1. Never trade with money you can’t afford to lose.

It’s a classic mistake that is just a recipe for disaster. If your next trade just has to be a winner or else you won’t be able to pay the rent or buy food for the family then you just can’t trade objectively. Generally, this is referred to as “trading with scared money”. Trading with scared money will always lead to trading out of emotion rather than logic.

If you are in this situation then stop trading immediately. Make sure you have your monthly expenses covered and put a regular amount away for a ‘trading fund’. Only trade again when you have sufficient to cover your trading system’s estimated requirements.

2. Don’t wait for the perfect trade.

Nobody enjoys a losing trade, unfortunately, that’s just part of the game. It’s easy to sit back and demand more and more confirmations that the trade that you are about to enter is going to be profitable. Perhaps you tune into Bloomberg and wait for the commentators to agree with your view or just wait a couple of days to be absolutely sure that the breakout that you saw happening really is happening. Perhaps you ask your friends and colleagues what they think. Alternatively, some traders have a list of a dozen indicators that all have to show green before they press the button.

Not being reckless and demanding a little confirmation is a good thing. When taken to extremes though will lead to severe procrastination. If you find yourself always saying ‘I knew that trade would be a winner, if only I’d got on it sooner’ or you start chasing trades long after the opportunity has gone just because you saw it first then you know you need to cut down on the confirmations.

Just remember there are no guarantees in trading. Be confident in your system and take the trade as soon as it is signaled.

3. Don’t get carried away by a large winning trade.

If you trade long enough eventually you’ll have a ‘spectacular’. Making 50% in a week or doubling your money in a month. Suddenly you start to feel invincible. You calculate how quickly you’ll become a millionaire and you start to browse the Ferrari or Aston Martin websites!

The market has a nasty habit of bringing such dreams down to earth and all too often you can find your best month ever is quickly followed by your worst week ever where you lose everything you made and more.

Always remain focused on your trading system. Don’t start to think you can outsmart the market.

4. Don’t have your own opinion.

Your opinion means nothing to the market. You are one person against tens of thousands of other traders. If you’ve ever found yourself screaming at your trading screen that the market is wrong then you need to let go of your own opinion and follow what the market is doing.

Perhaps your opinion on market direction for the long term is correct but in the short term all those differing opinions of all those tens of thousands of other traders can cause wild fluctuations on any particular day.

 

5. Don’t Hope, Wish or Pray

Hoping, wishing or praying will not turn a losing trade into a winning one.

If you ever find yourself in a situation where you start to hope, wish or pray for a trade to turnaround then here’s another 4 letter word to work on: EXIT! Close the trade and move on.

6. Don’t Have a plan – and then ignore it.

If you have spent weeks, months or even years developing a trading plan then why would a decision made in a split second whilst you are in a trade outperform that plan?

If you have a plan, stick to it rigidly. You know that losing trades will happen but you also know that your winning trades will more than outweigh the losers. It’s very easy to deviate from a plan when it seems to be producing a string of losing trades. If you’ve ever been there then you’ll know that the moment you decide change the plan is the moment that the original plan comes good.

Give your plan long enough to statistically provide evidence that it’s reason for being has changed – one or two losers doesn’t mean the plan has failed.

7. Don’t just have a good entry plan but no exit plan.

Where you exit a trade is just as important as where you enter it. If you buy to enter then your exit should be where that buy signal is no longer valid. This could be after the market has moved considerably in your favor – would you still be a buyer at this price? Or if the market has moved against you and invalidated the buy signal.

Before you enter a trade. Know where you will take profits and where you will stop the losses. Make sure you stick to the plan and adhere to this simple trading rule.

8. Never fall in love with a trade.

If you research a trade thoroughly before entering it then it can be easy to become attached to it! Just as if you spent a long time with another person and they are kind to you then you grow fond of them and want to stay with them. It’s human nature to want to be with the ones that love us. However, when that relationship turns bad are you strong enough to get out?

When a trade goes in your favor it’s easy to stay with it and enjoy the profit it’s providing you. However, when it turns against you do you forgive it or dump it? That trade will punish you if you become too attached.

