My Rules for Forex Trading

I'm having problems downloading the file. Any suggestions?

I upDated the program, but still this message poping up.

If someone sent this to me in oder format, like words, I will appreciate.

Thanks

@lever70

thank you very much for this document! very useful for a newbie like me!

@carrera

try http://view.samurajdata.se/ to view the pdf online

Anyway I'm attaching a plain text version of the document just in case.

Thank you for sharing it with us. Even though I have read and heard many times a similar information, it's always nice and refreshing to remind myself time and time again how important this advice is for a trader to be taken seriously as it's oftenly overlooked.

Good job..

Thanks bro, I got it from your txt file.

Lever70 -

Repetitive statements of fact over and over again lend to eventual habitual thought processes.

To all that continually contribute on Forex Factory - Thank you -

SeerEye

Good stuff, thanks for sharing it.

Hello level70! I found your document very intriguing. I lost it once, but I really wanted to find it again because it was so interesting. I'm glad to have it again after a long of search.

Like Quickdraw, I have some questions about the dynamics of reward and risk.

You have a rule: "End every day in profit." Well that would certainly be very nice. If you could do that, then there's no question that you'll grow your account geometrically. However, is such a rule feasible?

I love the rule about having a small profit target for the day. I agree that it's very beneficial to have a goal; it helps you focus on what's important. You simply trade better with a goal in mind. On the other hand, you don't want to become a slave to your goal. You don't want your goal to turn into a chore. You mention in the second rule (Treat trading like a business) that one should avoid such desperation as, "I must make 20 pips a day!"

Now even with a nominal goal of 5 pips per trade and a tight stop-loss of 10 pips, you must win 2/3 of your trades just to break even! That's quite a tall order. To win more than 67% of your trades seems tough to me, even with a small target of 5 pips. If your average winner is 10 pips and your average loser is also 10 pips, you need to be right 75% of the time to make your 5 pips/day goal. Now you did say that you usually don't let a loser get to -10. You usually like to cut the loss before that at, say, 6 pips. That would certainly make things easier.

If you have a daily goal of 5 pips, then does that mean your profit target on each trade is 5 pips? Would going for something larger be a violation of the rule that you should stop trading after you've reached your daily goal?

Perhaps your approach is more like this: Your system locates trade setups that have a fairly high profit potential, maybe even 50 pips. However, you're only looking for 5 pips per day. Some days you might make 30, 40, or 50 pips quite easily, and that's great! On other days, you might start with a loser, and you're down 6 to 10 pips. Then you try to grab a small profit on your next couple setups. You mentioned that just taking a couple pips after a loss will help you restore your confidence. Perhaps you are able to make back whatever you lost to get back to even. Then on your next setup, you just take your 5 pips with a take-profit target. Maybe if the day has been too stressful, you just try to get to +1 and call it a day. Even though that day was just +1, other days were more than +5, so you're still on track.

I've thought about all of this quite a bit. I have some experience in working with a small daily goal. I used to have a daily goal of 10 pips. The problem was that, on some days, I found myself with a bit of a losing streak, and I would spend hours and hours trying to get out of the hole. Now, I know that you say you should stop trading after two losses in a row. If you stop altogether for that day, you will not be able to end the day in profit. If you come back to trade again after a break, you might feel more confident and disciplined, but there's still no guarantee that you'll make it out of the red that day. I know you also have another rule: Do not trade unless you are 100% certain about what will happen. Of course that's a fantasy. (Maybe you don't mean that literally, but instead you mean that one should have high confidence every trade setup.) Even if you have a very low percentage of losing trades (say you only lose 25% of the time), you will still probably suffer 3 losses in a row once every few months, even if you take a break after the first two losses. That's a big hole to get out of. Even if you are trading on a very short-term chart, you will likely spend all night trying to get back to even, or maybe you never will...

For these reasons, I have thought about using a weekly goal instead of a daily goal. If you want 5 pips per day, go for 5*5 = 25 pips per week instead. You could shoot for a couple pips more to make the weekly compounding equal to daily compounding. With a weekly goal, it takes the pressure off having to perform every single day.

Could you help clear up some of these questions? As you can see, this has opened up a can of worms for me.

wow! really awesome book =) thanks for that!

I've been meaning to update these rules for a while and now I think I might actually do it. Glad to see people still benefiting from it. I want to update the information about pip targets and make this book less focused on my particular trading style. The essence of what I wrote, however, is really no different: however you trade, trade rationally, or not at all.