Trading rules

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1.      Strict money management

 

·         Proper use of my capital begins with accepting risk.

·         Trading the markets cannot be done successfully unless I assume risk.

·         There is only one risk in the market: that I may be on the wrong side of the net order flow.

·         One valuable clue is knowing when hedgers are active, because they will execute to avoid risk only at price areas that are actually important.

Rules for money management.

 

v  Don’t risk more than 3 % on each position

v  Roll protective stops to the break-even point.

v  Add to the winner on pullbacks.

v  Scale out when hedgers from the other side become active

 

Effective money Management is first and foremost preserving my capital until I find the winning trade.

 

2.      Risk vs Reward ratios

 

·         For my strategy the winning numbers are 42% win/loss ratio and a 2:1 profit/loss ratio for me to be profitable.

·         If I do 100 trades, and have 42% winners, and pull two dollars out for every dollar I lose, my probability of ruin is a little less than 14%.

·         To calculate the numbers (42 * 2) – (58 *1) yields a profit of $26

·         It actually is a better probability for my account if I have fewer winning trades but hold those winners for a higher profit/loss ratio.

 

3.      Taking a break

 

·         My thinking creates my opportunities and if my thinking suffers, so does my trading opportunity and my performance starts to slip.

·         It’s wise to remember that I’m competing against myself so I need to make regular time to get away from the markets and rest. It frees my thinking and preserves a sense of balance.

·         Taking a break enables me to show respect for my personal state of mind and the emotional health of those around me by properly balancing the intense world of successful trading with the infinitely more valuable relationships.

·         Trading can require more creativity, passion, commitment, and energy than most professions; trading also has the potential to leave nothing left at the end of the day for anything else.

·         Part of a well-rounded market presence is doing something regularly that preserves my sense. I won’t be run down, tired, lacking energy, burned out, or juggling too many balls in the air when the right opportunity comes along. Also, I will have the mental resources free to manage those trades better, and I will see more of them.

·         I really don’t need to trade every day and I’m not going to miss anything. The markets will never end and they will be here when I’m back from getting tuned up again.

 

4.      Don’t trade the news

 

·         Trading the news very deadly to my equity. My best course of action to reduce my risk exposure is to not trade the news.

·         Don’t chase the market. The point is simply that observing the market’s actual behavior post news gives me the clearest indication of how traders are currently positioned, how nervous or confident they might be, and how willing they are to execute.

·         By the time a fundamental news item is released, traders have already positioned themselves, and the winning traders have only done that from their understanding of the net order flow.

5.      Withdraw equity regularly Take The Money

 

·         Money is a vital and necessary part of my day-to-day life, and as such, it should be

·         moved around occasionally as my world changes.

·         Opportunities change, people change, things that were great investments in the past are no longer good today; money works hardest for me when I’m moving it around to take advantage of the changes around me.

·         I really don’t need a huge chunk of money in my trading account to exploit market inequalities, when my account balance reaches a certain number, I simply withdraw my gains.

·         This to me is a measure of self-protection; I worked very hard for those gains and don’t want to risk giving it back.

·         This routine gives me contentment to trade a certain lot size and do it very well.

·         For the financial goals I’m working toward, I don’t make the mistake of thinking I will attain them all at once when my trading balance reaches a certain point.

·         It is wiser that I break those goals down into mileposts and make a contribution toward them on a regular basis as my trading account grows.

·         I take the money and use it; move it around and increase my opportunity base and make a few long-term secure investments.