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Nine Simple Trading Rules You Need to Know

Fusion Markets

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Read Time: 11-12 Minutes.


If you want to cross the line between being an investor and being a trader, there are some things you should keep in mind. The rewards are higher, but there is much more at stake. You could lose hundreds, if not thousands of dollars in a day. I have been trading on MetaTrader for years. I have watched people gain and lose fortunes multiple times. Throughout those years, I have come up with essential truths to always keep in mind when trading:  





1.   Trading is both easy and difficult.  


There is a misleading simplicity when it comes to trading. As long as you diversify, stick to your strategy, never go all in, and always secure your profits, you can stick around for very long. 

However, trading becomes difficult because of the human aspect and our hidden biases. We tend to get greedy and blinded by small gains or by big losses. We tend to abandon our long-term strategies because of what we see in the short term, and this is where Rule Number 2 comes in… 

 

2.   Psychology is everything   


Trading is not all about watching the charts and the news 24/7. There is a more significant, underrated aspect of trading: your mindset. How sure are you that you can stick to your strategy even though you just lost $4,000.00 yesterday? 

Forex trading will expose you to the highest highs and the lowest lows. Throughout all these, you have to keep a stable mentality and not let impulsive decisions take control. You can have the best strategy in the world, but if you can’t learn to handle your emotional state, you won’t go far.   

The better you are at controlling your emotional impulses, the more successful you will be in trading and finance in general.  


3.   Everything in moderation, including moderation   


The money you are trading should never comprise all your assets. As they say, only trade as much as you are willing to lose. In the world of trading, you will come across individuals with stories of overnight riches because they went all-in. But that can only last for so long.  

Try to resist the temptation of being greedy and remember that wealth is not built overnight. It requires consistency and time. 

Of course, there will be exceptions when you have to break this rule, especially if you see huge opportunities present themselves in the market. However, the general rule still stands; practice moderation in most things, including trading.  


4.   Risk and reward  


Trading is a high-risk, high-reward game. While you might get caught up in the rewards, it's also important to be grounded by the risks. 

The fact that you can make $10,000.00 in two hours also means that you can lose $20,000.00 in the same two hours. If you are a beginner, you might want to stick to low-cost trading for now so that you also risk less money. 

Once you begin gaining experience, you can then start moving to larger trade sizes or expanding into different asset classes.  


5.   Leverage is your best friend and your worst enemy  


To leverage means to trade using borrowed money. It can be your best friend because you can earn more than you ordinarily could if you get a good trade. However, it can also be your worst enemy because if you are on the wrong end of a losing trade, you end up losing more than you might be capable of paying. 


As a general rule, avoid leveraging yourself too hard (think 1:500 leverage), especially if you are a new trader. Most traders getting started should think between 1:30 and 1:100 to get the hang of it. 


6.   Understand what game you are playing  


By now, we’ve already established that trading has risks. Forex trading, while playing by slightly different rules, is no exception. No matter what kind of trader you are, you should always understand and mentally prepare.  

Before you even make your first trade, even if you are trading with low-cost brokers like Fusion, you have to accept that while you can make money, you can also lose money. 


Too many think that trading is a get-rich-quick scheme, and all they must do is sign up on MetaTrader or any Australian forex broker, make a few clicks, and watch the money roll in. These are the kinds of people who end up losing money in their first week. 

The truth is, trading may be quite lucrative for some, but it requires hours and hours of studying, just like if you’re training to be a pilot, you aren’t expected to fly the fastest fighter jet before getting some practice.  


There are complicated analytical methods like technical analysis and fundamental analysis that professionals use to determine the value of a stock or a foreign currency. This way, they know exactly when to buy or when to sell. 

If you really want to get into trading, be it stock trading or forex trading, you have to put in the work and start learning. Remember, real money is at stake here.  


7.   Be responsible for your own trading.  


You might come across plenty of gurus and recommendations online, but at the end of the day, the only person gaining or losing money, is you? 

Remember that whatever happens to your trades will only affect you. It will not affect anyone else's portfolio, so there is no use blaming others if you lose money. 

Similar to #6, remember that different players in the market play different games. Your friend Michael who introduced you to forex might be a scalper taking short-term trades, whereas you might feel more comfortable as a long-term trader, which doesn’t make one better than the other. You do need to know what game YOU are playing, though.  

