TheSignalyst

5 Rules For Successful Trading!

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COINBASE:BTCUSD   Bitcoin / U.S. Dollar
Trading is simple, but not easy. Traders have difficulty succeeding simply because they are unable to follow clear rules over extended periods of time.

So what are the rules that every trader should follow? (in my opinion)


1- Only invest what you Can Afford to Lose.

Only invest money you can afford to lose, never ever borrow money or take a loan from the bank to invest in forex, or any other type of investment. Because if you do, you will get emotional and make irrational mistakes.


2- 1% Risk per Trade.

We only risk a small portion of our account per trade. We enter with 1% risk per trade (2% max). We enter with a fixed risk per trade, not with a fixed stop loss in pips, nor with a fixed lot size. That’s a common mistake many traders make.


3- Three Confluences Trades. (Technical Edge)

Trading is nothing but a game probability. Moreover, we consider ourselves risk managers not only traders, as the only thing we have control over is "risk". The market can go anywhere. To be on the winning side, we need to have an edge over the market.

One way to put the odds in our favor is by only entering trades when we have at least three confluences/clues, three things telling us to buy or sell lined-up together. One confluence may be random.

For example, we only enter when we have a pattern, support, and divergence. And our rules have to be objective following a well-defined back tested trading plan. I personally use RichTL to make objective (rule-based) technical analysis .


4- 1 / 2 Risk Reward Ratio. (Risk Management Edge)

Our second edge is going to be through risk and money management by entering with a positive risk-reward ratio. Remember, it is not about how many trades you win, what matters is how much you win when you win, and how much you lose when you lose. That’s exactly why we enter with a ½ RRR (or higher), which means we always target double our stop loss. This way even with a 50% win rate, we are still profitable.


5- Emotional stability.

In the trading world, emotions are considered the enemy of traders. Knowing how to control emotions while trading can prove to be the difference between success and failure. When getting into a bad trade, the trader who can manage his psychology well will be able to minimize risk, while the trader who is emotional may make the situation worse.

Therefore, knowing how to control your emotions very crucial in order to succeed in Forex trading.

If you are not feeling well, don't trade.

Remember: You don't have to catch every trade, and you don't have to trade every week.

In fact, our 5 rules are all connected in a way or another.

If you invest money you can’t afford to lose or enter with 10% risk per trade, chances are that you will get emotional and not follow your trading plan objectively by closing your trades before reaching 2R or even entering trades that are not according to your strategy.

In parallel, even if you invest money you can afford to lose and risk 1% per trade, you won’t be consistently profitable if you don’t have a well-defined strategy that gives you an edge over the market technically or through risk management.

In brief, stay away from trading if you don’t have these 5 rules.
This analysis is done using RichTL indicator
http://www.RichTL.com

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Comments

One more thing I would like to add, Mr. Rich, "Lucky"
+4 Reply
TheSignalyst RyodaBrainless
@RyodaBrainless, Nice one Ryoda! Please call me Rich, no formality here.

Luck is a matter of preparation meeting opportunity ;)
+2 Reply
Casmato RyodaBrainless
@RyodaBrainless, Lol my grandfather used to say "The harder we work, the "luckier" we get".
Of course later on I found out he got that from a book.
+1 Reply
@Casmato, beautiful Quote! Thank you for sharing it here.

I got the quote I shared in the previous comment from a book too ;)
Reply
All in..
+2 Reply
TheSignalyst Mr_Negativ
@Mr_Negativ, be careful ;)
Reply
what's your equation for "1% risk per trade"? Does that mean 1% of your dispossable income? Or 1% of current assets including your equities such as house or cars? Or set your stoploss at 1% of current trading assets?

thank you!
+2 Reply
TheSignalyst desertfox100
@desertfox100 good question. 1% of your trading account balance. For example, if you have 10 000$ in your account, you should risk only 100$ per trade 👌
Reply
justinazei desertfox100
thats very small money. to win 10 dolars is nothing
+1 Reply
TheSignalyst desertfox100
@justinazei I didn't get you. Risk 1% and target 2% 👌 so in the case of the 10k account, risk 100$ for a 200$ reward
Reply
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