Got Rulez yet?

Trade RULES are a must before you begin trading--these are rules you follow for yourself, for your comfort zone and risk management, and for your sanity. Trading Forex haphazardly will result in haphazardous results... So--what are your rules?

Every trade has to have rules to follow...this goes beyond a rule for a system or method that states "if the EMA is X and the Stochastics are Z, then I go SHORT". Rules are part of the psychology of TRading--and in Forex the concept of Psychology is a big issue...because of the speed at which Forex moves--you need to be prepared and you need to be ready if things change. You do this thru RULES. Rules you do NOT break or deviate from--even if it means a loss...when you deviate from your rules (or your trade plan) you increase the risk percentage for loss and failure.

Rules are made up based on common sense, systems & methods, from good rules other traders use, but most of all they are rules that YOU can make for yourself based upon past failures and mistakes so you don't do them again. How many times have you made a trade entry..second guessed yourself half way thru the trade or when it went against you, then you bail at a loss only to see the trade turn yet again and move fast to hit your original target? With a Trade RULE and a trade plan--you would not have made that loss and your trade would have succeeded to profit.

A few general rules every trader should use...in no particular order of importance...

Ultimate Rule of all rules--Never trade with real money when you start out for at LEAST 3-6 months. Demo and PAPER trading is OK and good practice--you never miss a prime opportunity in Forex--once you learn the markets and pairs--you will be amazed at how many prime trading opportunities present themselves often..if you miss one--another will be along soon..they are like trains or taxi's or busses or waves when you go surfing..wait for yours. Learn PATIENCE!

Rule #1 Trades LOSE...get over it..now. Always easier said than done--but seriously, get over your losses quick and accept now that they WILL happen. Even the BEST trade idea can fail--or it may not fail but the timing was wrong--or any other number of reasons. If you DWELL on a loss or try to make up for the loss--you are going to keep on failing...

Rule #2--Learn from your mistakes--or you are doomed to repeat them. Mistakes are expected--everyone makes them.. Hell--I invented a few unique mistakes..but I learned from them and try and vow to not repeat them...

Rule #3--Each Trade is its OWN trade. This means that your last trade--whether a gain or loss, has NO BEARING on this next trade. If you are trading to try and recoup a loss--bad trader, no donut!! You cannot approach a trading situation as a revenge means to recoup losses or make up for other trades--each one is its own. If you have a loss and think you have to reverse or try a new trade immediately afterwards to make your money back--go back to rule # 1 and get over it before you trade again....

Rule #4--Trade without Emotion. Seriously--unplug yourself from emotion when trading...its hard--but its neccesary. Trading needs to become MECHANICAL--almost robotic...or you will second guess or doubt yourself or dwell and cloud your judgement--and then you are back to rule #1 and #2 and #3. You can't sit and hesitate over a trade or it may happen before you decide--and then you will be chasing it...you can't sit there and freak out if trade moves against you.. It is what it is--deal with it amd do not let it eat you alive or you will break your rules and really mess up...

Rule #5--Stay SIMPLE in your methods...don't overanalyze. You do not need 5 indicators happening and 8 EMA lines and Bolinger bands and a dozen other lines in your charts....stay simple. FACT: not every indicator works for everyone, not every indicator works perfectly for every pair or in every market condition. Indicators and other TA charting methods are TOOLS...you need to learn how to use EACH ONE before you can slap it onto a chart--and learning how to use takes TIME to understand.

Rule #6--Market conditions change--traders need to learn to adapt. Too often many traders don't change when conditions change...then they turn a winning streak into a losing streak and give back their profits. LEarn to recognize conditions--learn to recognize change and be able to either sit out or alter your methods.

Rule #7--PROTECT YOUR PROFITS and MINIMIZE YOUR LOSS EXPOSURE. Your account is your blood--your loss exposure is a cut. Don't let your account bleed dry...and don't expose yourself to such a huge loss by riskjing too much hoping for a huge gain. With huge risk comes huge loss potential. Forex works best in small steps gained--not huge leaps tried. In football--a short pass strategy will make more yards gained towards the endzone, than a hail mary play will....same for Forex. You do not need to make 100 pips per trade or try for major massive gains in one trade--be happy with ten trades for 10 pips. You won't get rich overnite in Forex--wealth can come after you have mastered trading and built up REPEATED CONSISTANCY in your trading. When you can repeat your success results and recognize trades and execute plans with mechanical efforts--thats when wealth comes. Until then--aim small, stay grounded and protect your account!! NO trade is worth your entire account at risk!!!

Rule #8--LEARN to be a trader--and know what kind of trader you are. If you know yourself--you can easily see your faults, your weaknesses, and your vulnerabilities.--only when you can see these issues can you CHANGE them from negative to positive...and you do this by educating yourself. Know what kind of trader you are--are you a short term player, or are you a longer player..know how much you like to risk--where your comfort zones are..and what kinds of trades you like (breakouts, news plays, etc). But also be able to recognize that what you may like may not be GOOD for you too--I like to sit and scalp or day trade on impulse--but its BAD habit for my trading habits and results and I get a lot of losses if I do it. I am not a fan of mid and long term trades or not watching markets hourly--but WOW do they work for me when I do them.


There are many dozens more rules (of mine in addition). These should get you thinking however.. In the course of the next few weeks I hope to add more to this thread and help folks with TRade Rules and TRade Plans.. Post your rules--I'll post mine more...and post questions or issues that you may have with rules that can hopefully be resolved.

FXW

Good advice.
I'm going to print it out so I can refer to it.

Thanks,
Pocket Change

You're very welcome! Always glad to help.

FXW

It is very important to know the basic trading rule before anyone jumps into the market. These rules give here are really good and i will follow them next time.