9. How to Follow Your Trading Plan to Ensure Success

In trading there is really only one certainty - some of your trades will lose money. Losing money is never fun, but it is a major part of trading. How you deal with those loses separates the successful traders from the unsuccessful ones. The secret of success in trading is to be able to ignore individual trades, some will win and some will lose. After a series of losing trades we must still be able to pull the trigger and place the next trade, you never know when the next winner will come. Of course, we assume that our method is sound to begin with and this is where we need confidence. It is essential to believe in your own system and this confidence comes from doing our own testing.

Most traders will lose confidence in a method with as little as 3 losing trades in a row. In an extreme case you might have a system that wins only 25% of the time but the average winner is 5 times larger than the average loser. If you have 3 losing trades in a row and give up then you have lost 3 points. The confident trader will know that 3 losers in a row is not uncommon (0.75*0.75*0.75 = 42% of the time!) for this system and will continue to trade - the next trade is the winner for +5, giving +2 overall. The losing trader might now see that the system has become profitable again and jump on board - just ready for the next losing 3 trades in a row. The point is, with any trading system you cannot pick and choose which trades to take - you must take them all.

You must know your system before you begin to trade - check out our equity curve simulator.

1. Resolutions of Top Traders

Every day we should all strive to become better traders. Here are 10 ways to help achieve that ambition:

• Do not feel compelled to always have a trade on or to trade every day. Capital preservation is the key to successful trading and sometimes that just means waiting when the odds are not in your favor.
• "Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting." Jesse Livermore
• Develop your own proven trading system - accept that losing trades will be part of that system.
• Do not let emotions influence your trading decisions.
• Trading is a business, be strategic and logical.
• Learn something new every day that will help to maintain or increase your edge.
• Keep a trading journal and review why your actual trades vary from your trading plan.
• Do not fight the market; it's easier to run with the wind than against it.
• Always trade with a stop loss and never move that stop further away or remove it completely. Do not allow a day trade to become a long term investment.
• Become an expert, know your market inside out. Be it options, futures or an individual stock - you should strive to become the World authority in it!
• The market will rarely do what it 'should' be doing. Instead, focus on what it is doing.

 

How to Control Fear and Greed in Trading

There is an old saying that the market is driven by fear and greed. Anyone that has placed more than a couple of trades will surely have experienced these two emotions.

All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let's look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios:

1. The trader's three previous trades have been losers. The unsuccessful trader will consider this before placing his next trade and be fearful that this trade will also end up a loser. This might result in a delay in placing the trade whilst waiting for the price to confirm that they were right - thus missing a perfectly good entry. They might suddenly discover that some other factor, previously unconsidered, is a reason not to enter the trade at all. Basically they will be fearful of another loss.

The successful trader will have tested their strategy extensively and will be aware that a series of losing trades is very probable. They will also measure their success on whether they place the trade according to their system rather than whether it is purely a winner or a loser. They trust their system and place the trade when the set-up occurs. The fear is removed from the trade because they know that several losers in a row is to be expected.

2. Once a trade is entered it immediately moves against the trader. The unsuccessful trader will fear that they have made a mistake. They fear making another loss so they wait and hope that the market moves back in their favor. The fear of taking another loss now controls their trading decisions; they might move their stop further out so the market doesn't take them out for a loss. They might ignore the trade, hoping that it will get back to at least breakeven - the daytrade becomes a position trade of a few days and then it becomes a long term 'buy and hold' strategy.

The successful trader, of course, will know from extensive testing of his system that such trades happen and that the trade might come round or it might hit the stop. His stop is in place and it will remain in place - the system dictates where the stop is, not the trader's fears.

3. Once a trade is entered it immediately moves strongly in the traders favor. The unsuccessful trader will suddenly see a villa in the sun or a new sports car flashing before his eyes. This trade is going to the moon so he removes his price target and decides to let it go. Greed has now completely taken over his trading decisions and the previous plan (if any) is ignored. Of course, markets rarely move in one direction for long and when the market turns the greed turns to fear as the dream slips away and the trader tries to hold on until the price gets back to where it was. The daytrade becomes a position trade...

