I have been trading for a month or so now, I have met moderate success in trading.But then, as babypips taught me everything about forex, I thought to discuss my rules here. So I am putting my trading rules up here to share for the critics, newbies, experienced, appreciations alike.
My plan:
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Never risk more than 2%.
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Make 5 % of account balance and stop trade for the day.Dont get greedy(Most important.)
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Lastly, lose no more than 5% of your account on a single day.
Then I calculate:
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Calculating the risk: 2% risk on a trade on an account of $500(my first small trading account to test the waters) would be $ 10.
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Selecting the position: You need to do your own check for this. Make your own system/ take up up some system from “The Holy Grail” threads(not recommended. It happens that every person has his own perspective while looking at the indicators so, if he writes his system, his system gives his system’s heart but not the brain. You still need to figure out what exactly he was looking for while looking at those indicators.)
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Choosing a lot: The most important step. [U]For a mini lot, $10 loss would mean stop loss at 10 pip[/U]. If, you follow a particular system, it tends to tell you the SL. So, if your system says put 20 SL, then following the three rules and buy 5 microlots.(1 pip movement in microlot is 0.1 bucks, so 20 points is $2 and for 5 microlots is $10(our risk)). Now according to me, SL properties change according to time:
a. On dry times(like trading Eur/GBP in Asian session) it would be take sometime before that is hit. But,on some most busy session it would hit in no time(Like our beloved London session). This trading session rule is not cast in stone, but it works most of the times.
b. Trends are our biggest help, if we have a strong trend in our direction, it could be sometime before our SL is hit. But, if we go in at the start of a trend(not exactly the start but rather a start that the indicators tell us), you need to be very careful. I tend to go in a bit late in a trend, just to be safe. -
RRR(Reward to Risk Ratio)/TP: Normally, I use 2:1 RRR and set TP accordingly. As, this is not a rule, it is always needed to be figured out, what TP is required. Most systems tend to give out the TP. Use that,if and only if, your RRR doesnt go below 1:1. If, it does, dont trade.
That’s it, that is my system. Any, comments, criticism ,suggestions, trading system would be appericiated.