Basic Guidelines for Trading Forex, commodity, and stock index

Plan your trade and trade with plan: You must have a trading plan to succeed. A trading plan should consist of a position, why you enter, stop loss point, exit the target, plus the strong money management strategy. A good plan will remove all the emotions from your trades.

• Trend is your friend: Do not fight the trend. If the market is bullish,you must take long position. Conversely, if the market is bearish, you must open short position. Do not fight the trend.

• Focus on keeping capital: This is the most important step you should take when dealing with your trading capital. Your main objective is to preserve capital. Do not trade more than 10% of your deposit in a single trade. For example, if your total deposit is $ 10,000, every trade should be limited to $ 1,000. If you do not do this, you will exit the market in a short time.

• Know when to cut your losses: If the trade goes against you, sell and let. Do not insist on poor trading and hope that the price will rise. You most likely end up losing more money. Before you open a transaction, set your stop loss price, the price at which you should sell when the trade turns unfavorable. It depends on your risk profile how much you need to set a stop loss.

• Take advantage when trading well: Before entering the transaction set how much profit you want to take.If the trade turns out to be good, take advantage. You can take all the profits or take advantage gradually. When you have earned your trading cost, you have nothing to lose. Sit quietly and watch the movement of profits.

• Without Emotion: Two biggest emotions in trading: greed and fear. Do not let greed and fear influence your trading. Trading is a mechanical process and it was not for the emotional. As said Dr. Alexander Elder in his book “Trading for Living”, if you sit next to a successful trader and observe, you may not be able to tell whether he earns or loses money. That’s the emotional stability of a successful trader.

• Do not trade if you only based on tips from others: You can trade only if you have done your own research or analysis. You should be a trader who has understanding.

• Make a trading journal: When you buy a market instrument, write down the reasons why you buy and how you feel at that time. Do the same when you sell. Analysis and write down the mistakes you make, and the things you’ve done it right. With reference to the trading journal, you learn from your past mistakes. Correcting your mistakes, continue to learn and continue to improve.

•  When you doubt, do not trade: If you have doubts and are not sure where the trend of the market, remains outside. Sometimes, doing nothing is the best thing to do.

• Do not over trade: Ideally you should have 3-5 positions at a time. Not more than that. If you have too many positions, you will tend to be out of control and make emotional decisions when there is a change in the market. Do not trade for the sake of trade.

(From: http://hikamirzan.com) 

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