Firstly, I'm a big fan of simplicity: after all, to make money all you have to do is buy low and sell high. Here are my personal trading rules:
- Use only price action. This means trendlines, supports and resistances; no fancy indicators.
- The potential profit must be roughly at least 3 times the potential loss. This is because the market is unpredictable most of the time; if we're right, we want to be very profitable whereas if we're wrong, we only want to make a small loss. This is the opposite of a blown account.
- Never risk more than about 3% of your balance on a single trade. We don't want a blown account.
- Trade aggressively. Whether we make a trade today or exactly the same one a week from now doesn't affect the outcome -- it only delays it.
- Do not add to winning or losing positions unless it's a separate trade. Yes, you might make more money, but you might lose more money too. The only time we add to a trade is if we spot a new pattern on the chart, and this trade will have a stoploss and a takeprofit as according to rule #2.
- If a trade is not going to plan, exit it. This includes winning trades. If what's happening wasn't what we thought would happen, then the fact that we're making a profit could be down to just luck.
- Close all positions on Friday evening. This is because we cannot amend positions over the weekend.
Good luck,
Adam
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