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Attachments: My Rules for Forex Trading
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My Rules for Forex Trading

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  • First Post: Apr 21, 2007 10:39am Apr 21, 2007 10:39am
PDF document (22 pp.) detailing my rules for successful forex trading, no matter what the system. Enjoy.
Attached File
File Type: pdf RulesforForexTrading.pdf   635 KB | 18 downloads
Nice... usefull.. cliche but true.
Nice Job!!

Quoting lever70
PDF document (22 pp.) detailing my rules for successful forex trading, no matter what the system. Enjoy.
Great material, easy to read and understand. For the experienced traders it may be cliche, but for the new traders it's extremely valuable information. Thanks again for your effort.
I appreciate the compliments thus far. However, I am puzzled as to why what I have written would be viewed as "cliche." In particular, the information on position sizing and money management is geared specifically to forex traders. The reflections in this e-book are on the basis of my own experiences as a trader, and are not merely copied from elsewhere. Please give it a fair chance.
Lever,
Actually, I think that the rules are important for any trader, experienced or not. I am not a "newbie" but I am always eager to listen and learn from someone obviously more experienced then my self. You must be very nice person to take the effort to create material like that to help other traders. You have paid, I am sure, for all the wisdom, and you are willing to pass it on to others at no cost. I wish someone like you told me all the rules when I started. It would have saved me lots of money. Lots of traders don't realize that the rules are more important then the system.
Thanks again.
Regards,
Pluto2
Quoting lever70
I appreciate the compliments thus far. However, I am puzzled as to why what I have written would be viewed as "cliche." In particular, the information on position sizing and money management is geared specifically to forex traders. The reflections in this e-book are on the basis of my own experiences as a trader, and are not merely copied from elsewhere. Please give it a fair chance.
Don’t feel bad. I’m not saying cliché to underestimate what you have been written. It is just the rule that you can found anywhere in the forum from the experienced trader. You should be experienced trader also to write this. Please do not take it personally. Same, it is useful both for newbie or experienced trader. It gets you out from loosing your head.

I salute you for your effort to share this to us. Thanks a lot.

Rule more useful than method only if you already have method to follow; method that suit your kind of personality (risk taker, very careful, conservative, or so on). If you don’t have any method at all, then get a method first then follow the rule. I think that is the purpose of virtual account.
gonna print this out... great stuff
Very Nice Lever; Thanks for your time and effort For reading I also liked Trading in the Zone, by Mark Douglas.
Fourteen Laws To Prosper By

IMPORTANT NOTE: Many traders will read the following and say, "yeah I already know that". They will gloss over it and not put any more thought into it. I can however tell you with certainty that if you don't live by the above rules you will have a hard time succeeding in the long run. I have seen countless traders blow out their accounts because they ignored one or more of the above principles.

1. Don't trade when you are tired, sick, anxious or worried.
2. Don't make your trading system more complicated then it is.
3. Make sure you paper-trade before you risk real money.
4. Don't get greedy. As they say… "Hogs get fed, pigs get slaughtered."
5. Always put a protective stop in place.
6. Losses are part of this game and you must be able to accept them. If you can't stomach the idea of losing money, then don't trade.
7. Decide on your exit strategy, before you enter the trade. In other words, where and how will you get out? Also decide how many contracts you will trade and whether you will scale out of your trade. The bottom-line is make sure you plan your trade and trade your plan!
8. Don't bail out of your trades prematurely. Ride them until you hit your target.
9. If the risk is too big on a trade then don't take it.
10. Don't force trades that aren't there. There is no need to rush into a trade as there are always new ones forming.
11. Don't sit at your PC more than 90 minutes without a break. You need to get up and stretch and move around. This will keep your mind sharp and focused. It will also relieve trading stress and tension.
12. The hardest time to take a trade is when you have just had a few losers in a row. This however is exactly the time you need to jump right back in there as odds are that the next one will be a winner.
13. Don't trade if you are using the rent money or are down to your last few dollars. Trading with "scared money" never works out.
14. Don't be unrealistic. While trading can provide some amazing returns, don't expect to turn $2000 into $1,000,000 in a year. (Please read rule #4.)

thanks for sharing i'm sure a lot of people will learn from this!
Thanks for this Lever. I have already, in my short trading life, come unstuck by NOT sticking to a small daily profit and compounding this by letting losses run in the forlorn hope of a reversal.

Sometimes it needs someone else to point out what you secretly know yourself is wrong.
Quoting lever70
PDF document (22 pp.) detailing my rules for successful forex trading, no matter what the system. Enjoy.
Hi lever70 !

My short comment on your document AWESOME !!
I don't know your background and experience but your statements
mirror exactly to the point what I've experienced during my years
of mastering the forex world.

It's a must for all beginners and even the "old" traders.

With respect

Bernhard
Quoting behof
Hi lever70 !

My short comment on your document AWESOME !!
I don't know your background and experience but your statements
mirror exactly to the point what I've experienced during my years
of mastering the forex world.

It's a must for all beginners and even the "old" traders.

With respect

Bernhard
I concur.

My only comment is that you, being an academic, tend to use flowery and effusive terms which took my small brain some time to process when reading the document.
Once again,

Awesome.

