Investment Principles of Experienced Forex Traders

Using correct money management techniques is the most important component of successful trading. Whether it is stocks, futures, or Forex, successful traders always list correct fund management methods as the top principle for making money. Below I will share with you the investment principles of an expert in Forex speculation.

Investment guidelines for Forex speculators

1. When placing any order, there must be a stop loss.

Minimizing losses is the fundamental guarantee for long-term profits. Therefore, in order to minimize your losses, any order placed must have a stop loss.

2. The risk/profit ratio should be at least 1: 1.5.

When you are about to place an order, you must clearly think about the possibilities of profit and loss. Assuming that the profit potential is ￥4000 and the loss potential is only ￥2000, then the risk/profit ratio is 1: 2, so it is worth a try..

3. Don’t overload your account.

Because Forex trading can amplify the amount of capital control, the usual ratio is 100: 1. This means that 1, 000 US dollars can control 100, 000 US dollars. Then this function of capital amplification is like a double-edged sword, with high returns accompanied by huge risks. Therefore, prudent investors usually control the maximum loss within 10% each time, so that profits will be stable and long-term. So our goal should be to be a good investor, not a speculator.

4. Accept failure and shift your attention to the next trade as soon as possible.

No one in this world can guarantee that every transaction he makes is profitable, so when you lose money in a transaction, forget about it as soon as possible and shift your attention to the next transaction. Otherwise, you will lose more and more and you will be unable to extricate yourself.

5. Develop a practical trading plan.

Don't involve feelings and money. Simply treat every order as a business transaction, without involving emotions. If there is a loss, learn to accept it and move on. Learning how to accept failure is more important than success. It is similar to an old Chinese saying that failure is the mother of success. There are no emotional factors. It is difficult to adapt and get used to trading according to trading principles at first, but you have to adapt to it because it is the only way to make money.

6. When your trades are profitable, protect your winnings.

Protecting your profits is another important factor in achieving stable, long-term profits. When you are in a profitable position, it is important to raise your stop loss accordingly. In this way, even if you hope to hold this position for a longer period of time and obtain more profits, at least your minimum profit is guaranteed.

7. Control the size of the transaction within the range of losses you can afford.

Although everyone knows that trading more than you can afford is a stupid thing to do, this kind of stupidity is still very common among us traders. The purpose of our Forex transactions is to improve our quality of life, so we should not use money that we should not use, such as monthly living expenses, retirement savings, and do not borrow money to conduct Forex transactions. Because if you do this, your mentality is no different from that of ordinary gamblers, and the end result is usually that you lose everything.