will obviously take something very significant for the market to move 500 pips and hit your take profit within 24 hours. But it is easy enough for a market to move 50 pips in either direction in 24 hours.

If you are closing trades because you are scared to lose more then you are clearly risking too much. The only time you should close a trade early is when you have perfectly good reason to believe that your initial prediction is wrong or the trade has reached its potential.


6. Know when to stop trading

Most traders will have been there at some point. You’ve blown a lot of money in one day and you are tempted to risk even more just to make that money back. I’m not sure if it even needs explaining as to why you shouldn’t do this. But for those that need this to be explained here it is.

In Poker there is a term called ’tilt’. ‘Tilt’ is a poker slang term that is often used to describe the angry or frustrated emotional state of a player. We commonly associate ’tilt’ as the result of simply taking a bad beat or losing a big pot. So simply put. You lose your head and gamble even more money in the hope that you will get lucky and make your money back.

Teach yourself that when you begin to lose your head and feel like you are about to make a decision like this. Log out of your trading platform and go and do something else. It’s usually wise to take a week or so off from trading as well. Let your mind recover and return to trading completely fresh.

7. Accept losses

Almost the same as the previous rule. Learn to accept that nobody in history has ever been correct in every investment decision they have made. Even Warren Buffett himself has losers. Losers are a fantastic opportunity to learn where you went wrong and improve your trading massively.

8. Don’t fall in love

You should never fall in love with an idea so much that you can’t see any other point of view or cant accept that things didn’t go as you expected. As an example, you are looking at the USDJPY pair, everything is pointing towards the pair going up. You suddenly feel like you are a genius and about to make a huge profit. You open the trade and are simply waiting for the market to prove your ‘genius’ analysis right. But suddenly there are some poor US figures and the USD begins to plummet. This is when you need to accept that you aren’t the genius you thought you were and you must close the trade and move on.

9. No excuses

As the saying goes, ‘a good workman never blames his tools’.  If you lost your trade because the UK unemployment rate was a lot lower than you expected, and the markets reacted accordingly. Then you only have yourself to blame for not checking the economic calendar and doing your research on the possible outcomes. Taking responsibility for your own poor judgment is something that will help you, as mentioned before, learn from your mistakes and improve.

10.  Discipline

Last but not least. If you keep the discipline to stick to your trading plan and follow the previous 9 rules above. I can almost guarantee that your trading account will see the benefits.


 I picked these rules because I have been the victim of not following them more than once, and I have learned the hard way. Following these rules will eliminate unthinkable amounts of stress. 

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