“The market is a brutal place. Forget trying to be liked. Need a friend, get a dog. The market doesn’t know you and never will. If you are going to win, then someone else has to lose. You don’t like these “survival of the fittest” rules? Stay out of the zero-sum game.”
Michael Covel (Trend Following)
Market is zero sum game so do not play if you cannot give it your 100%. If for any reason you think that you cannot give your 100% any day do not trade that day.
Because the other person will be fully prepared to take your money. So be fully prepared and focused when you trade and when you cannot do that get out of the market.
You can always trade another day.
It’s not the thinking that makes the money – it’s the sitting and the waiting that makes the money.
– Jesse Livermore
You have to wait for the right opportunity to show and be ready for it when it comes.
It has been shown time and time again that on Wall Street people very often fail to see the thing that is right in front of them.
– Jesse Livermore
If you want to improve in your trading you should keep a good record of your trading so that you can see what is right in front of you.
This post is a part of great Forex trader series. Today we are going to discuss point 4 which is “Your biggest loser can’t exceed your biggest winner.”. You always have to make sure that you’re biggest losers in not greater then your biggest winner.
You should keep a record of all your trades. For example if you have a profit of 15 points on a given day then you should not make trade which have risk more than 10 points. So that you will have a winning day on your book. No matter what. So that you can make consistent money.
In all your trades you should focus on making at least twice the risk you take on a trade. You should fix your trade risk in amount at the start of the month so that you can make trade accordingly.
For example you have capital of Rs. 50,000 and you decide to take a risk of 1% of it so you’re per trade risk after commission should not be more then Rs. 500 or less. And your profit should be at least Rs. 1000.
We cannot control what market do. But we can control how we trade the market. All the profit that you will make will depend on how good are in doing that. This part end see you in next part.
This is third part of great Forex trader series. Today we are taking about third point which is “Never turn a winner into a loser.” What that simply means is that you should let your profitable trade become a loss in your book.
How can we do that? We can do that by trailing the stops. When market moves in your favor 5 or more points. You should update your stop to your entry point. As the price keep on going in your direction you should keep increasing your stop in the direction of the trend.
You should always move your stop in the direction of your trade. What it means is that if you are long on a given trade you should increase you stop. If you are short on your trade you should decrease your stop. Not the other way around.
When I started trading Forex I did not trail my stop due to which my profitable position become loss. Because the market reverse after a significant increase or decrease. So you should learn about conserving your profits so that you can keep your profits.
You can learn more about placing stop and different types or stop and basics about technical analysis in
Technical Analysis of Stock Trends Robert D. Edwards. I have read this book many times I learn something new every time.
This post is part of the great Forex trader series today we are going to discuss on why it is important for your trading success that you “Always lower your trade size when you’re trading poorly.”
When the trades that you are making are not profitable and you have more than expected losing trades then you should with your given system. Then you should reduce your trading lots to minimum that your broker can allow till you start to make profits again.
This will help you to reduce your draw down and reserve your capital for future trading. When you start to make profitable trades systemically start to increase your trade size again.
What I do is when my capital is 10% lower than the starting amount I started the month with I reduce my trade lot to 1. When I have a profitable week then I increase the lot to two.
If I have two consecutive profitable weeks then I start taking 1% on every trade that I make. I also make it necessary that every trade that I make should have a risk reward ratio of more than 1:1.5 or higher.
That is it for today tomorrow we will discuss about Never turn a winner into a loser. See you tomorrow.
If you want to become a good trader I highly recommend reading Come Into My Trading Room: A Complete Guide to Trading (Wiley Trading) by Alexander Elder
This post is part of the great Forex trader series today we are going to discuss on why it is important for your trading success that you “Be disciplined every day.” First things that we have to clear out are what I mean by DISCIPLINED TRADER.
What conclude of being disciplined every day?
- Have a trading plan.
- Enter trade with according to your trading plan.
- Keeping a good record.
- Analysis of your trade after it is over.
- Following the money management while trading.
So these are things that you need to do every day when you are trading. So if you have made a written trading plan. Which is complete mean have reasons to buy and sell when to trade? Where to place your stops? How to take profits?
You should make all your trades with accordance with your trading system. You should follow your trading system every day and make every trade by your trading system. If you are doing that then you are a disciplined trader.
Read Disciplined Trader: Developing Winning Attitudes by Mark Douglas it’s a great book.
It is very important to have a trading plan if you want to succeed in your trading. Here is something that I learned while trading with my trading plan.
A Disciplined Way For Trading
It gives a structured way to trade the market of your choice. There is no reason not to trade if your system is giving you a signal to buy or sell.
Even then you are not trading then it is not the problem with the system but in you psychology.
A Structured Way To Trade
A well-defined plan give you structure to trade so that you can find the not important things that you are doing while trading and focus all your attention on what is most important like the Pareto principle.
Improve Your Profitability
If you focus on the most important and trade with a structured system you will become more profitable.
Give You Clear Idea Were You Were Wrong
When you analysis what trade you have made with your system in past you can determine where you were wrong and correct it.
A system makes you consistent in your trading which is the most important thing of all.
If you do not have a trading plan in place this thing will not come to your trading and you will never become a professional trader.
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”
– Robert G. Allen
You have learn to take and manage your risk it is only way you can become rich in long run.
I have been trading Forex for some time this are some the rules that I found that will make you a great trader if you follow them 100%. I have been keeping record of my trades and find out that whenever I loss this is because I fail to follow one or many of this rules.
I will explain this rules in detail in coming post here is the list.
- Be disciplined every day.
- Always lower your trade size when you’re trading poorly.
- Never turn a winner into a loser.
- Your biggest loser can’t exceed your biggest winner.
- Develop a methodology and stick with it.
- Be yourself.
- Earn the right to trade bigger.
- Get out of your losers.
- You always want to be able to come back and play the next day.
- Don’t worry about news. It’s history.
- Love to lose money.
- Never take a big loss. Only a big loss can hurt you.
- Make a little bit everyday.
- Consistency builds confidence and control.
- If your trade is not going anywhere in a given timeframe, it’s time to exit.
This is the list we learn in more detail about them in coming day.