Rule 2 - Play it Safe, Use Protective stops

Whether you're protecting yourself from massive devastative losses or you're protecting profits you've earned, protective stops will help you sleep better at night. The worst thing that can happen for your psychological state while trading is to suffer sudden, massive losses.

Recently I had wood floors installed and one of the installers looked at my computer and was like "oooooh, forex." And told me this horror story about how he lost $10,000 in a margin call right after Hurricane Katrina. How many traders (or former traders) have the same story?

If you loose significant portions of your equity in a big price swing, or in a margin call, you have no one to blame but yourself. I always put a stop at 2.5% of my total account value whenver I place a trade. Make it part of your trading strategy to never never NEVER place a trade without a stop, and never have to go back to installing floors for Lowes instead of making your own money.

If you've stopped using stops because you kept running into them, a little more tough love: if you're constantly hitting your stops, you're either setting them too close, or - more likely - you're choosing the wrong entry points.

Forex is like sex, it's more fun if you play safe!

Forex Psyche Rule #1: Stay Calm!

The forex markets don't have emotions, but they are influenced by the emotions of millions of traders around the world. By staying calm and keeping your wits about you, you can take profits when possible and get out of bad positions before they take down your entire account.

If you find yourself irritated, agitated, terrified: close your positions in the best way you can (or put in appropriate stops) and walk away. Get some air. Go for a run. Placing poorly planned orders in an attempt to regain lost funds will most likely backfire. If you're not calm, rational and patient, GET AWAY FROM YOUR COMPUTER.