The successful trader has set a target, either a certain price or a timed exit and will stick to it. If the trade only takes 5 minutes then that's just great, there's plenty that won't.

6 Critical Factors for Successful Trading

Success in any profession can be broken down into a number of critical factors. Trading is no different. Does your trading tick all 6 boxes or are there any areas you need to work on:

1. Do you have an edge?Trading futures is a zero sum game - you must have an identifiable edge over the other market participants. Have you identified a high probability pattern that can be exploited time after time? Remember though, the only constant in trading is change - you will have to constantly evolve your trading edge to stay ahead of the crowd.
2. Disciplined Execution. There is no point in identifying an edge if you can't execute the trade. Measure your trading success against your trading plan not the actual outcome of the trade. If you make a loss but you executed your trade exactly according to your plan than pat yourself on the back, don't beat yourself up over it.
3. Money Management. If your risk per trade is too aggressive then you run too high a risk of blowing your account, too conservative and you will not optimize returns from your system. It is essential to establish the maximum expected draw down of any system and set money management rules accordingly.
4. Have a Trading Plan. A trading plan will dictate what you will do in any given situation during the trading day. When the market is open you do not want to have to think - just concentrate on executing your plan. When the market is closed you need to be preparing for the next session to ensure you have a clear plan prepared.
5. Accountability. You are responsible for every trade. Ultimately the decision to put on a trade is yours. If your stop is hit and the market immediately reverses then you are responsible, not the 'big boys' gunning for stops - it happens, move on. If you get huge slippage on your trades then does your trading plan account for it or is your plan unrealistic for the market you are trading?
6. Commitment. Trading is not like a regular job, you don't pick up a pay check at the end of the month even though you did no work and spent the whole month surfing the web and emailing your friends. You must be committed to placing every trade according to your plan, even through the losing periods where every trade seems to end up a loser. Trading seems to throw up extremes of good times and bad times, you must not get over confident during the good times and you must not give up in the bad times - remember it is all part of the plan. You must set aside adequate time every day to compare your actual performance against your trading plan. You must be committed to continuous testing of new ideas and regular monitoring of your existing plan. Research into future ideas is essential - remember the only constant in trading is change.

 

