If you set up a rules based forex trading system for entering trades and you rigidly follow these rules, the results should be positive trades, pips, and profits. If the results are consistent losses with few or no winners, then the rules you set up or the trading system you are following is a faulty system.

Abandon the system and set up new rules based on a new set of rues that is specific to that system. Fortunately, you can discover a faulty system with demo trading, without any financial risk or actual monetary losses.

If you start to enter demo forex trades based on your trading rules and you simply cannot make any profitable trades, your system is likely ineffective. The culprit is more than likely the technical indicators behind the system, because technical indicators proliferate the forex industry and simply do not work.

Forex traders that are using rules based forex trading system now are almost always using technical indicators, so their rules are based on the indicators. This results in frustration and no pips. Move on quickly from the useless technical indicators and set up forex trading rules that do not rely on indicators. Any forex system that uses rules with technical indicators at the foundation will almost always fail, except for making a few pips here and there.

Setting up good quality trading rules includes eliminating rules that are not providing results. Every forex trader knows technical indicators provide thousands of combinations but the pips are simply not there. When you enter a forex trade you should always follow a set of rules, these rules should be simple, not complicated. Anyone should be able to easily explain their rules to another trader. Here is an example of a basic set of five entry rules for any trade for use in the main forex trading session.

Rule 2 — Only enter trades with no nearby resistance on buys or no nearby support on sells, at least pips, and at least pips on some highly volatile pairs. Rule 3 — Trade only if one currency is strong or the other one weak or both, see an example of consistent Euro EUR currency strength in the example below using our real time trading tool called The Forex Heatmap®. You can see the movement was very strong, pips in one trading session on just one pair. Rule 5 — Demo trade first, then move to micro lot trading , then continue to scale up to mini lots over time.

Build your experience base. Using these five simple rules we lay out in here should result in significant positive pips for any forex trader, without relying on any technical indicators whatsoever. This way you can make sure your system is valid before committing any real money and going to live trading. The above five rules are based on the Forexearlywarning system, and can be used to validate the system fairly quickly with demo trading.

These are five very simple forex trading rules that any forex trader can implement almost immediately across many pairs, with no reliance on technical indicators or complicated systems.

Anyone can understand and use these rules. A trader can use some easy to set up, free exponential moving averages to determine the primary trend. Real time, consistent currency strength or weakness can be easily measured on entry using live tools like The Forex Heatmap®. Start testing these rules first by demo trading. Trading results should improve immediately for any trader who has been struggling by implementing these five basic rules.

These five basic rules can get you started trading with the Forexearlywarning system. Now we can start to investigate some additional rules you can add depending on how strict you want to be.

Any good rules based forex trading system will also have rules for money management. Along with the five forex trading rules for trade entries listed above you can also have rules for money management.

Money Management Rule 3 — Do not enter a trade unless you can possibly get at least 3 pips for each pip you risk. For example, if you start your trade with a 30 pip stop you must be trying to get at least pips from that trade potential reward.

Better risk management , trade after trade, is what forex traders want more of. The list of 5 rules above are for trading in the main forex trading session. These 5 rules are great for the main forex session because the liquidity and market participation is very high. Most great trades occur in the main trading session. But occasionally some trades occur outside the main session boundaries, so lets modify the rules slightly for trading outside the main session.

Lets set up some rules for trading in the Asian session now. We would keep the original five rules in place for the main session then add one more. When trading in the Asian session you would also want to enter trades only at the beginning of a new movement cycle on the H1, H4, or D1 time frames. So by adding one more rule we can now look to enter trades in the Asian session. Trade at the beginning of the trend cycle on the higher time frames when entering trades in the Asian session.

Rules Based Forex Trading — Trend Cycle. Many entries in the Asian session are around AUD, NZD, and JPY news drivers, so keep an eye on the forex news calendar for volatile news drivers for these three currencies. The forex market is advertised as a 24 hour market. When trading in the Asian session, you can also use rules based money management outlined above. These rules do not change. So now, traders have a set of rules for trade entry and money management for almost all situations.

Enter most of your trades in the main forex trading session, which is the best time to trade forex. The main forex session is a 5 hour window of time, where strong movements can occur daily.

Plus, traders can also occasionally trades in the Asian trading session a few times per month, when new movement cyces are starting. When you are monitoring the forex market, if you see a pair that has been moving for a long time on the smaller time frames, you likely missed the movement. The pair could continue moving but you want to catch a fresh movement cycle after consolidation or rest periods.

