Trading rules
These are the basic rules that i follow.The rules that i have stated are purely mine and anyone is free to use or change the rules to suit their own personal style of trading.
Rule number one target PER DAY = $50 yes thats right im not going in to make millions off the bat keep it real and keep it simple thats the way your not gonna get burned.You might be wondering as to why this strange amount just $50 well its simple.Take every cost that you have right now that includes food ,bills ,entertainment and so on and add everything up. After that divide it by the amount of trading days for me its 5 days a week.So the round figure over a month will be a cool $1000 not alot but here is the thing if you dont need to then DONT touch the money.However if your just in it to make a decent amount each month then by all means enjoy it.
Reasons behind not touching the money is simple.For every amount that you earn it increases your threshold for margin call on top of that you can be more aggressive by doubling the amount of a single trade to reduce the risk to yourself and at the same time hit your normal profit limit faster.Here is basically what i am doing right now so you understand better.
I started with a $1000 USD account the levy is about 100:1 and i am trading the DJ30 indices every lot i buy or sell will cost me $100 dollars as used margin.so that means that if i buy in ONE lot it will cost me $100 and i only have $900 as my margin.The spread is $2 so each time i trade i have to plan for it to go up by MORE then $2 to cover the spread.Every pip that goes up or down is a profit or lost of $1 dollar.So if im a long term trader i can simply say ok i want to earn $50 set my limit order at that and walk away anddddd maybe wait months for it to hit if i caught it at the wrong time.If it drops 900 pips then its game over for me.However whats my goal its $50 PER DAY so i cant be doing that right.Once again i start to divide the number of hours im willing to trade which brings me to about 8 hours so the magic number will be $6.25 per hour of trading.Now looking at how things have started to break down into smaller pieces doesn't then stress level go down as well.If i told you to get a winning trade of $50 in one trade it basically means that you will need a very good strong run and you must have balls of steel to withstand the fluctuations that happen over an hour or 30 mins.If you are an experienced trader its not much of a problem but at the same time wouldn't it better to trade with a lower stress level.
Remember to scale down things and do them one step at a time everything will start falling in place as soon as your mind is clear and set on what you want.
Ok right about now your thinking sounds reasonable enough for every hour i just need to make one short simple trade of $6.25.So if i do hit my target of $1000 per month why cant i take out the money and enjoy it? The short answer to that is i want to use that money to earn money faster, less stressful and train myself to be even more comfortable with earning more.Here is how ,remember when i said i started with $1000.I ratio my trades in this manner for 1 single trade either a buy or sell i need $1000 as my total funds to put me at ease.So using that ratio after one months time instead of buying in 1 single lot and waiting for it to go up or down 6.5 pips the number is once again HALVED. This time for every hour i just need ONE trade to move 3.25 pips and im done.Is that easier or harder then before?
Now before anyone starts screaming you want us to become intraday traders or scalpers the answer i will reply is that (THIS works for me) im not trying to convert anyone or to cause any confusion. I'm mearly recording what works for me in case i get old or senile and i need somewhere to remember and if i can get there doing this then i will just lay it out as a map for anyone to see.I got NOTHING to sell or gain by doing this other then the shear thought of someone else being able to trade better , easier and make it in the world of sharks over at wallstreet.
Here is where everything that i have learnt goes into play .First things to check whats the TREND for today is it up , down or sideways ?? Next on my list will be reports that are coming out before during or after market times.I will cover everything in more detail on other sections as i get to it if any part confuses you all just drop me a massage and i will clear things up.Ok before moving on to things to do before the market starts my ratio for stop loss is below.
Rule number one target PER DAY = $50 yes thats right im not going in to make millions off the bat keep it real and keep it simple thats the way your not gonna get burned.You might be wondering as to why this strange amount just $50 well its simple.Take every cost that you have right now that includes food ,bills ,entertainment and so on and add everything up. After that divide it by the amount of trading days for me its 5 days a week.So the round figure over a month will be a cool $1000 not alot but here is the thing if you dont need to then DONT touch the money.However if your just in it to make a decent amount each month then by all means enjoy it.
Reasons behind not touching the money is simple.For every amount that you earn it increases your threshold for margin call on top of that you can be more aggressive by doubling the amount of a single trade to reduce the risk to yourself and at the same time hit your normal profit limit faster.Here is basically what i am doing right now so you understand better.
I started with a $1000 USD account the levy is about 100:1 and i am trading the DJ30 indices every lot i buy or sell will cost me $100 dollars as used margin.so that means that if i buy in ONE lot it will cost me $100 and i only have $900 as my margin.The spread is $2 so each time i trade i have to plan for it to go up by MORE then $2 to cover the spread.Every pip that goes up or down is a profit or lost of $1 dollar.So if im a long term trader i can simply say ok i want to earn $50 set my limit order at that and walk away anddddd maybe wait months for it to hit if i caught it at the wrong time.If it drops 900 pips then its game over for me.However whats my goal its $50 PER DAY so i cant be doing that right.Once again i start to divide the number of hours im willing to trade which brings me to about 8 hours so the magic number will be $6.25 per hour of trading.Now looking at how things have started to break down into smaller pieces doesn't then stress level go down as well.If i told you to get a winning trade of $50 in one trade it basically means that you will need a very good strong run and you must have balls of steel to withstand the fluctuations that happen over an hour or 30 mins.If you are an experienced trader its not much of a problem but at the same time wouldn't it better to trade with a lower stress level.