If you take responsibility for your trades, it is more likely that you will treat your failures as learning experiences to do better next time. Failure is the best teacher, and that leads us right to Rule Number 8….  


8.   The best investment: Your own learning   


Indeed, the best investment you can make is in yourself. If you are beginning to dip your toes into the world of finance, you might want to stay away from the markets (for now) and start investing in books and learning materials to give you an edge. Or practice slowly with a demo forex account or a small live account to test.  

The gains you can make from trading and investing may last you a week or a month, but the gains you make from investing in your own education will last you a lifetime. 

The more knowledge and information you have when you trade, the more likely you will be making successful trades in the future.   


9.   Don't be crazy  


Trading will give you plenty of temptations. You might think that you can buy low now and sell at a really high price tomorrow, so you want to pour in your life's savings all in one go. 

Stop. 

Trading requires discipline, and there's no reason to go crazy all in one go because of speculation. There is much to learn in the world of trading. 

You will be in here for a long time, so take it slow and enjoy the ride.  

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Beginners
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The Fibonacci Cheat Sheet

Read Time: 6-7 minutes

 

Essential Ratios Every Beginner Trader Should Know. The Fibonacci sequence and the golden ratio have long fascinated mathematicians, scientists, and artists. Their influence extends across every aspect in life and can be observed in nature, architecture, and even the financial markets. Fibonacci-based tools are readily available and can assist in identifying entry and exit points, retracement lengths and more.

   

What is Fibonacci and Why Does It Matter in Trading?

   

The Fibonacci sequence consists of a series of numbers where each value is the sum of the two preceding numbers, starting from 0 and 1. For example, 1+1=2, 1+2=3, 2+3=5, and so on. When we continue this pattern we get:

   

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233...

   

Taking it one step further, if we observe the mathematical correlations between these numbers, we identify a range of ‘ratios’. For example, if we divide 21 by 34, we get 0.618%. If we divide 21 by the number two spots to the right (55), we get 38.2 and so on.

   

This mathematical constant appears in various natural and human-made structures, from spiral galaxies to architectural designs, and even nature.

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In trading, Fibonacci ratios can help analyse price action, pinpointing areas where market trends may pause, reverse, or accelerate. By learning to apply these ratios, you can identify potential support and resistance levels, retracement zones, and projected price targets, ultimately giving you better entries and exits on your trades.

   

Breaking Down the Key Fibonacci Ratios

   

The most widely used Fibonacci ratios in forex trading originate from the relationships between sequence numbers. As an example, some of the most commonly used in trading include:

   
         
  • 23.6% – A minor retracement level often observed in strong trends.
    •      
  • 38.2% – A commonly used retracement level where price corrections may occur.
    •      
  • 50% – Not an official Fibonacci ratio, but significant due to psychological factors.
    •      
  • 61.8% – The golden ratio, a crucial level for support and resistance.
    •      
  • 78.6% – A deeper retracement level where strong reversals may occur.
    •      
  • 161.8% – A common extension level used to forecast potential price targets.
    •    
   

These ratios are applied using Fibonacci retracements and extensions.

   

How to Use Fibonacci Retracements   

   

We have explained Fibonacci retracements as one of the indicators that we have discussed here on our blog before. A trend is a significant price movement in one direction, followed by a price movement in the opposite direction, followed by a price movement in the direction of the initial trend. You can use Fibonacci retracement levels to determine where these pullbacks might find support or resistance. You can get better entries and/or exits on your trades by doing this.

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Fibonacci Retracements

 

For example, during a bullish trend, price may retrace to the 38.2%, 50%, or 61.8% level before continuing higher. This can also be observed in a downtrend, where these levels can serve as potential swing points where price might pause or reverse before resuming its downward trend.

 

How to Use Fibonacci Extensions

 

While retracements focus on pullbacks, Fibonacci extensions project potential price targets beyond the original price movement, using the same ratios. These levels help estimate how far price may travel after a retracement completes – ultimately leading to better profit targets/exit points.

 

The 161.8% extension, often called the "golden mean," is one of the most significant levels. It frequently acts as a target in strong trends, marking potential areas where price may consolidate or reverse.

 

Extensions are particularly useful for setting profit targets, as they provide logical exit points based on prior price action.


