Principles of working on Forex.

Most novice traders lose money almost instantly in the forex market, the main reason being a simple lack of understanding of the basic principles of forex trading. There's nothing complicated about it; you just need to have a clear understanding of what to do and what absolutely should not be done when trading.

Forex principles are a set of rules that a novice trader should follow; essentially, they are tactical decisions for successful trading.

They can be roughly divided into two main categories: capital management and trade execution. Let's take a closer look at this topic.

Principles of capital management.

1. Forex deposit size – this aspect is especially important when trading using the scalping strategy. Despite what skeptics say, this is the best way to make money with a small amount in a short time.

The main mistake traders make is trying to maximize their profits by constantly increasing their trade volume using their deposit.

I remember two particularly striking examples of proper and improper deposit management.

In the first case, a trader with 3,000 rubles managed to increase his deposit to 400,000 in a few days – a truly remarkable result. Unfortunately, the next day, the deposit was reduced to 100 rubles.

The second example is a more successful example of applying forex principles: the initial amount of $300 was quickly increased to $2,000, followed by a withdrawal of $1,500. A series of unsuccessful trades then wiped out the deposit. After some time, trading was resumed with $500, bringing the deposit to $1,200. Another withdrawal of $700.
This trading scheme was used for a month, and as a result, the account profit reached $2,300.

From the examples provided, it follows that the main principle of capital management in risky forex strategies is the timely withdrawal of profits.

2. Leverage – this factor and the mismatch between the deposit size and trading volume are the main reasons for losing a deposit. In forex, the largest exchange rate fluctuations rarely exceed 1%, which, when trading without leverage, would result in a loss of 1%. If you use a leverage of 1:100 or more, such a movement will trigger a stop out .

Therefore, one of the forex principles states that a novice trader should not use leverage greater than 1:50.

Principles of making transactions on Forex.

1. Use analysis —no matter how long you think a current trend will last, always conduct at least a cursory market analysis. Sometimes the situation changes while it's still in progress, preventing mistakes.

2. Trade only at favorable times —that is, open trades only when the market is in a favorable situation. Many traders trade only when the market is flat, while others persistently wait for announcements of National Bank interventions.

3. Stop in time —I've heard more than once of traders who lost their deposits after 10 consecutive losing trades. Therefore, the key is to stop in time after 2-3 losing trades; in most cases, losses only increase.

I haven't covered most of the well-known principles and rules of Forex trading in this article; you can read them in the article " Forex Rules ."