So traders can set up another rule for these situations. So if you want to buy, we have to make sure the value of the base currency will increase. After buying at a low price level, we will close the position close position with a higher price. So, if you want to sell, we must ensure that the value of the base currency will decrease. We buy at a high price level, then close the position after the base currency value is lower than the opening value. Because in the way of forex trading there are two types of positions, forex traders have the opportunity to make profits, either when the exchange rate of a currency strengthens or weakens.

Also read: History of Forex Trading: From Era of Gold to Online Trading Like Now. Have you ever logged into a Money Changer to exchange foreign currency foreign exchange?

There are two types of exchange rates, namely the selling exchange rate and the buying exchange rate. Similarly in forex trading, all price quotes are written in two prices: bid and ask.

The bid price is usually lower than the ask price. The bid price is the price at which the broker is willing to buy the base currency and sell the quote currency. This is the price we use if we are going to sell a currency pair. The ask price, or sometimes also known as the offer, is the price at which a broker is willing to sell the base currency and buy the quote currency. That is, the ask price is the price we use if we are going to buy a currency pair. In the example above, we have the option to sell Euros at 1.

The difference between the bid and ask prices is referred to as the spread, and it is part of the reward traders give the broker in return for providing trading software and connecting with the market.

In forex trading, price movements are calculated starting from a few numbers behind the comma. Or in other words, a pip is a unit of measurement that shows the change in value between two currencies. Well, this 0. A pip is usually the last decimal in a quoted currency value. Most forex pairs appear with 4 decimal places, but some pairs such as the Japanese Yen cross pair have 2 decimal places. Along with the development of financial technology, more and more brokers provide trading facilities that can monitor price movements to even smaller fractions.

Therefore, not all brokers use 4 and 2 digit quotes; There are also brokers who use 5 and 3 digit quotes. Got it!? Well, now the question is, how to calculate profit from pips?

Because each currency has its own exchange rate, the way to calculate the pip value for each pair continues to change along with the fluctuations in the exchange rate. Consider the following example:.

Rambo has an account with DoraFX broker that provides four-digit quotes. Here, a change of one pip means a change of 0. So the dollar value per pip per unit traded is:.

The trading platform can do all the calculations for us automatically. Margin Trading allows us to trade forex with much less capital than is actually needed to access the forex market. In fact, it takes millions of dollars to play forex like the big players. However, Margin Trading allows us to take part in this very lucrative market. Why so? Because forex trading is trading non-physically, that is to say, the broker does not need to hand over a wad of real 10, Euros to us.

We as traders are enough to pay trading fees in the form of spreads and commissions only to the broker. And the next day the currency pair has experienced a movement of points to 1. For example, if we buy euros, the profit we will get is calculated as follows 1. Well, the capital is small, only Euros. Imagine if we deposit a larger capital, 10, Euro for example. So if you count again, with a deposit of that size, the profit can be Euros!

We are desperately looking for a capital of 10, Euros aka million Rupiah, just to get 1. Wait a minute! The example above is conventional trading with a one-for-one system, which means the higher the capital, the higher the profit. This type of trading will certainly not be of interest, especially for those of us who have mediocre pockets.

This is because in order to really make a profit, you will actually need a large capital. In essence, you only need to guarantee a small amount to get the 10, Euro capital. If the 10, Euros capital is used for trading and makes a profit like in the example above, then the profit is still Euros!

In essence, we can be percent profit once a trade! Also read: 6 Reasons and Advantages of Forex Trading that You Must Know. Or in other words, margin is the amount of money we need to hand over to the broker as collateral so that we can trade forex freely.

In practice, margin is usually indicated in the form of a percentage of the guarantee that we must submit versus the amount of funds that we can use to open a trading position.

Based on the margin determined by the broker, we can calculate how much our maximum leverage is. From the description in the previous section, of course it can be concluded that the existence of leverage and margin is profitable for traders. However, this is actually a double-edged sword that must be used wisely. For example in the example above.

Therefore, it is recommended to use moderate leverage and margin, around if you are still new to forex trading. In addition, we must pay attention to the following important terms when trading forex:. If you understand these terms, then we can anticipate the possibility of inadequate margins or even experiencing losses that exceed our available capital. Please note, risk in forex is inevitable, but can be controlled, including the risk of insufficient margin.

Also read: The 6 Type Forex Market Participants In The World. Technology has made the way of online forex trading in such a way that it makes it easier for us as traders. For example, after opening a trading position, we do not need to stare at the computer while waiting for the position to reach the profit target.

We simply place an instruction on the platform, at what price the target profit is considered to be reached and the trading position should be closed. Later, even if we are relaxing watching a movie in the cinema or busy working in the office, trading positions will be closed automatically and profits will be directly entered into the account.

