Forex

10 Forex Trading Rules To Learn From George Soros

December 20, 2023726 views0

We often think of trading as an art rather than a science. Because there are no rigid rules and principles, we are free to experiment and do things in our own way. However, this flexibility should not result in a lack of structure and discipline. Read More

Being impulsive and not having a plan can put you in a dangerous position as a forex trader. George Soros is well-known as the man who broke the Bank of England by shorting the British Pound. He is a renowned author of many books related to financial markets and has many valuable insights to share about trading.

Today, I will tell you about 10 forex trading rules that George Soros followed throughout his trading journey and how they can help you build a successful trading career in the forex market.

Recognising your mistakes leads you to successEven though George Soros is an expert trader, he accepts the fact that he wasn’t perfect from the beginning. He has made his fair share of mistakes, and he was able to become successful by recognising these mistakes in time. He knew when he went wrong, and we needed the same ability to become a skilled trader over time. We need to rely on analysis and calculations instead of giving in to our urges and sudden impulses. Trading calculators can help you add more precision to your trading decisions, and such simple tools can save us from making silly mistakes that cost us a lot.
However, making mistakes is normal, as our analysis can go wrong at times. Firstly, you need to accept your shortcomings and mistakes rather than blaming the market for everything. The market is not going to move according to your expectations, you are supposed to analyse the situation and take a position based on how it is moving. However, sudden reversals are not a rare phenomenon, and you must be able to learn from the trades that didn’t work in your favour. Making mistakes doesn’t make you a loser as long as you learn the lesson and correct them in time.
Pay attention to how much you gain when your analysis is right and how much you lose when it is wrongThis is a simple rule that sums up the importance of having an optimal risk/reward ratio. Your risk of loss should be low while your potential return or profits are higher. Taking a big risk for a small win is a stupid move in trading, as you will not make significant gains but encounter huge losses when things go wrong. A solid risk management plan and a profitable strategy are essential to limit losses and amplify profits. To assess the profitability of your trading system, you will have to backtest the strategy with historical market data in a demo account.
For this, you can utilise the backtesting feature on trading platforms. MT4 and MT5 are the most preferred trading platforms among forex traders. MT4 is known for its simplicity, while MT5 is known for its sophisticated tools and advanced capabilities for trading automation. Both platforms facilitate easy backtesting, and you can optimise your strategy for better performance based on the results. If you’re a beginner, then you can access the MT4 trading platform.
Making mistakes is fine as long as you are able to correct them in timeThis is related to the first rule, but the goal is to remove the guilt and focus on improvement. You will surely feel stressed and disappointed while encountering back-to-back losses. But you should not let these failures affect your confidence. Don’t be ashamed of your mistakes, instead, give yourself a pat on the back for being able to see how things went wrong. You should use a margin calculator to calculate the right margin you should use in your trades to manage your risk.
Don’t beat yourself up for making poor decisions, but make a promise not to repeat it again. Even the most successful traders would tell you a bunch of stories about blowing up accounts. They just happen to figure things out in time, and you should aspire to do the same.
If you are having fun, you are not going to make any moneyThis was something that Soros said about investing, but we can apply this rule to trading as well. Trading is not supposed to be fun or entertaining. Yes, it can be exciting, and nothing beats the feeling of winning a trade. However, the process should not be driven by feelings or emotions. You will have to remain rational and logical, which is boring and sometimes complicated. You should be prepared to watch the charts and delve into the technicalities of trading.
Don’t forget to practise on a demo account with a serious approach, as it allows you to observe and learn about the market without risking real money in the first place. Trade the demo just like you would trade when real money is at risk. Be professional and only enter the market if you have the will to work hard to reach your goals as a trader.
The market is unpredictable, and you must be prepared for different scenarios instead of trying to make an accurate predictionContrary to popular belief that state trading is about predicting price movements, George Soros has a different outlook towards financial markets. He doesn’t think the market is predictable, as you have to wait and confirm your analysis before taking action. Basically, you should avoid entering trades way too early and exiting too early. You should not jump to conclusions as the market will move itself, unveiling the situation. You need to be prepared for different scenarios and plan for the best and worst situations. This is also related to risk management, as we always place a stop loss, no matter how promising the trade looks.
Join a trend early, and if not, wait and enter before the trend reversalSoros talks about entering the market when it starts trending, and if you don’t open a position in the initial phase of a trend, it would be better to wait some more time and enter when the charts suggest a trend reversal. Joining a trend late will reduce your potential profits as you won’t get the benefit of a favourable entry price. Big traders like Soros stabilise the market by doing so, but for retail traders, this is just about maximising the gains by opening a trade at the best price levels. You can also wait for pullbacks and retracements, which indicates a pause in the trend before it resumes and can be ideal entry points.
There is always uncertainty in the market, and you have to expect the unexpected to make more profitsHere, Soros talks about the importance of thinking outside the box, as sometimes counter-intuitive trading decisions are the best, resulting in profits. On the other hand, when we stick to the traditional way of thinking, our trading decisions are obvious, and they may not give the expected results. This type of strategy can work for experienced traders, but you need to be careful while placing trades against the trend. Following the trend is easier, whereas counter-trend strategies are tough to execute for an average beginner.
It takes less effort to make an unfavourable situation favourable, and it gives bigger gainsThis quote is talking about turning the tables in an unfavourable situation. Buying the dip and waiting for a price hike can be a good example to describe this quote. You can see how some currencies gain strength after falling to the lowest level in the forex market. If you want to check the price of one currency in another, you can use a currency calculator. Those who opened long positions during this situation will be able to make significant profits following a rebound.
The market is often driven by fear or greed, and mostly greedSoros thinks market sentiments have a bigger role in deciding the trend. This is true for the short-term volatility and fluctuations that happen in the forex market. There is either fear or greed, and Soros says greed is good for investors when it’s limited. For forex, we can apply this for positions held for an extended period (position trading).
Stay flexible and correct your predictions when they are wrongGeorge Soros didn’t try to make accurate predictions but made profits by correcting the false ones along the way. Basically, it is about being flexible as your predictions can go wrong, and you just need to be quick enough to realise the same and take action as demanded by the situation. You should be able to go with the flow rather than swimming against it.

Conclusion

In a nutshell, the rules or sayings of George Soros are nothing but knowledge that comes with hands-on experience. You will also learn more as you start trading for real, and those who are already trading should keep learning and improving. Becoming a good trader is all about admitting when you are wrong and correcting yourself in time.