How To Be A Forex Trader Without Killing Yourself

By: Ricky Weber Click author's name for more of his/her articles

As a culture, we have very fond and fuzzy memories of stock brokers and traders leaping to their death from tall skyscrapers in New York during the depression in the late 1920's and early 1930's. It is no secret that being a trader in any market can be a seriously stressful job.

One of the most stressful of all financial markets to trade is the forex or foreign exchange market, because today when trading on a retail level there are hundreds of brokers that offer comparable account features with a normal account leveraging ratio of 100:1 or sometimes even higher.

Trading at 100:1 leverage in the stock market would be literally unthinkable, but due to the massive daily amounts of currency exchange activity it is pretty standard to leverage your money at such a high ratio. Needless to say, using such a high amount of leverage increases your trading risk proportionately, and does nothing but add to the stress of trading in the forex market.

Here are a few important rules that you can follow with your forex trading in order to minimize risk and stress, keep all of the hair on your head, and make sure that you never buy a gun that has only a single round in it:

Do not trade with money that you need to pay the rent with. The best traders create an atmosphere of complete emotional detachment from the money they are trading, otherwise the base instincts of greed and fear will own you.

Focus only on one or two currency pairs at a time. EUR/USD and GBP/USD are usually the only currency pairs new traders follow, but sometimes they will trade USD/JPY or even EUR/JPY. One of the great things about forex trading is you only need to focus on a handful of major currencies instead of dozens of stocks.

Create a simple trading strategy at stick to it! Making a trading strategy that works and is not overly complex can be an easy task. An example of this might be to buy when you see the price break through an established resistance level and when the direction of the moving average line confirms the trend.

Do not over leverage or over trade your account. Arguably trading with your money at 100:1 is over leveraging, but you can still use sound money management principles to keep the risk in check by never risking more than 5% of your total account balance on a single trade. Also make sure that you have a specific reason for entering the market every time you trade, and do not go into an open position without a clear exit strategy.