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Three Rules That Have Made a Difference in My Trading Life
This week Robbie Booker and I had a call with a very nice gentleman who traded lumber for a living that won a half hour coaching lesson from us. He had just started trading FX with his wife and was full of questions, but the one thing that he most wanted to know was -- “When did I finally feel like I’d made it as trader?”
The question frankly took me off guard, because in reality I never fell like I “made” it. First of all I spend so much time experimenting with ideas and getting beat up by the market, that I never feel like I have a handle on anything. Secondly, even on my core setups I’ll go through periods of drawdown and doubt, continuing to refine the ideas as the market slaps me around.
There are however, three things that I’ve done that have helped to stay alive in the markets, as I try to figure out the next strategy.
1. Always take my stop. This is the single biggest reason most traders blow out their accounts. There is just nothing more to be said here. If you pull your stops, mark my words you will blow up.
2. Trade on 10:1 leverage or less. “Leverage can work for you or against you” is the quaint little disclaimer all brokers use. The truth is that leverage ALWAYS works against you especially when it matters most. Want to stay alive? Drive 55. (For all the non-Americans that a reference to US speed limits. Higher leverage is like high speed, the faster you go the harder you crash)
3. Have an experimental account. Trade whatever you like whenever you like it. You’ll do it anyway, buy you should never do that with your serious money. The only rule I impose is to keep my equity at roughly its starting level.
That’s it. Those are the three rules that have made the difference in my trading life. I hope they help you as well.