25 Rules of Trading Discipline – Part 5

trading disciplineThis is the final part of 25 rules of trading discipline. I hope that you make use of these rules when making a trade in the Forex market. Forex can be profitable if you know how to control you emotional part and apply the correct strategy that you have tested. By the way, these rules do apply to any investment trading like stocks, options, commodities, etc.

Rule #21
Learn to sweat out (scale out) your winners.

increased profitWhat does that mean? It means that you should not hold on with your losers instead making the best out of your winners. If your trade size is more than a one lot and your trade is a loser, you must exit the entire position en masse. If your trade size is more than a one lot and your trade is a winner, it is best to exit half of your position at your first target price.

If you trade with protective stop-loss orders, you should amend the order to reflect the change in trade size (remember you have exited half of your position). Then raise or lower the stop price, depending on whether it i’s a long or short position, to your original trade entry price. Basically, you are now “playing with the house’ money.” You cannot lose on the remaining position, and that’s obviously a fantastic position in which to put yourself. Place a limit order a few tics above or below the market, depending on your position, sit back and relax.

In the end, your net effect of scaling out of your winners will be an increased average win per trade while keeping your losses to your pre-defined risk parameters.

Rule #22
Make the same type of trades over and over again – be a bricklayer.

bricklayerThis rule emphasis on consistency again. Remember Rule #6 and Rule #20, develop a methodology and stick with it and consistency builds confidence and control respectively. You have to be a bricklayer. You show up every day and execute the same type of trades over and over again, just like a bricklayer who shows up for work every day of his working life and executes the same methodology— brick by brick by brick.

Rule #23
Don’t over-analyse, don’t procrastinate, don’t hesitate. If you do, you will lose.

disappointedOver the year of my past trading, I have several occasion when I knew where the market is heading but I failed to put a position on. Why? Because I did not want to chase the market, or I was waiting for the best price to enter, or only 2 out of my 3 market indicators are met and I am waiting for the 3rd one. I felt so disappointed when I missed all these trades.

This rule has changed my mind-set. Even I am correct with the market direction and because of this procrastination and hesitation, my profit to the trade is still zero. I will not get paid in this business if I did not put a trade on. Don’t over analyse the trade. Place the trade and the manage it. If I’m wrong, follow the rule and just get out. I will never be right unless I actually place a trade.

Rule #24
All traders are created equal in the eyes of the market.

tradersThis rule should provide some motivation when trading in this market. It tells you that all traders start out the day in the same way. All start out at zero. Once the bell rings and trading begins, it’’s how we should conduct ourselves from a behavioural standpoint that will dictate whether or not we can make money for the day. But, if you follow the 25 rules, you should do well. If not, you will do poorly.

Rule #25
It’s the market itself that wields the ultimate scale of justice.

forex marketDon’t ever think that you can be smarter than the market. The market moves wherever it likes to go. It does not care about you or me. It does not play favourites. It does not discriminate. It does not intentionally harm any one individual. The market is always right. You must learn to respect the market. The market will mercilessly punish you if you do not play by the rules.

That’s it. Hope that you like this 5-part series and learn to condition yourself to play by the 25 Rules of Trading Discipline and you will be rewarded. Happy trading!

If you have any questions about any of the material within the article, leave your comment below.


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