The most important thing you should know about trading is that it involves high risk and there is an every chance of you losing your capital as you tend to trade on leverage capital. You have x amount with you but due to leverage provided by the broker, you tend to trade in 2x to 5x times risking your money. There is no doubt that you can make a lot of money which is in multiples if your bet goes right but you can lose a lot of money in multiple times if your bet goes wrong.
As a precaution I would suggest you not to go in trading with borrowed capital. Initially you should rather paper trade before you put your real money in trading. Trading is very appealing to human mind as it seems as one can earn a lot of money by just sitting and trading on computers. One is reminded of big traders like George Soros who earned in Forex trading huge money when he went short on Pound. Forex trading is a 24 hour market.
I feel that there are important rules of trading which one should be aware of before he or she ventures into trading in equity, currency, commodity or bond markets. There is no doubt that there is money to be made in trading. There are certain rules one should keep in mind while trading.
- Never risk more than 10% of your trading capital in a single trade.
- Always use stop loss orders.( Here you should know your loss you can give in a situation where the trade starts going against you.)
- Never do overtrading.
- Never let a profit run into a loss.
- Don’t enter a trade if you are unsure of the trend.
- When in doubt, get out, and don’t get in when in doubt.
- Only trade active markets.
- Distribute your risks equally among different markets.
- Never limit your orders. Trade at the markets.
- Extra monies from successful trades should be placed in a separate account.
- Never trade to scalp a profit.
- Never average a loss.
- Never get out of the market because you have lost patience, or get in because you are anxiously waiting.
- Avoid taking small profits and large losses.
- Never cancel a stop loss after you have placed it.
- Avoid getting in and out of the market too soon.
- Be willing to make money from both sides of the market.
- Never buy or sell just because the price is low or high.
- Never hedge a losing position.
- Never change your position without a good reason.
- Avoid trading after long periods of success or failure.
- Don’t try to guess tops or bottoms.
- Don’t follow a blind man’s advice.
- Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.
- When you lose don’t blame it on luck.