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Common Sense Guidelines for the Average Trader
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Common Sense Guidelines for the Average Trader
Look for a reputable broker

Ability to trade effectively depends on consistent spreads and ample liquidity
Anyone can establish a position
Ability to close out a position at a fair market price is more important
Live to trade another day

Apply prudent money management skills
Avoid using excessive leverage that puts your investment capital at risk
Always trade with a stop!
Don’t trade emotionally, stick to your plan and maintain discipline

Establish a trading plan before initiating a trade
Set reasonable risk/reward parameters
Don’t override your stops for emotional reasons
Don’t react to price action – means don’t buy just because it looks cheap or sell because it looks too high, Have supporting evidence to back up your trade
Don’t punt

Don't punt( Punting is trading for trading sake without a view)
Don’t leave stops at obvious levels such as “big figures” (e.g. eur/usd 1.20, usd/jpy 110)

i.e. JUBBS stops = stops at obvious levels and thus are more likely triggered
Don’t add to a losing position in unless it is part of a strategy to scale into a position

In other words, don’t double up in the hope of recouping losses unless it is part of a broader trading strategy
Trading with and against the trend

When trading with a trend, consider the use of trailing stops.
When trading against the trend, be disciplined taking profits and don’t hold out for the last pip
Treat trading as a continuum

Don’t base success on one trade
Avoid emotional highs or lows on individual trades
Consistency should be an objective
Forex trading is multi-currency

Watch crosses as they are key influences on spot trading
Crosses are one currency vs. another, such as eur/jpy (euro vs. jpy) or eur/gbp (eur vs. gbp)
Crosses can be used as clues for direction for spot currencies even if you are not trading them
Be cognizant of what news is coming out each day so you don’t get blindsided

Be cognizant of what news is coming out each day so you don’t get blindsided
Beware of trading just ahead of an economic number and be wary of volatility following key releases
Beware of illiquid markets

Beware of illiquid markets
Adjust strategies during holiday or pre-holiday periods to take into account thin liquidity
Beware of central bank intervention in illiquid markets
Jay Meisler, a partner in Global-View.com, says one problem of trading with too-high leverage is that one piece of surprise news can wipe out one's capital. "Those who treat forex trading as if they were in a casino will see the same long-term results as when they go to Las Vegas," he says, adding: "If you treat forex trading like a business, including proper money management, you have a better chance of success." …Newsweek International, March 15, 2004

Treat this business as a marathon and not a sprint so you avoid burnout and maintain stamina for the long haul.

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Common Sense Guidelines for the Average Trader