Congratulations.
Quoting FXexpat
Fourteen Laws To Prosper By

1. Don't trade when you are tired, sick, anxious or worried.
2. Don't make your trading system more complicated then it is.
4. Don't get greedy. As they say… "Hogs get fed, pigs get slaughtered."
5. Always put a protective stop in place.
6. Losses are part of this game and you must be able to accept them. If you can't stomach the idea of losing money, then don't trade.
7. Decide on your exit strategy, before you enter the trade. In other words, where and how will you get out? Also decide how many contracts you will trade and whether you will scale out of your trade. The bottom-line is make sure you plan your trade and trade your plan!
8. Don't bail out of your trades prematurely. Ride them until you hit your target.
9. If the risk is too big on a trade then don't take it.
10. Don't force trades that aren't there. There is no need to rush into a trade as there are always new ones forming.
11. Don't sit at your PC more than 90 minutes without a break. You need to get up and stretch and move around. This will keep your mind sharp and focused. It will also relieve trading stress and tension.
12. The hardest time to take a trade is when you have just had a few losers in a row. This however is exactly the time you need to jump right back in there as odds are that the next one will be a winner.
13. Trading with "scared money" never works out.



I was about to point out 8. when I read in the PDF
"There’s nothing wrong with getting out early if you are in profit".

Yes, you can't go broke from closing in profit it would seem, BUT you can totally ruin your system and profits. And if you constantly close for less profit than the size of your losses, how are you going to be net positive?


I can completely agree with all of the quoted above and a lot of the stuff in the PDF.

However, one could dispute
"Always have a profit target for the day / Always stick to a small daily profit target". and
"Take profits quicker after a losing streak"

If I am holding a trade that is up 50 pips and in direction of the main trend - why close it at 50? Holding on to a trade, if entered at crucial junctions, can mean one trade, one entry - 1-20 days of profit day in and out...
20 may be an extreme, but I have held things for over 2 weeks before - actually am, since I mention it. Shorted USDCAD at 1.1500, 1.1200 is dealing now. Had I closed that at +50, I would have never gotten here.

Also see my "why it pays to hold on to trades" mini series on the James 16 thread for 4 other examples.

Starts at http://forexfactory.com/showpost.php...postcount=3269

then the next three posts as well.

Exits are an artform and can make or break your whole bottom line.


I also think for the psychology one could ponder what I wrote here in response to reading what "the wizard" posted a bit before it:
http://forexfactory.com/showpost.php...postcount=3319

Oh and the quoted above conflicts with "Stop trading after two consecutive losses".
Personally I'd say only trade the good setups, period. How many times you lose or not shouldn't impact you at all either way.

Other than that - all I did while reading the PDF was nodding my head and going, yupp, yupp, yupp, yupp, completely agree

Thanks a lot for the PDF, it was certainly a lot of work and it is GREAT material!

Everyone should read over it once at least and ask himself if this is anything one is at fault for disobeying oneself

Thanks (to lever70)! Good stuff.

Take care,

SeekingLight
Trust price. Know yourself.
SeekingLight articulated better than I could have the limiting nature of some of the points in the PDF.
The below quote explains it a bit more:
Quote
Trends always go further than rational people expect, or even imagine. Most investors don’t have the stomach for extended rallies or declines. The philosophy of not having a predetermined profit objective allows us to continue with a trend for its full duration and then some. We try very hard to avoid the pitfalls of liquidating a trade too early, even at the cost of giving back large profits...Trends exist and they endure for a specified time, longer than most imagine. In a very uncertain world, perhaps nothing makes more sense than simply following trends.
John W. Henry
In trading, there is no bullshit. You either make money or you don't.
Further point to the "Don't Gloat" rule.

Bitter experience has taught me that a string of successes can lead to self delusion about your own ability to read the market. WRONG. The next thing you know a large trade goes against you, you have either omitted your stop loss because you feel they are now unnecessary or you keep moving them and then you double up, etc. Next thing you know you have to accept a massive loss, all the previous good work is undone and your confidence is shattered.

Treat each successful trade as just another day on the job, another rung up the compounding ladder. Treat the next trade with respect and bail out ASAP (even before the stop loss) if it goes against you by 10 pips or more.

JMO
Great little book Lever.

Thanks
Quoting SeekingLight


I was about to point out 8. when I read in the PDF
"There’s nothing wrong with getting out early if you are in profit".

Yes, you can't go broke from closing in profit it would seem, BUT you can totally ruin your system and profits. And if you constantly close for less profit than the size of your losses, how are you going to be net positive?


I can completely agree with all of the quoted above and a lot of the stuff in the PDF.

However, one could dispute
"Always have a profit target for the day / Always stick to a small daily profit target". and
"Take profits quicker after a losing streak"

If I am holding a trade that is up 50 pips and in direction of the main trend - why close it at 50? Holding on to a trade, if entered at crucial junctions, can mean one trade, one entry - 1-20 days of profit day in and out...
20 may be an extreme, but I have held things for over 2 weeks before - actually am, since I mention it. Shorted USDCAD at 1.1500, 1.1200 is dealing now. Had I closed that at +50, I would have never gotten here.
I am primarily a short-term trader. When I wrote those rules, I was thinking of my short-term trader friends, and I should have included that as a caveat. Of course if you are trading swings, you should give your trade every chance to work as you intended it when you entered. The rule might be amended to say "Always have a profit target for your trade."

Thanks for pointing this out.
Quoting mrgreen
SeekingLight articulated better than I could have the limiting nature of some of the points in the PDF.
The below quote explains it a bit more:
The Red Sox owner's point is well taken. BUT, trends in forex are better traded in shorter timeframes. Of course one can look at a weekly chart of GBPUSD and say "you could have traded every pullback to the trendline." But in my opinion, it is more profitable for the small trader to trade trends based on the hourly and 4H charts.

Go Yankees.
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