Why it's Important to Stick to a Set of Rules when Trading Forex
In this video:
00:50 Writing down a set of rules and sticking to them
02:35 An experience that I’m currently enjoying
03:25 “Life Advantages” in Forex Trading
The Importance of Setting a List of Rules in Forex Trading.
Sticking to a set of rules would definitely help you to become a formal profitable Forex trader. Let’s talk about that right now.
Hi Forex traders it’s Andrew Mitchem from The Forex Trading Coach and today is Friday, the 15th of August and I want to talk about the importance of setting yourself a list of rules.
You see trading obviously is such an emotional business. We’re trading with real money, you’re making money, you’re losing money, you’re making it again and it definitely affects the way that you feel and emotions can become such a big part of your trading. It’s very important to try and keep that under control.
There are many ways to go about that. I use low risk per trade and I’ve talked about that many times on these videos and podcasts. But also today I want to talk about writing down a set of rules and sticking to them but they need to be set of rules that work for you. Because when you have a set of rules, it may be an entry rules setup, it may be an exit rule decision; whatever it might you’ve got to be able to be comfortable with that and to stick with it.
You know we have rules as guidelines. It helps us in making stupid decisions, emotional decisions, it takes as much of the emotion away from our trading as possible. So I want you to have a think about that and set a group of rules and list of rules, pin it on the wall next to your computer, whatever it might be and go through that list of rules every time you’re thinking about taking a new trade. Do it every day before you start to take trades.
Analyze that market
What are you looking for?
What setups are you looking for?
Are you looking at trading with the daily strength?
Are you looking at reversal trades?
What percentage of your account are you looking at risking per trade?
How many trades would you have open at once?
If you saw a really good setup on let’s say the Euro/U.S. Dollar (EUR/USD) to sell it and you had a setup on the daily chart, the 4-hourly chart, the 1-hourly chart and then the 15-minute chart comes along, show us a good setup.
Are you going to take that where it might be your 4th or 5th trade on the same pair and the same direction?
You might do it. If that’s your rules then go for it but you need to have that written and down in advance.
What happens if you get really close to your profit target?
Are you the sort of person that gets a bit itchy and watch the start/closing part of your trades?
Do you like to move your stops to break-even?
You know are you sitting there staring at your charts you’d say, “No, I’ve got my profit target for a reason. I’m going to walk away and leave it.” What is it that suits you? So have that set of rules.
Now, to bring that back to an experience that I’m currently enjoying is, as you probably know I’m learning to fly a helicopter right now and about an hour ago I’ve just returned from a flight. The same thing applies in helicopter flying; I have a set of rules:
I take off at the right speed
I go at the right height
I have the right pressure on the engine
I have the right forward momentum
I have the rotors going at the right speed
Whatever it might be there are set of rules for a reason. When I’m come in to land, I come in to land at a certain angle. I have radio calls for a reason. It’s all to do with safety and rules. And so the difference is:
In helicopters – if you get it wrong you might not get another chance.
In Forex Trading – you can get it wrong and have another chance, another trade. You might even blow your account but at least you can have another go.