Have you ever met a trader making double-digit percent return per month on a consistent manner?
Trading professionally with proper money management would likely get you a return of few percents a month. From my personal experience a 3-5 percent return on capital per month is a very realistic number.
So if you’re that kind of person who wants to “make a killing” trading, please reconsider your expectations.
2. You should be well-capitalized. Small accounts will probably burn you.
This point is correlated to the first one. let me illustrate with an example:
Suppose that you have a $30,000 trading account. According to the 3-5 percent return per month rule, that would give you 1000-$1500 return per month, which is a very good number, relatively speaking.
Now let’s assume that you have a $5,000 account, according to the 3-5 percent rule, that would return 150-$250 per month.
In the second example(smaller equity), the return would likely be unsatisfying for someone looking to trade for a living. Would it be for you? Wouldn't you break your money management rules and take more risk to increase that return?
3. doesn't work all the time.
Assumptions we make will always have a percentage of failure. The main goal is to keep your risk limited, your targets bigger than your risk, looking for consistent profit on the long run.
4. Trading is not about forecasting the market.
Do not try to forecast where markets are headed all the time. What a trader does is wait for the market to GIVE him certain conditions that validate a trade. (Don’t trade under the market rules, trade under your rules.) Do you feel sometimes that you're lost and don’t know what to do? it's probably because of this.
5. Limit your risk.
If you did use stop loss on your trades within the past year, but you didn't and took excessive risk only on one trade, this single trade might wipe out all of the profits you gained through the year.
How many times did you ignore your stop loss convincing yourself that you will close at a better price? It may have worked sometimes, but what if the price goes against you more and more? Are you mentally strong enough and able to close at a bigger loss? You probably won’t, until forced to close on a margin call.
6. Don’t over analyze.
Over analysis and complicating your tools will lead to confusion and is not necessarily efficient.
7. Ignore your bias
Initiating a trade requires technical evidence, three, four or five conditions that occur concurrently.
8. Always use a top-down analysis approach.
Start from the higher time frame to the lower time frame. The higher the time frame the more strong and invulnerable the trend is, and the more strong and invulnerable the levels are.
9. Trend-trading increases your chances of success.
Trading setups that occur within the context of the trend tend to have a higher success rate than those against it.
10. Don’t give up when you encounter a losing streak
Yeah it can go up to 10 losing trades… Don’t worry, it’s normal in trading.
Hope you found it useful and enjoyable... If you have points that you would add to this, I would be happy to hear them, please comment and discuss..
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Any investment of time may have benefits for you, in that it clarifies your thought processes, and probably makes you better at what you do (not suggesting pure self-interest at all) - and by extension may benefit others (some who say nothing). Nothing bad in all that. Your 'work' is there for others to benefit from - for free. However, a proportion of the time you end up spending seemingly disproportionate time with vague and meaningless comments. Then there is always the counter-argument group who unwittingly 'dilute' your good intentons. That's the pattern I spot.
I'm not suggesting at all that different opinions should be ignored or silenced. I learn from people all the time who have views different to my own. It is about listening and thinking about their different perspectives. However, I do have to draw 'a line' in my 'other work', where I say to myself 'Is my investment of time on this or that matter likely to be worthwhile/beneficial in the round (and to whom).... how much time and effort should I devote to this?' (Similar by analogy to knowing where I might place my stop-losses when trading). I'm not here to stop you doing what you decide is best. Hopefully, I'm giving you some other perspectives to 'consider'. :)
E-correspondence is fraught with risk of transmitting a meaning different to what might better be communicated in more direct modes of communication. If ever you wanna have a chat on the phone or skype, I'm sure we could arrange it (from your google+ profle or similar).
I’ve been studying forex for 5 years 12-16 hours a day before going live.
The only 2 rules should be:
Rule #1: This is not a lottery, it’s a language. Study it, it takes time to read any new language.
Rule #2: Find your trading style. (What’s your personality?)
Allow me to comment your rule #1 & 2:
It’s FALSE for many people. Many traders make well over 3-5% / month. A friend started trading a year ago with $3,000 and is now at $300,000 and growing steadily. His target and stop is at 5% per trade. One trade a day that compounds. It is possible to double an account monthly and many don’t post about it because then they get accused of lying. 5%/month has become a religion.
