17 Most Basic Rules

1.Stay with the trend. 

Identify as soon as possible the main trend and its
subsequent intermediary cycles to minimize the risk for losses.
As is often said, the trend is your friend. If you are going with the
trend, any minor retracement will not affect the final result when
it comes back in your direction. If you are counter-trending, be
careful because the price can move against you and possibly never
recover as it picks up with the long-term trend. In a bullish
market, go long. In a bearish market, go short. In a sideways
market, it is better to stay on the sidelines and wait for a better
opportunity.

2.Buy strong, sell weak.

Identify which currencies are showing more
strength and which ones are weak, and try to pair them up.

3.Buy low, sell high. 

Always try to get the best possible price both when
buying and selling. Never sell into a support level nor buy at a
resistance point.

4.Let your profits run, and cut your losses short. 

Control your fear of losing when you are in a winning trade, and learn to develop
patience so that a trade can evolve to its full potential. Conversely,
as soon as a trade has proven to be wrong, don’t hesitate for a
second in closing it according to the rules you have defined for
your risk level. Don’t fall into the temptation of widening your
stops because last time you were stopped out the trade went back
in your direction.

5.Past performance is not a guarantee of future performance.

Your system might have been performing very well, and suddenly there
is a change in the market behavior. Be aware of the signs of such
a change, and adjust your system accordingly. Markets could have
been trending for a long time, and they now are consolidating
sideways. Be sure to have several strategies ready to use in each
different market condition.

6. Develop your patience. 

Not having a position is also a position. There
will be moments when the best trading approach is to stay on the
sidelines and wait patiently for a setup to develop. Never jump
into a nonplanned trade out of impatience or boredom. Wait for
pullbacks to enter if you have missed the initial entry. The market
moves in waves, and by waiting for the correction, you will have
the odds in your favor as to the necessary stops. Reaching that
rate-of-return goal does not have to be done over night. In the
FOREX, it could be reached quickly, allowing you to sit on the
sidelines the rest of the year if you choose to. Have patience.

7.Let your trade breathe and develop fully to its complete potential.

Inversely, be impatient and eager to close any trade that is proving
itself wrong from the beginning. Capital preservation is a must.

8.Don’t count and cry over missed pips.

Missed money is better than lost money. There always will be a better opportunity to enter the
market.

9.Add to your winning trades; never add to your losing positions.

Averaging down is down is a very risky practice that could make
you lose much more than you planned initially. Inversely, when a
trend is developing successfully, consider adding to your trade
after each small correction.

10.Never risk more than 5 to 10 percent of your equity total and not more
than 1 to 2 percent on a single trade. 

In this way, if you happen tohit a losing streak, you still will have more than enough capital
left to take losses back to breakeven.

11.Avoid trading at news time and when markets open or close. 

Too much random volatility can kill your account very fast. Wait for
the market sentiment to settle down, and go with the flow as
soon as the direction is clear. Trade only when conditions are at
their best.

12.Periodically review your past performance, and redefine your plan if
needed.

Adjust your money management and position size
according to your profits or losses on equity. Evaluate your
results, and compare them with your goals. Readjust your goals if
necessary.

13.If you experience a heavy loss, take some time off to reevaluate the
situation and clear your mind. 

Stop trading for a few days.Absolutely do not trade for revenge! You shouldn’t allow yourself
to fall into the need of getting your money back as soon as
possible. Instead, examine the reasons that caused the loss,
recheck all your rules and trading plan, and take some rest to be
able to come back refreshed and with a clear focus.

14.Match your position properly to your account size. 

Risking more than the recommended percentage can increase your gains
tremendously, and you could be tempted to do so because the
high leverages and small margin requirements of some brokers
allow you to exceed your capabilities. Remember that it works the
other way around as well: Losses can become unmanageable very
soon. Think and plan for a long-term career.

15.Learn to read chart patterns and price action. 

Draw trendlines, and study and analyze the market’s past behavior and present trends.
Watch carefully how price reacts on supports and resistances. Try
to understand what happened at every point of the price wave.

16.Consider scaling out of your position when it is profitable, if its size
allows. 

In this way, you take some profit at an appropriate
moment and still remain in the market for the long run, should it
happen. If the trade then goes against you, at least you took some
profit at a good point.

17.When being extremely successful, proceed with extra caution.

Reinforce the discipline or, better, take a day off  from the market.
Overconfidence can occur insidiously and you could lose in a few
hours what took you several days to build. Keep your profits, and
stay alert!