A graph with a line and a dotted line AI-generated content may be incorrect.

 

Fibonacci Clusters: Combining Multiple Levels for Strong Trade Setups

 

A Fibonacci cluster forms when multiple Fibonacci levels from different price swings converge at a similar price point. These clusters can help identify the stronger swing points, which often lead to market reactions.

 

Traders often use these clusters for:

 
       
  • Identifying precise entry points
    •    
  • Setting stop-loss levels
    •    
  • Establishing profit targets


    •  




 
   

Figure 1 – AUDUSD Weekly Chart

   
   

For instance, if a 61.8% retracement from a major trend aligns with a 161.8% extension from a smaller move, the resulting zone becomes a high-probability trade area.

 

Step-by-Step Guide to Using Fibonacci in Your Trading

 

To effectively use Fibonacci techniques in forex trading, follow these steps:

 
       
  1. Identify Key Price Swings – Look for significant highs and lows as reference points for Fibonacci retracement or extension tools. It’s important that you’re drawing the tool using the correct swing high and lows of each move.
    2.    
  2. Plot Fibonacci Levels – Use charting software, such as MetaTrader or TradingView, to overlay Fibonacci levels on key price movements.
    3.    
  3. Look for Areas of Confluence – Check if the Fibonacci levels align with other technical indicators, such as moving averages, trendlines, support/resistance zones, or even other Fibonacci levels.
    4.    
  4. Observe Price Reactions – Monitor how the market responds to each Fibonacci level, looking for confirmation through price action signals like candlestick patterns.
    5.    
  5. Manage Risk Effectively – Define risk-reward parameters using Fibonacci-based stop-loss and take-profit levels.
    6.  
 

Final Thoughts

 

The Fibonacci sequence and golden ratio help to structure the way the market behaviour is analysed, and the major price levels are identified. You can enhance your technical analysis and, by result, decision-making, by applying Fibonacci retracements, extensions, and clusters.

 

However, it is crucial to mention that no tool is 100% accurate and that the use of Fibonacci tools can greatly enhance a sound trading strategy by providing more potential entry and exit points. However, like any other indicator, there are no guarantees, so it is recommended to look for a reaction and/or confirmation of each Fibonacci level before making the trade.


18/03/2025
Beginners
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Leveraging Economic Indicators

Read Time: 6 minutes


For successful forex trading, economic indicators are essential tools in understanding market trends and predicting potential currency movements. These indicators, such as GDP, employment data, inflation rates, and more, provide a window into the economic health of a country, which ultimately influences currency values across the market.  

Understanding the influence of economic indicators allows you to make informed decisions based on more accurate analysis, increasing the likelihood of profitable trades.  



Table of Contents






Key Economic Indicators



Gross Domestic Product (GDP)


GDP is the total market value of all goods and services produced within a country, reflecting its economic health.

A rising GDP often signifies a strong, growing economy, which can boost a nation’s currency due to investor confidence. Conversely, a declining GDP might signal economic trouble, potentially weakening the currency. For forex trading, GDP data can help identify long-term currency trends, particularly when compared across different nations.



Employment Data


Employment data is a major economic indicator with a substantial impact on currency values, particularly the Non-Farm Payrolls (NFP) data in the United States.

The NFP measures employment changes outside the farming sector, providing a snapshot of the U.S. job market. When job creation is strong, it suggests economic health, often strengthening the currency as investors and traders feel confident.

Weak employment figures can suggest economic issues, potentially leading to currency depreciation. Since employment is closely tied to consumer spending and economic stability, this data can be very valuable for traders.



Inflation Rates


Inflation, primarily measured by the Consumer Price Index (CPI), reflects the rate at which prices for goods and services increase.

Moderate inflation is generally healthy, indicating a growing economy. However, high inflation can devalue a currency as purchasing power declines. Central banks often adjust interest rates in response to inflation; if inflation is high, they may raise rates to control it, which can attract foreign investors seeking higher returns, thus strengthening the currency. Understanding inflation’s impact on interest rates and currency valuation is vital for forex traders.



Interest Rates


Interest rates are the cost of borrowing or the return on savings, set by central banks to regulate economic activity and influence currency value.