Through a similar method, we can also prevent fatal losses due to Margin Calls. You do this by placing a Stop Loss to close a losing trading position, before reaching the margin availability limit. Therefore, even if we do not observe the market continuously, we can still prevent unwanted losses. Also read: What is Forex Trading: Definition, Markets and Forex Basics.

What to do? On the forex trading platform provided by the broker, various types of instructions are available. In addition to instructions for closing trading positions automatically, there are also various types of orders, such as: sell if the price is above the current price Sell Limit , buy if the price is below the current price Buy Limit , and so on. This can be witnessed and tested directly on the trading platform, even if you only have a forex demo account.

HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.

This article will present a rules based forex trading system and a short list of rules for more accurate trade entries, and we will also present some basic rules for money management.

By incorporating these rules into your forex trading, trade entry accuracy and pip totals should increase substantially. We will start with some basic rules for a simple but effective forex trading system. Then you can increase the number of forex trading rules rules to limit the number of trades, or to enhance the results and overall pips captured on a trade by trade basis.

Setting up a rules based forex trading system allows you to formulate a complete trading system based on those rules. It also gives you the ability to test any trading method. This is much different than random trade entries. Rules must be specific, not general. A rules based trading system means you do not guess or use discretion from trade to trade.

You simply follow the rules. The rules you set up should be simple. All traders should avoid complex rules, systems, and standard technical indicators that cannot be easily explained.

If you set up a rules based forex trading system for entering trades and you rigidly follow these rules, the results should be positive trades, pips, and profits. If the results are consistent losses with few or no winners, then the rules you set up or the trading system you are following is a faulty system. Abandon the system and set up new rules based on a new set of rues that is specific to that system. Fortunately, you can discover a faulty system with demo trading, without any financial risk or actual monetary losses.

If you start to enter demo forex trades based on your trading rules and you simply cannot make any profitable trades, your system is likely ineffective. The culprit is more than likely the technical indicators behind the system, because technical indicators proliferate the forex industry and simply do not work. Forex traders that are using rules based forex trading system now are almost always using technical indicators, so their rules are based on the indicators.

This results in frustration and no pips. Move on quickly from the useless technical indicators and set up forex trading rules that do not rely on indicators. Any forex system that uses rules with technical indicators at the foundation will almost always fail, except for making a few pips here and there. Setting up good quality trading rules includes eliminating rules that are not providing results. Every forex trader knows technical indicators provide thousands of combinations but the pips are simply not there.

When you enter a forex trade you should always follow a set of rules, these rules should be simple, not complicated. Anyone should be able to easily explain their rules to another trader. Here is an example of a basic set of five entry rules for any trade for use in the main forex trading session. Rule 2 — Only enter trades with no nearby resistance on buys or no nearby support on sells, at least pips, and at least pips on some highly volatile pairs.

Rule 3 — Trade only if one currency is strong or the other one weak or both, see an example of consistent Euro EUR currency strength in the example below using our real time trading tool called The Forex Heatmap®. You can see the movement was very strong, pips in one trading session on just one pair. Rule 5 — Demo trade first, then move to micro lot trading , then continue to scale up to mini lots over time.

Build your experience base. Using these five simple rules we lay out in here should result in significant positive pips for any forex trader, without relying on any technical indicators whatsoever. This way you can make sure your system is valid before committing any real money and going to live trading.

The above five rules are based on the Forexearlywarning system, and can be used to validate the system fairly quickly with demo trading. These are five very simple forex trading rules that any forex trader can implement almost immediately across many pairs, with no reliance on technical indicators or complicated systems.

Anyone can understand and use these rules. A trader can use some easy to set up, free exponential moving averages to determine the primary trend. Real time, consistent currency strength or weakness can be easily measured on entry using live tools like The Forex Heatmap®.

Start testing these rules first by demo trading. Trading results should improve immediately for any trader who has been struggling by implementing these five basic rules.

These five basic rules can get you started trading with the Forexearlywarning system. Now we can start to investigate some additional rules you can add depending on how strict you want to be. Any good rules based forex trading system will also have rules for money management. Along with the five forex trading rules for trade entries listed above you can also have rules for money management.

Money Management Rule 3 — Do not enter a trade unless you can possibly get at least 3 pips for each pip you risk. For example, if you start your trade with a 30 pip stop you must be trying to get at least pips from that trade potential reward. Better risk management , trade after trade, is what forex traders want more of. The list of 5 rules above are for trading in the main forex trading session.

These 5 rules are great for the main forex session because the liquidity and market participation is very high.

Most great trades occur in the main trading session. But occasionally some trades occur outside the main session boundaries, so lets modify the rules slightly for trading outside the main session. Lets set up some rules for trading in the Asian session now.

