Monday, October 22, 2007

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Learn the basics of forex trading 2

Learn the basics of forex trading 1
Learn the basics of forex trading 3

24. Be more objective and less emotional.

25. Use money management principles.

26. Money management increases the odds that the trader will survive to reach the long run.

27. Diversify, but don?t overdo it.

28. Employ at least a 3 to 1 reward-to-risk ratio.

29. Calculate the risk/reward ratio before putting a trade on, then guard against holding it too long.

30. Don?t trade impulsively ; have a plan

31. Have specific goals and objectives.

32. Five steps to build a trading system: a) Start with a concept b)Turn it into a set of objective rules. c) Visually check it out on the charts d) Formally test it with a demo e) Evaluate the results.

33. Plan your work and work your plan.

34. Trade with a plan - not with hope, greed, or fear. Plan where you will get in the market, how much you will risk on the trade, and where you will take your profits.

35. Follow your plan. Once a position is established and stops are selected, do not get out unless the stop is reached or the fundamental reason for taking the position changes.

36. Any successful trading system must take into account three important factors: price forecasting , timing , and money management. Price forecasting indicates which way a market is expected to trend. Timing determines specific entry and exit points. Money management determines how much to commit to the trade.

37. Don't cherry-pick your system's set-ups. Trade every signal.

38.Trading systems that work in an up market may not work in a down market.

39. Establish your trading plans before the market opening to eliminate emotional reactions. Decide on entry points, exit points, and objectives. Subject your decisions to only minor changes during the session. Profits are for those who act, not react.Don't change during the session unless you have a very good reason.

40. Double-check everything.

41. Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the ?right? decisions and the trade still goes against you. This does not make it a ?wrong? trade, just one of the many trades you will take which, through probability, are on the ?loosing? side of your trading plan. Don?t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.

42. The place to start your market analysis is always by determining the general trend of the market.

43. Trade only with a strategy that you've proven to yourself.

44. When pyramiding (adding positions), follow these guidelines. a. Each successive layer should be smaller than before.
b. Add only to winning positions.
c. Never add to a losing position. One of the few trade management rules that we can state we never break is ?Never add to a losing trade?. Trades are split into winners and losers, and if a trade is a loser, the chances of it turning right around and becoming a winner are too small to risk more money on. If indeed it is a winner disguised as a loser, why not wait until it shows it?s true colors (and becomes a
d. winner)before you add to it. If you do this you will notice that nearly always the trade ends up hitting your stop loss and does not look back. Sometimes the trade turns around before it hits your stop and becomes a winner and you can count yourself very fortunate. Sometimes the trade hits your stop loss and then turns around and becomes a winner and you can count yourself unlucky. Whatever the result, it is never worth adding to a loser, hoping that it will become a winner. The odds of success are just too low to risk more capital in addition to the initial risk.
e. Adjust protective stops to the breakeven point.

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