Interest rates are among the most influential economic indicators in forex. Central banks set these rates based on economic conditions, adjusting them to either stimulate or cool down the economy. Higher interest rates often attract foreign investment, increasing demand for the currency and boosting its value. Conversely, lower interest rates can make a currency less appealing to investors, leading to depreciation. For forex trading, interest rate changes and the policies of central banks (such as the Federal Reserve in the U.S. or the Reserve Bank of Australia) provide critical insights into likely currency movements.



Consumer Confidence Index (CCI)


The Consumer Confidence Index measures consumer sentiment and expectations regarding the economy.

High consumer confidence can indicate increased spending, which drives economic growth, while low confidence suggests economic uncertainty. CCI is considered a leading indicator, as consumer sentiment often precedes actual economic changes. When consumers feel positive about the economy, the currency may strengthen; when confidence drops, the currency may weaken. Forex traders use the CCI to anticipate changes in spending behaviour and overall economic direction.




Interpreting Economic Indicators



In forex trading, interpreting economic indicators requires understanding both individual data points and the relationships between them. Economic indicators can influence currency values in varying degrees, with some holding more weight than others. Traders must also consider correlations, as indicators like GDP and employment data often move together, giving a clearer picture of economic health.

One challenge traders face is managing contradictory signals. For example, strong employment data may suggest a strong currency, but if inflation is simultaneously high, it could lead to fiscal and monetary policy changes, ultimately impacting the currency differently. Weighing the significance of each indicator helps traders decide when to take action and which indicators align with their trading objectives.



Essential Economic Indicators and Practical Application


- For traders just starting with fundamental analysis, some economic indicators offer a straightforward approach to understanding market dynamics:

- Non-Farm Payrolls (NFP): Released monthly by the U.S. Bureau of Labor Statistics, NFP provides a quick look at employment trends, making it a critical indicator for traders.

- Consumer Price Index (CPI): CPI reflects inflation and purchasing power, directly influencing central bank policy and forex rates.

- Central Bank Interest Rate Decisions: Rate changes have immediate and often lasting impacts on currency valuation, making them a fundamental factor in forex trading.

You can find the details of every economic data event using our Economic Calendar.

Accessing timely and reliable economic data is crucial. Many traders use economic calendars, such as our one here, which provide release dates for upcoming economic data, allowing them to plan trades around these announcements. Economic calendars are invaluable tools for tracking data releases, setting alerts, and managing expectations for market volatility.

It's also important to be mindful of common misinterpretations, such as assuming that a single indicator will drive long-term trends. Forex markets are influenced by a multitude of factors, so it’s essential to view each indicator within a broader economic context.




Synergising Economic Indicators with Technical Analysis



Whilst economic indicators provide insights into a currency’s underlying strength, technical analysis offers real-time insights into price patterns and potential entry points. Combining fundamental and technical analysis enables traders to balance economic data with chart patterns, enhancing trade timing and precision. For instance, fundamental economic indicators can provide you with a long-term bias, and technical analysis can be used to find entries and exits in the direction of that bias.




Advanced Trading Techniques



Timing Your Trades


Timing is crucial when trading around economic data releases. Pre-release analysis allows traders to set expectations based on market consensus, whilst post-release strategies can help manage volatility once the data is out. Our Economic Calendar is an indispensable resource in this regard, assisting you in aligning trades with significant data releases and prepare for potential shifts.


Integrating Indicators into Your Trading Strategy


Developing a comprehensive trading strategy involves diversifying currency pairs based on each currency’s economic indicators. For instance, trading a U.S.-based currency pair based on NFP data, while trading an Australian pair based on the RBA’s interest rate decisions, can provide a balanced approach. Incorporating adaptive risk management around key data release dates can help traders mitigate the risks associated with high-impact news events.




Conclusion


Economic indicators are invaluable resources for forex traders, offering insights that can guide trading strategies and improve profitability. By understanding these economic indicators, you can better anticipate currency movements and make informed decisions. However, mastering these indicators requires continuous learning and constant observation.

Ultimately, leveraging economic data within a broader market analysis framework supports responsible trading practices and provides you with an additional source of information to make better trading decisions.


Remember: Successful forex trading requires a balance of economic insight, technical skill, and disciplined risk management. Stay informed, practice consistently, and adapt your strategies to ever-changing market conditions.

07/01/2025
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