FOREX TRADING RULES– FOREX LESSONS LEARNT ON MY JOURNEY SO FAR, competition entry from John T. Something I think we can all relate to no matter how long we have been trading, & some great rules that you should look to follow.

I’ve now been trading for 2 years – initially I saw my account drop steadily but then it flattened out, and now finally (I think!) beginning to move into profitability.

I’m sure there are common themes that all of us have experienced in the topsy-turvy world of Forex. I’ve jotted down a few of my own thoughts which you may find familiar, and will end with what I see as most important in the path to success.

WHERE IT ALL GOES WRONG AND WHAT WE CAN DO ABOUT IT

We start out deciding we will use the markets to make massive amounts of money – in fact instead of making our fortune the majority of us lose massive amounts of money instead.
Educate yourself first, and go for a slow and steady path to profitability rather than aim for overnight riches.

“THIS ROBOT WILL TRIPLE YOUR ACCOUNT IN A MONTH/HASN’T EVER LOST A TRADE – TRY IT FOR A MONTH WITH THE SAFETY OF OUR MONEY-BACK GUARANTEE” – loads of problems with this one: it won’t/oh yes it has, and it’ll be easier to book a holiday to Mars than get your money back.

Your analysis tells you that during today a currency is going to move down – you are absolutely right but as you put your stop loss in the wrong place you still lose money.
Plan your stop to be far enough away to give some room, and then add a bit more.

“All I need is to find a decent system” – actually there are plenty of systems that work but can you use them in a disciplined and methodical way, and do you have the confidence in the strategy to stick with it and ride out the losing periods?

If you are a serial $97 system purchaser (as I have been) you can still learn something from them as there are common themes – all traders are looking for the same ingredients: direction, momentum, support, resistance, and entry/exit signals.

No system or strategy can make the market move hundreds of pips if it doesn’t want to so you just have to catch the train and ride as far as you can before it stops and turns around. There is no magic system, but we need to find one that suits our lifestyle and personality.

News comes out that should be good for a currency, so it will definitely strengthen – not necessarily it won’t – as Marc says “This is Forex!”

I’ve identified an area of strong resistance, but price is racing up to it, there’s no way its going to reverse with this head of steam up, so I can’t short here even though it’s in my plan – oh yes you can, just watch, be patient and look for clues.

“I’ve been sitting at my screen all morning and there’s been no action; rather than feel I’ve wasted my time I’ll just take this trade even though it doesn’t quite meet my rules.”
You’re much better making the positive choice not to trade and pat yourself on the back for making the right decision.

If I’m not in a trade I can see with razor accuracy exactly where I would have got in and my exit point – but trading live I click the mouse for my entry and within a millisecond have spotted that EMA right in the way or seen divergence on MACD that immediately makes me wish I wasn’t in this trade.
In order to see what the charts are telling me I need to take emotion out of my trading. The key to this is having a plan in advance and sticking to it, and also not mentally beating myself up if I spot a missed opportunity.

“This looks a trading certainty, I’ll double my stake on this one – whoops.”

Money management is the key to long term viability and profitability of your account.

“Now I’ve had a couple of great weeks I’ve cracked it, so I’ll increase my stakes” – what this really means is “I’m now feeling over-confident so am in a perfect state of mind for placing trades I shouldn’t and I’m bound to lose.”

There are no “experts” worth listening to in Forex – no expert is right all the time, and they cannot look over your shoulder during an active trade.
As you will be relying on your own convictions to carry any trade through you need to be your own expert.

WHAT IS GOING TO BE MOST IMPORTANT FOR MY FUTURE SUCCESS?

Set my own routine at the start of the day for checking and updating charts.
Identify the setups of interest and have clear reasons for proposed trades. Write them down – in the heat of the moment I will not have confidence to take a trade if I can’t see or remember why I’m taking it.
Don’t attach too much emotion to the success of a single trade – of course I want them all to win but there will be losers and it’s the longer term that counts.
If I’m not comfortable handling the risk on each trade I need to trade with a smaller stake.
I need to trade without letting emotion cloud my judgement. If I feel my heart thumping or I am feeling nervous prior to entering a trade this does not bode well as I will then be reacting to events with emotional responses rather than clear judgement. The best way of eliminating emotion is to enter trades that I have planned beforehand with clear reasoning.
When monitoring an active trade I need to think in pips not pounds. The pips are what I’m after whatever my account size, and they have less emotional impact than hard money. Therefore use the charts to monitor and manage trades, not my profit and loss account. That way I will feel the same even as my account size grows.
If I’ve had a winning run or a successful morning I need to be wary, and have strong reasons to enter further trades for the day. If I’ve achieved my target why risk giving money back and feeling bad when I can enjoy the rest of the day in the knowledge that I’m in profit?
I will endeavour to learn something from every trade, winner or loser. Keeping a journal will help with this.
Finally I will persevere when things are not going my way, keep discipline in my trading and money management, and make sure I use my trading to help me to live and enjoy my life rather than be ruled by it.