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-   -   Axioms of trading (https://www.forexfactory.com/showthread.php?t=40441)

blueruby Jul 27, 2007 8:48am | Post# 1

Axioms of trading
 
Axiom - a self-evident truth that requires no proof.

Can there be such a thing as an axiom in something so artfully diverse as trading?

Something that always holds true in every instance?

FXHolic Jul 28, 2007 6:05am | Post# 2

"Remember your trading career depends mainly on your ability to control risk, therefore stay away from greed. Before even entering a trade, consider the worst case scenario, decide trade size and stoploss accordingly"

FXHolic Jul 28, 2007 6:07am | Post# 3

"If you trade Intra-day, keep an eye on longer time frame charts and how the currency is performing against others"

FXHolic Jul 28, 2007 6:09am | Post# 4

"If you are in a trade and the pattern or S/R fails to hold, the best course of action could be to use SAR (Stop & Reverse), change the direction of your trade"

FXHolic Jul 28, 2007 6:13am | Post# 5

"The worst thing a trader can do (and unfortunately most new traders do) is to hold a loosing trade. In doing so you not only accumulate losses, some times to unbearable levels, YOU DEPRIVE YOURSELF FROM CAPITALIZING ON THE MOVE IN OPPOSITE DIRECTION!"

FXHolic Jul 28, 2007 6:16am | Post# 6

"The best remedy of indecision is to stay aside and let the market unfold a directional move"

FXHolic Jul 28, 2007 6:19am | Post# 7

"The easiest way to trade is to trade on longer time frame in the direction of the trend, but enter only on a decent pullback"

FXHolic Jul 28, 2007 6:21am | Post# 8

Your Against Yourself!
 
"In Trading it is you against yourself. Trading is as easy as buying up-trend and selling in down-trend. It is only your emotions that make things so difficult."

FXHolic Jul 28, 2007 6:25am | Post# 9

Market Mode
 
"Before entering a trade, keep yourself aware of the current mode of market, whether it is trending (up or down), range-bound or choppy, trade accordingly."

FXHolic Jul 28, 2007 6:26am | Post# 10

S/R Broken
 
"Don't keep your stoploss too far from the nearest support/resistance, because if the S/R is broken, the resulting move can be too fast and too much."

FXHolic Jul 28, 2007 6:27am | Post# 11

"There will be winning trades and there will be loosing trades, make sure that the loosing trades are much smaller than the winning trades."

FXHolic Jul 28, 2007 6:28am | Post# 12

Patience
 
"In a choppy or confusing market mode, stay away and wait for the next session, if one major session will does not bring a good move, the next will."

FXHolic Jul 28, 2007 6:30am | Post# 13

"There will always be a good trade following a bad trade and vice versa, please don't lose too much on bad trade and gain maximum on good trade."

Patience in first case is deadly, whereas in the later it is the key to success.

charlinks Jul 28, 2007 2:40pm | Post# 14

Profits...
 
"To secure profit is to prepare for loss!"

merlin Jul 28, 2007 2:58pm | Post# 15

the only axiom is that there are no axioms in trading

we actually tried to do this a few years ago. every truth we came up with ended up having some flaws unfortunately, so we gave up. i think this is a good exersize, if we can come up with the "truths" of trading, that would be incredibly useful.

PeterFM Jul 28, 2007 3:08pm | Post# 16

How about this, Merlin....
 
In trading nothing is certain, except uncertainty

Craig Jul 28, 2007 3:37pm | Post# 17

The only criteria in all of trading is 'does it make money?' if it breaks the 'rules' who cares?

blueruby Jul 29, 2007 9:20am | Post# 18

Wow. I'm amazed at the number of responses.

I'll pose the question again....

Can there be such a thing as an axiom in something so artfully diverse as trading? Something that is always true?

Of course there can. But, Iíll forewarn you, in order to be universally true, the axiom would have to be somewhat general.

The problem I want to address is that there is so much conflicting information. This exacerbates the negative psychological aspects of trading, because in any trading situation you find yourself in, you have at some time recieved trading advice that will cause you to doubt yourself at that moment.

For example, when a trade is clearly moving against you, patience is NOT a virtue. You should not let the trade "breathe". There are times when you need to jump, and times when you need to wait.

Another example: in a true ranging market, holding a loss is often OK, and adding to it can be a proper trade management strategy. In addition, you buy weakness and sell strength, and you cut your profits short!

I've come up with very few axioms, which I will post one by one. I'm open to arguments if you feel that what I've posted is not an absolute truth of trading. But give me a valid, coherent argument against what I've said.

If you have one to offer, then by all means post it. But, it has to be an axiom. That is, it is universally accepted as truth, there can be no argument, no cases where it does not hold true.

Will this help? I believe it has to. Truth, stable data, facts, can only serve as a foundation to hold to during moments of confusion. Undercutting the sea of information to the absolute basic truth has to improve improve stability and integrity.

blueruby Jul 29, 2007 9:21am | Post# 19

"If you are in a trade and the pattern or S/R fails to hold, the best course of action could be to use SAR (Stop & Reverse), change the direction of your trade"
Does this always work? Is this always true? If not, then it's not an axiom.

blueruby Jul 29, 2007 9:29am | Post# 20

In trading nothing is certain, except uncertainty
OK, we're getting somewhere. This is nearly the same as my #1.

Axiom 1: Price can go up, down, or sideways at any time. You can not predict direction.

Some might argue with that, since, if you say it will go up and it goes up, you predicted correctly. But, that's after the fact. You weren't right until it did it, and up until then Mr. Megabucks could have sold and hammered it down. Up until the final outcome, there was not 100% certainty, therefore it was not a prediction, it was an "educated guess" based on probabilities, chart patterns, your favorite indicator, or the stars. I'm using "predict" in the strict sense of the word.

What good is this?

It is a constant reminder to analyze continuously, in present time. If you're totally certain you're right in your prediction, you will hold a losing trade too long. A trader must react to what the market is saying, not what they think it will do. Have a plan for each trade, "what will I do if it goes up? Down? Sideways?"


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