Traders should always have at their disposal real time news and charts before trading, to get a better feel of the forex market. They should regularly check the forex economic calendar to stay updated on upcoming economic releases and events that often greatly affect foreign currency rates.

Trading Rules

Do not always follow the crowd. Often, by the time "the crowd" has reacted, the price move is almost over.

If you end up the wrong way in a position, try to avoid the temptation of quickly reversing the position to "get back" a loss. Reversing a forex, position is sometimes the right move, but simply make that move for the right reasons, not because you let your emotions get in the way of sound judgment.

Be decisive when "pulling the trigger" on a trade. If you are confident in your trading strategy, you should not be overly cautious or indecisive when making trading decisions because waiting too long could cause you to miss out on a good opportunity.

Don't let greed get in the way. Once you have acheived the anticipated target, consider liquidating some or all of the trades and then move on to the next trade. It is natural to hope that one trade will end up as your "winning lottery ticket" and make you rich, but that is simply not realistic. Do not hold the position too long and end up loosing the trade to the market.

Use appropriate stop-loss orders at all times to cut your losses and never, ever sit back and let your losses run. Almost every trader at some point makes the mistake of letting losses run in hope that the market will eventually turn around in favor but, more often than not, it simply leads to an even greater loss. Win some, lose some. Simply learn to cut your losses, take the occasional lumps and move on to the next trade. If a mistake is made, learn from it and do not do it again. Avoid letting your losses run, get into the habit of determining an acceptable target as well as an acceptable risk tolerance level for each and every forex trade before entering the market. Then simply place a stop-loss order at the appropriate price - but not so tight (close to the market) that the stop could quickly take you out of the position before the market has a chance to move in your favor. Using a stop is always the smart move.

Trying to pick tops and bottoms is another common FX trading mistake. If you are going to trade tops and bottoms, at least wait until the price action actually confirms that a top or a bottom has been formed before you take a position in the market. Trying to pin-point tops and bottoms in the foreign exchange market is very risky, but exercising a little patience and waiting for a proven top or bottom to form can increase your odds and somewhat reduce your risk.

Last, but not least, always do your homework and stay current on global events. You never know what's going to set off a particular currency on any given day.