Advice for Novice Traders

1. In order to become a successful trader, you must have sufficient risk capital, the loss of which (or parts of) will not completely destroy your morale - you must be able to handle this ordeal calmly and this should not affect your lifestyle in any way. Your mind should be on the market, not on your finances. You must concentrate on the task of trading, and must remain calm, in order to make the proper trading decisions. You should never use the last remains of your finances for trading - the responsibility and the pressure would be too great, and your mind would stray towards your finances, and not towards the market situation, thus greatly increasing the possibility of mistakes.
2. Don't rush to open a real account after only a few days of practice. Practice for as much time as necessary for you to feel confident on your own. Do not compare yourself to other traders - just because it took them a certain amount of time, doesn't mean you don't need more. Your primary goal in this practice is to develop an individual trading style or technique such that, at the very least, your next week's trade earnings are not less than this one's, and your monthly earnings should increase every following month. Only after achieving this result, should you open a real account.
3. When the amount of winning trades surpasses the amount of losing trades, and your account balance is increasing, you have achieved a positive result in trading. However, if you have 5 losing trades for $2000 total and 1 winning trade for $3000, that is nothing to brag about since you probably made it through only by luck, or by the fact that you took an insane risk to use the maximum number of lots for your trade. You should never depend on luck outside of the casino or the lottery. Not on the market - eventually your luck will come to an end.
4. Its not enough to achieve the above results on your demo account. It is equally as important to understand why it happened, and to develop your profit-making individual trading style. Intuition is very important, but basing your trading decisions solely on intuition is unacceptable.
5. Set up strict limits for your losing trades, so that you don't lose more than you can handle. These limits should be within 3-10% of the total sum of your account, depending on its size. If the market starts going in the wrong direction, don't try to think of excuses why you shouldn't close that position - as soon as the losses reach your set limit, immediately close the position. Even if the market starts going in the right direction 5 minutes later, you have eliminated the risk of it not turning around. You will make such trading rules, so that you could trade by them, not try to go around them - you would only be hurting yourself if you did.
6. One of the most deadly mistakes a trader may commit, one will destroy your trades, is when the trader (after already losing $200 on a position) begins to think of excuses not to close this position - perhaps the market will suddenly turn around and move in a favorable direction? The trader keeps thinking of this, and doesn't have the heart to close the falling position, waiting until this happens. The market does not do any favors for anyone. Eventually the trader will be forced to close the position, with losses of $1000, or even greater. Not only will the trader lose money, they will lose morale too. They will lose confidence in themselves and their decisions. The reasons for committing this mistake is simple – greed and hope. Losing $200 doesn't hurt your opportunity to not only make up your losses, but also make additional profit. Losing $2000-$3000 in 1 or 2 trades, you completely destroy your opportunity to earn further money! In order to avoid this trouble you must follow a simple rule - never go over the risk limits you set for yourself. Close your positions immediately when your losses reach these limits!
7. The less money your account holds, the less money you can lose in a trade, and the greater that trade's value is to you. Because of this, you should avoid opening a real account with $1000 - its just not enough, because just like a "spy" you can't afford to make a mistake, you don't have the right to make a mistake, and a mistake is fatal. On any market, there is no such trader, even the most experienced, which hasn't ever made a mistake.
8. Mistakes and losses are an unavoidable part of any trade on any market. The sooner you learn to accept losses in such a way, the sooner you will begin to earn. You should not blame yourself, others, or the market for your losses. Your losses are in no way related to your reasoning abilities. Your task is to calmly analyze your mistakes and to not repeat them in future trades. You should not jump from joy after winning $800, nor beat your head on the wall after losing $200. The less you let emotion get a hold of you during trading, the better your ability to see the true market situation and to make the right decision. It is vital to develop a cold-hearted lack of emotion, and to treat winnings and losses as just numbers - not money. Understand that traders don't learn from their winnings - they learn from their losses. When every loss is perceived as one step towards your next winning trade - you are on the right track.
9. The trader's greatest enemy is not the market, putting the blame on which is the same as blaming nature. The trader's greatest enemies are greed, impatience, lack of control over emotions, insecurity in oneself, and a self-centered nature of the trader. You must never open a position simply because you get bored and want to do something, because you haven't opened a position in a while. There is no norm as to how many positions you should open in a given period of time. Even if you only open one position on 2-3 days, but that trade earns you $600-800 - you are on the right track.
10. Keep a diary, where you will describe the conditions that led you to make the trading decisions that you did. Write about the market events that influenced your decisions to open or close a position. After every trade, analyze it and write down the result in your diary. If you made a profit, it is important that you understand and remember your flow of thinking, which led you to the right decision - market events happen often and new news may replace old news, so you will eventually forget what happened unless you keep track of it yourself. It is even more important to understand why you lost. There are really not that many mistakes that amateur traders commit, and if you can understand them all, you can learn not to repeat them.
11. Reading the opinions of others, base your trading decisions on your own analysis of the market, and your feel for the market, which you will eventually acquire. If your prediction matches someone else's, good. If not, that’s not a problem either. However, if upon seeing such a disparity, you start doubting your analysis, it is best not to make the trade on your real account - only on demo. If you are confident in your decision, go ahead and do it - one of the predictions will be correct. If your prediction is not the correct one, find the fault in your analysis.
12. Always follow the ancient and universal rule of the market: cut your losses as soon as possible, and hold your winning positions open as long as possible. There is more to add: never, under any circumstances, allow a loss to occur in a position that has been making profit. It is better to close it all together without profit if the market suddenly turned in the opposite direction, rather than allowing a profit to turn into loss. That would be just stupid.
13. If you suffer a loss, don't try to immediately open a new position to "get revenge" on the market - you are only making your situation worse. Only if you see that the direction you have chosen for that position was totally incorrect, then it would make sense to quickly close that losing position, and immediately open a new position in the opposite direction. Don't play guessing games with the market. It is better to lose opportunities, than to lose money.
14. You can try to win $1000 in the paid demo competition, but you should only attempt this after developing a working individual trading technique, which has been consistently bringing you profit on the demo account. Learning to trade in the paid competition is pointless. In your attempt to win more money than everyone else, you will cross all limits of risk, and even if you win, you will not be able to trade so confidently with your real money. Such a risky technique will only bring losses on the real account, and you will not have a cautious, safe technique available.
15. Try to think of your demo account as your real account. The sooner you are able to convince yourself that the demo is trading the same real money that you would trade on your real account, the sooner you will begin to develop the proper technique of trading which you will eventually use on your real account. You must act the same way when demo trading, as you will when trading for real, because the technique you develop determines your success in trading.
16. No one knows better than you how much money you should put on your real account later on. In order to trade in the demo, it is recommended to lose money until your demo balance reaches the sum you plan to use on your real account. In this case, you will trade in conditions most close to the actual trading with your real money. This is a unique opportunity to develop your necessary technique, in the conditions of your real account.
17. New traders are not recommended to trade on Sunday nights,New York time, because this is actually Monday morning on Asian markets, and the behavior of the currencies at this time is the least predictable. It is also not recommended to trade on Fridays, especially mornings, New York time - on Friday the market usually breaks away from the trend, which it set during the week, and for you it may become an unpleasant surprise. Also, on Friday, more often than not, the market has a tendency to sell off American dollars, especially in periods of an uncertain economic situation in the USA.
18. Try to begin trading at the same time of day, each time - the behaviors of the currencies at different times of the day differ, and by concentrating on a certain time of day to trade, you will be able to understand the characteristic behaviors of currencies at this time. Begin your day by researching events that occurred on the market while you were away from trading. After getting familiar with the market events, look at the graphs for the movement of the currencies, starting from "tick" charts and ending with daily, and select a tactic which you will use for this particular day.
19. Concentrate on 1-2 currency pairs, not more. Research their behavior thoroughly. Do not trade different currency pairs, but observe and analyze the behavior of all currencies - they are all dependent on each other. Understand which cross rates have the greatest influence over the behavior of the currency pairs, including the US dollar.
20. The proper path towards understanding the market is to receive education which our website provides, both online and in-class. In either case, we recommend that you trade on your demo account daily, read the "FOREX News" on our site, and research charts. Profit comes to those who understand and learning to trade on this market is not as difficult as learning the stock market, but in either case, it’s a gradual process - only patience and a systematic approach will bring you the results which will change your life in a financial way.

