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Forex is a business and like any other it requires safety, yes you herd me right!
How many times have you herd the phrase only trade with money you can afford to loose? How can anyone learn to protect there account when they are fed this kind of advice in the forex trading world?
There are a couple of simple rules that if followed correctly will make the difference between you becoming another statistic with a blown up forex trading account or a successful trader.
The 1% Rule Until you become successful and consistent in you trading you should never risk more than 1% of your trading account on any one trade. You should also never have more than 3% of you account at in any one moment.
Keeping your risk to a minimum plays an essential role in the protection of your trading account during your early trading days. I always advise new traders to stick a piece of paper to the top of there monitor which says “Protect Your Trading Account” Read this every time you take a trade.
The 35% Rule Statistics show that on average once a trader draws down his/her trading account down by more than 35% there is a high probability that they will let there emotions take over and blow the whole account by over leveraging in a attempt to regain the losses.
If you ever find yourself at this point you should stop trading immediately, it’s your cut off point! Focus on finding what went wrong with your trading and correct it.
Don’t just throw money back into your trading account, get a part time job, do what ever it takes but earn every cent of that money back even if you have to get a job selling pizza’s! This will bring you back down to earth and remind you the value of the money in your trading account. Once you have worked to get back all your losses you can fund your account again. This is a highly affective strategy to gain control of you emotions.
Trading need not be complicated, follow these two simple rules and like me you will never become one of the 95% of traders who fail!