Remember to scale down things and do them one step at a time everything will start falling in place as soon as your mind is clear and set on what you want.
Ok right about now your thinking sounds reasonable enough for every hour i just need to make one short simple trade of $6.25.So if i do hit my target of $1000 per month why cant i take out the money and enjoy it? The short answer to that is i want to use that money to earn money faster, less stressful and train myself to be even more comfortable with earning more.Here is how ,remember when i said i started with $1000.I ratio my trades in this manner for 1 single trade either a buy or sell i need $1000 as my total funds to put me at ease.So using that ratio after one months time instead of buying in 1 single lot and waiting for it to go up or down 6.5 pips the number is once again HALVED. This time for every hour i just need ONE trade to move 3.25 pips and im done.Is that easier or harder then before?
Now before anyone starts screaming you want us to become intraday traders or scalpers the answer i will reply is that (THIS works for me) im not trying to convert anyone or to cause any confusion. I'm mearly recording what works for me in case i get old or senile and i need somewhere to remember and if i can get there doing this then i will just lay it out as a map for anyone to see.I got NOTHING to sell or gain by doing this other then the shear thought of someone else being able to trade better , easier and make it in the world of sharks over at wallstreet.
Here is where everything that i have learnt goes into play .First things to check whats the TREND for today is it up , down or sideways ?? Next on my list will be reports that are coming out before during or after market times.I will cover everything in more detail on other sections as i get to it if any part confuses you all just drop me a massage and i will clear things up.Ok before moving on to things to do before the market starts my ratio for stop loss is below.
I have been to a few web seminars and most have always come to either a simple 1:4 risk to reward ratio and others a 3% on your total amount of funds as risk ie $1000 account = $30 risk.Here is the thing that i have found out the hard way which is what all of them are saying although true its working to their advantage not yours.Lets put it in plain and simple english how many times has anyone gotten into a trade with lets say a stop loss of 1:4 ratio right.Now the minute your trade has been placed it takes a nose dive and before you can do anything about it your stop loss has been hit and you are stuck with a bad trade and a lighter pocket.As if this wasn't bad enough once that happens the market corrects itself and bounces back to a higher high where your limit to take your profit was at.I know the feeling first hand cause this ALWAYS happened to me when i was just starting to trade.
So right now your thinking dam it if i had stuck to it longer i would have made it and your stop loss suddenly becomes a 2:4 ratio instead.Now your thinking im fine its gonna dive down and correct itself and i will get a profit.Now what happens the market just starts going down down DOWN and never returns.Now your stuck with 2 losing trades and questioning what the hell went wrong.
Nothing went wrong my friends you are now making a new friend and that friend is called the MARKET.Before even thinking about a stop loss rule you need to understand that the MARKET doesn't follow you or does what you expect it to do.Once you understand that your on your way.
My personal Stop loss ratio is 4:1 Risk to reward.Now now i know what all of you are thinking , your mad who would risk 40 dollars to (MAYBE) earn 10 bucks.There wont even be enough to cover if i only have one bad trade.The basic natural reaction of man is to brood over losses and always short change the winning trades i will get to that on a later note.The hardest thing for a trader to do is to walk away from a losing trade with his head high but that is something that everyone has to learn in order to conquer this game we are playing.
The reason why i am willing to risk 4:1 is cause i know that i don't want to be caught out if it swings in the wrong direction but at the same time if i have a winner i am gonna lock it in fast.I know there are traders that say let the winners ride and ride and you earn big bucks.I know from first hand experience that winners can become losers in a matter of seconds.So my rule is that if your PL is green take it and don't look back instead start planning for the next trade and celebrate YES you heard me CELEBRATE that you done well,did a nice trade and EARNED money that's the most important lesson.
So right now your thinking dam it if i had stuck to it longer i would have made it and your stop loss suddenly becomes a 2:4 ratio instead.Now your thinking im fine its gonna dive down and correct itself and i will get a profit.Now what happens the market just starts going down down DOWN and never returns.Now your stuck with 2 losing trades and questioning what the hell went wrong.
Nothing went wrong my friends you are now making a new friend and that friend is called the MARKET.Before even thinking about a stop loss rule you need to understand that the MARKET doesn't follow you or does what you expect it to do.Once you understand that your on your way.
My personal Stop loss ratio is 4:1 Risk to reward.Now now i know what all of you are thinking , your mad who would risk 40 dollars to (MAYBE) earn 10 bucks.There wont even be enough to cover if i only have one bad trade.The basic natural reaction of man is to brood over losses and always short change the winning trades i will get to that on a later note.The hardest thing for a trader to do is to walk away from a losing trade with his head high but that is something that everyone has to learn in order to conquer this game we are playing.
The reason why i am willing to risk 4:1 is cause i know that i don't want to be caught out if it swings in the wrong direction but at the same time if i have a winner i am gonna lock it in fast.I know there are traders that say let the winners ride and ride and you earn big bucks.I know from first hand experience that winners can become losers in a matter of seconds.So my rule is that if your PL is green take it and don't look back instead start planning for the next trade and celebrate YES you heard me CELEBRATE that you done well,did a nice trade and EARNED money that's the most important lesson.