We would keep the original five rules in place for the main session then add one more. When trading in the Asian session you would also want to enter trades only at the beginning of a new movement cycle on the H1, H4, or D1 time frames.

So by adding one more rule we can now look to enter trades in the Asian session. Trade at the beginning of the trend cycle on the higher time frames when entering trades in the Asian session. Rules Based Forex Trading — Trend Cycle.

Many entries in the Asian session are around AUD, NZD, and JPY news drivers, so keep an eye on the forex news calendar for volatile news drivers for these three currencies. The forex market is advertised as a 24 hour market. When trading in the Asian session, you can also use rules based money management outlined above.

These rules do not change. So now, traders have a set of rules for trade entry and money management for almost all situations. Enter most of your trades in the main forex trading session, which is the best time to trade forex. The main forex session is a 5 hour window of time, where strong movements can occur daily. Plus, traders can also occasionally trades in the Asian trading session a few times per month, when new movement cyces are starting.

When you are monitoring the forex market, if you see a pair that has been moving for a long time on the smaller time frames, you likely missed the movement. The pair could continue moving but you want to catch a fresh movement cycle after consolidation or rest periods.

So traders can set up another rule for these situations. Additional Forex Trading Rule — Only trade a pair when it is starting a new movement after a consolidation or retracement period, or when a non-trending pair starts a new movement or trend breakout. When you are trading with a trend based system, you would prefer to trade near the beginning of a new movement cycle, so you can sit back and ride the trend for a few days or longer and let the market do the work.

Also, news drivers can move markets and cause stop outs, or additional profits. So you need a set of rules for trading around volatile news drivers. Additional Forex Trading Rule — When entering a trade make sure strong news drivers are at least one hour away to give you time to move your stop to break even on any recently entered trades. Otherwise exit the trade or wait until after the news to consider a new trade entry.

Make sure stops are at break even ahead of any volatile news events on the forex news calendar. Sometimes the entire forex market, or groups of currency pairs are trending and moving with the trends almost every day. Understanding the condition of the market is important to forex traders and can be incorporated into a rules based forex trading system.

If many of the pairs and currency groups look choppy on the charts you can set up rules to deal with this problem, like specifying the number of lots traded to be less.

Market conditions change from trending to ranging or choppy and if you can identify this, you can account for this with a new rule. In order to be able to know the condition of the forex market you need a technique and set of indicators to analyze.

We suggest multiple time frame analysis applied to individual currencies. Using these market analysis techniques will always give you a clear view of the current market conditions, trending, ranging, oscillating, choppy, on any pair or group of pairs with one common currency. One rule might be to evaluate the condition of the market and to know if you have some pairs that are trending up or down. Then you can set up rules based on trending pairs, this is like writing a trading plan.

You can use multiple time frames across many pairs to know the condition of the market. Become proficient at multiple time frame analysis so you can identify the condition of the market across many pairs and currency groups.

Additional Forex Trading Rule — If you identify a choppy group of pairs or choppy market in general, be prepared to trade less lots on each live trade or not to trade at all until it clears up, which may only take 1 or 2 days. Or else move to another pair. We have an article completely dedicated to trading in a choppy market that would be a great read for these market conditions.

Anyone who has successful traded the forex market this long has earned the right to look for more pips. Experienced traders can look to do short term intra-day trades, trade outside the boundaries of the main trading session, and possibly even do short term trades against the trend. You still need to have a set of forex day trading rules similar to the ones we have discussed so this article.

Experienced Traders Rule — If a currency pairs trends in one direction for a week or more, but cycles in the other direction it is okay to do a short term trade against the major trend. Experienced Traders Rule — If the entire market is ranging and you would like to do some short term trading trying to make pips at a time this is not a problem either, as long as you follow the five basic rules we set out in this article.

Forex day trading rules are most definitely for experienced traders. Experienced Traders Rule — Reducing the time frame for entry below the H4 threshold, down to the H1 time frame, is possible for experienced traders if the other rules are met or there is a fresh movement cycle starting on the H1 time frame. Experienced Traders Money Management Rule — If you identify a choppy market, trade less lots or not at all and scale out lots sooner, using strong signals from The Forex Heatmap®.

Experienced forex traders can develop more intricate rules for profit taking, setting price targets, and scaling out additional lots.

We warned you at the outset that this would not be the most riveting article you would ever read. Anyone should be able to easily explain their rules to another trader. You should also be aware that, for brokers and dealers, many of the rules and regulations that apply to securities transactions may not apply to forex transactions. It is a formal exchange, such as the New York Stock Exchange NYSE. A leverage maximum means that the investor you is required to have at least 0.

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