29 Trading Rules

• Never over-trade.
• Never risk more than 10% of your trading capital in a single trade.
• Never trade without protective stops.
• Never cancel a stop-loss after placing a trade.
• Never average a loss.
• Never let a profit run into a loss.
• Never buy or sell just because the price is low or high.
• Never try to guess tops or bottoms.
• Never limit a profiting trade, instead move your stops to guarantee a profit.
• Never get out of the market because you have lost patience or get in because you are anxious from waiting.
• Never hedge a losing position.
• Never change your position or close a trade without a good reason.
• Never follow a blind man’s advice.
• Never enter a trade if you are unsure of the trend. Never buck a trend.
• Avoid scalping for small profits and taking large losses.
• Avoid trading after long periods of success or failure.
• Avoiding going in and out of the market too often.
• Avoid getting in wrong or getting in right and out wrong, making a double mistake.
• Always identify strong support/resistance levels.
• Always lock in a profit at predetermined increments on profiting trades.
• Always use protective stops on open trades.
• Always distribute your risk equally among different markets.
• Always be willing to make money from both sides of the market.
• Always reduce trading after the first loss; never increase.
• Always cut your losses short and let your profits run.
• When in doubt, get out. Do not get in when in doubt.
• Only trade active markets.
• Only pyramid trades that have a strong trend and should be accomplished once the price has crossed support/resistance.
• Profits from a successful trade should be kept for future trade margins.