I thought it would be fun to go over the trading rules that you need to follow. I thought a list would probably help you out much more than just breaking it down over posts. So I hope you enjoy this.

1. Trading Is An Art, Not A Science

I know a lot of people really want this to be a science. It makes things so much easier, but the market is inevitably influenced by people. People are definitely not a science. There is a lot of “science-like” things that can occur and during normal situations they can remain almost like a science. But inevitably the art will beat it.

2. Never Let A Winner Turn Into A Loser

You’re going to find that the market is very competitive and moves very fast. This provides a lot of challenges for people and the main one is winners turning into losers. I don’t think there can be anything more disappointed than having a trade that is in positive territory that turns sour. Using stop-loss and trailing stops to help prevent this sort of thing from happening.

3. Logic Wins; Impulse Kills

I’ve been talking to people about this for a long time. Logic is your best friend. You want to listen to your head and not your heart. Impulse and emotional thinking will get the worst of you in the end. You might win a few times, but in the long run you will fail.

4. Never Risk More Than 2% Per Trade

This is a very important rule in marginalizing risk. No trade is going to be a guaranteed profit, so you have to make sure that you only have small amounts invested. It’s a diversification of trades that allow you to avoid the problem of one big devastating loss.

5. Use Both Technical And Fundamental Analysis

You need to use both of these to be successful. The fundamentals will give you a very good overview of direction. The technicals will help you with the slight moves that happen in shorter periods of time.

6. Being Right And Early Means You Are Wrong

Being right is a great thing, but timing is more important. There is a specific time to move and if you show up at the wrong time you’re going to get burned. It’s just an inevitable thing, so make sure you know when to get in if you know you’re right.

7. Differentiate Between Scaling In And Adding To A Loser

The difference between adding to a loser and scaling in is your initial intent before you place the trade. Adding to a losing position that has gone beyond the point of your original risk is the wrong way to trade. There are, however, times when adding to a losing position is the right way to trade. For example, if your ultimate goal is to buy a 100,000 lot, and you establish a position in clips of 10,000 lots to get a better average price, this type of strategy is known as scaling in.

8. What Is Mathematically Optimal Is Psychologically Impossible

I think what I’m trying to say here is that you’re not perfect. You’re never going to make the right move all the time and you’re emotionally going to make the wrong choice. This is why it is important to trade a 2:1 reward to risk ratio because you can trade wrong 6.5 times out of 10 and still turn a profit.

9. Risk Can Be Predetermined; Reward Is Unpredictable

You never know what your profit will be and that is just the way it is. You have to make sure that you can handle the loss that you could possibly face. All “good” trades are nothing more than educated guesses, so you have to know what you can handle.

10. No Excuses, Ever

Basically you should never been in a trade that you don’t understand. There is no excuse for such tactics. Sometimes you anticipate a specific outcome based on news. The news goes in your favor, but you see the total opposite thing happen. You have to get out. You shouldn’t stick around in something that you obviously don’t understand.