P.S. A good friend of mine became a billionaire with the bitcoin. He bought a ton at $2 and sold at $1000. He’s not even 30.
P.P.S. Years ago, I used to follow a forex teacher every week, until he said one day that he was making 5% /month. That day he lost most of his subscribers.
Your rule #3. True & False. Setting your target bigger than your risk is only one way of trading. It’s a popular way but it’s NOT a rule. And the chances of hitting 100pips in profit versus a 50-pip stop is about 33% because the target is twice as far as the stop. Some markets turn all the time, such as the EURUSD. Instead, it’s way safer to target the same # of pips but to play way higher odds like line breakouts.
Your rule #4: True & False.
Every tick/pip of the price goes where it goes every minute for very specific reasons. It’s a language and it’s extremely precise. There’s no randomness in the market. Even on the M1. (I can prove it but won’t reveal my knowledge. I worked too hard) Most people think the market is random but in reality the truth is that they haven’t learned to read the market. Most traders only read parts of the language, simple structure such as support/resistance, price action, etc.
If I move to Japan, will I play my rules(survive at first and only repeat the same habits daily; same restaurant, same subway, … (trading the same patterns)) or go way beyond and learn to read Japanese, learn the psychology of the population, their habits, their fears, goals, etc? It’s a choice. So your rule is like saying: Stick to the patterns you know. It’s only a good advice for beginners/travellers. Not a rule.
Your rule #5:
Stops are not essential. It depends on your strategy. For example, instead of closing a position, if one believes the market will go higher, one can open a small buy, and as the market goes against him, buy again lower to get a better average price. People simply get caught in their only unique opened position because of a way too large lot size, so they exit most often prematurely.
Or another strategy is to open an hedge while the market reverses and to close the hedge once back at $0. I use hedges as an insurance. So forex becomes like trading options, without time limits. (I’m not in USA so I can hedge, and anyway there’s a well known broker that allows us residents to hedge and has no fifo rule).
There are other strategies as well to avoid using stops. So, anything that talks about stops are not rules, they are suggestions.
Your rule #6:
Analysis paralysis. I tend to agree on that one. But knowing what to do should only require a quick look. But that requires experience of course. I remember my first 3 years. I had signs telling me bullish and other signs bearish. Only rule here should be: Don’t trade live until you know what you’re doing.
Your rule #7:
I tend to agree on that one.
Your rule #8: I totally agree. So wait to open a trade at those lines. And reverse position when price crosses that solid line. (Open Buy when price crosses over. And if price crosses under the line, close buy and open sell.) Trading gets as simple as that. Target the next solid line.
Your rule #9:
True, but the real trend direction is on which timeframe? That’s what nobody tells right? Which direction is the trend if the M15 is trending up and the H1 is trending down while the D1 is trending up and the Weekly is downward? I know the answer but it took me years to see it. And nobody tells, all they say is: The trend is your friend. First thing that happens, as soon as you open a position, the trade goes against you, then you look at another timeframe and it was going opposite way and you hit yourself. In reality: All bad teachers, traders get bad or cloudy advices and believe in other people rules without understanding how that teacher thinks/trades globally. There are a million ways of trading.
Your rule #10: I agree on: Don’t give up.
But I disagree on calling ‘normal’ 10 losses in a row. It’s a USUAL thing in an industry were people don’t obtain/receive the proper education or are not committed enough, but it certainly should not be considered normal.
Losing more than 2-3 trades in a row is ok if the losses are small. But again it depends of the strategy, so it’s not a rule. Example: "After a break out or a flag pattern if the price comes back under the support line there isn’t enough volume at that moment, close the trade 5 pips under the support line for a tiny loss. »
If a trader gets 10 big losses in a row, to me it means he might just be throwing dices or flipping a coin, while believing he’s a professional.
AND GUYS TRADING IS EASY: WHY ALL THOSE DARK RULES?
Anyone can make a killing using a simple moving average (a 200EMA on a renko chart for example), flipping its position when the price crosses it.
Or just wait for a bounce on a major support/resistance and flip (close & reverse) position on a break of the line.
P.S. My intents here were only tell people: "Hey! TRADE and don't settle down to any idea or rules that goes against your goals. You want to be a millionaire? Don't think like the mass. That's how I became a multi-millionaire in my other businesses. I love to dream and hate dream stealers. It remembers my parents who told me 20 years ago, for my own good because they love me, to get a job."