Blake’s Top 3
There are several rules I (attempt) to follow before entering a trade. I can never ensure myself that I will make money in any one trade, as this is an impossible achievement, but there are certain rules I follow to assist me in ensuring that I put as many probabilities in my favor as possible.
When I am entering the market I always ask myself “are you chasing price? Are you buying as the market is rallying, or are you shorting when the market is falling?” If this is the case, it usually stops me in my tracks. I am always looking for a good bargain. If I think a currency is trending higher, yet price is pulling back, I will look for a certain price to be a buyer as the currency resumes its uptrend.
“What’s my risk?”:
Before I enter a trade I always want to know my risk BEFORE I enter the market. I want to know exactly at what point is this decision “wrong” and then find out how much it will cost me. From there, does it fit within my risk parameters? If it doesn’t, there is no trade, no matter how much money I could potentially make.
Rate the trade to gauge risk:
How do I rate this trade or idea? On a scale from 1-10, is it a 10? Is it a 4? The difference between the two will assist me in sizing the position. Obviously, if this is a 10 (which I may only see 1-2 a month) then I may look to be more aggressive in my risk and potential return calculations. If it is a 4, I may take a tracker trade (something to have on my blotter so I am keeping a close eye on it, but not a big enough position to alter my P/L too much) or I may just pass on the trade altogether.
Steve’s Top 3
Do not over-trade:
Great trades don’t come every day (unless you are a scalper) and thus the only way to trade frequently is by lowering the standards (the quality) of what you consider an acceptable trade. Lowering the quality means lowering your performance and that is something that affects negatively your P&L.
Limit your total risk to what you can afford to lose without getting sleepless nights:
It is a very old adage that if you can’t sleep at night because of the size of your positions, limit the size of your positions as much as needed so you can get a good night sleep. I have been in that situation several times during the first years of my trading career and I can testify that the cost benefit analysis clearly shows that maintaining a calm mental status is a precondition to successful decision making.
Develop and continuously evolve your trading methodology:
There is not 1 single approach to successful trading and I have met traders that are consistently profitable using different trading approaches, trading on different timeframes, using various sets of skills and market edges (macro, technical et cetera) but what is important is to find the method and approach that works for YOU. That requires time and it is a process of trial and error. You need to be persistent and work continuously until you can settle on the set of rules and practices that server you best.
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Nic’s Top 3
Preserve Mental Capital:
Do whatever it takes to stay positive when trading. Don’t stay in trades that aren’t working, cut them and focus on the ones that are. You can always get back in again when conditions have changed.
Keep Trading in Perspective:
It is important to stay focused on the big picture when trading. A losing trade should not be a surprise, it is a part of trading. It is the cumulative profits that make a difference. When you accept that then you minimise the effect of emotions on your trading performance.
Have a strategy and stick to it:
Develop a strategy that you know over time has an edge and gives you a positive return. Then your focus should be on executing it as well as possible. Sometimes I execute my strategy perfectly and I don’t make money or it doesn’t work. When that happens I usually do something to reward myself because my focus is executing my strategy really well and not what the market gives me.
Grega’s Top 4
Those who follows me on twitter will know that I am a fully technical trader that likes set-ups based on the Elliott Wave structure. There are three simple things why I love Elliott Wave set-ups; 1st is because you know where you are wrong so you can limit your risk, second, it’s because you follow the trend and focus on corrections within an uptrend or downtrend and third, it’s because that’s the only tool that tells you when these corrections are finished so that you do not fall into a sideways price move. So, when I execute a trade three are a few rules that I tend to follow.
Trade Clear Patterns:
I will focus, or trade only markets that have a clear pattern and structure. What is a clear wave pattern? Very simple; when I open a price chart and if I recognize the pattern in the first 10-15 seconds then this tells me that price action is clear and that this may be worth of my attention for potential set-up. If I am struggling to make a good wave count on the price chart, then simply I will close it and move to the other one.
Do Not Trade Against The Trend:
If rule #1 above was considered, then I move to rule #2. This one is that I always trade within a larger trend. So if on the weekly trend is rising, then I will focus on daily and 4h price action to spot contra-trend move and then look to ride that trend when correction is finished.
Confirming Price Action:
Non-Elliott Wave traders are sometimes too quick calling that correction is over. So it’s important to know the substructure of the corrective cycles. Well, if you are familiar with the Elliott Wave theory then you will know that you need to see A-B-C move before trend may be ready to resume. So my third rule is wait on a completed substructure in a counter-trend cycle and then wait on reaction within a higher time frame trend. If there was a weekly trend rising, and I spot A-B-C pullback down on a lower time frame, then I will wait on a bounce first, ideally above the channel line and grab opportunity there against that low. For better and easier illustration I attached a chart below.
Ride The Winners:
Once I am in the market I always put my stops in place but never set-up a limit target. I always have an open target and all what I do is only moving stops into a profit zone when price progresses in my anticipated direction. Keep in mind that there will be many times when market will surprise you and make an extended and sharp wave that you didn’t expect at all. And these are the positive trades that you want to ride, these will bring you money and cover some past loses. I remember examples when I took a trade to catch wave five but then this move came out to be wave three of an extended structure, so I missed a lot of potential profits. And that’s why I set-up this rule. But remember, I keep moving stops once I am in the trade; so protect what you made but leave chances to make even more.
Stelios’s Top 3
Be patient and disciplined:
It’s important to always wait for the right setup and to not overtrade. I’m a medium term trader and most of my trading decisions are based on fundamentals and macro analysis. I always wait for the right reasons to enter a trade AND the right entry / exit points. The reasons will come from fundamentals and the entry/exit points will come from technical analysis.
Only risk what you can afford to lose and keep individual trade size under control:
It’s natural to want to carry more risk when a particular trade looks great on paper. I will obviously vary trade size depending on the level confidence behind it, but the size will always be a relatively small percentage of the portfolio. This way a single trade can never make an unrecoverable dent if it goes bad.
Don’t be afraid to be a contrarian:
One of the toughest things to do is to go against broad market consensus. I have personally made some of my best trades when going against the general sentiment. You will often see “herd mentality” in the markets, where people seem to follow the masses simply because it’s what everyone is thinking at the time. Whenever is see such behaviour, it always gets my attention and i spend some extra time analysing that particular instrument. I’m obviously not saying that I’m always a contrarian – far from it – but these are definitely situations worth analysing in detail. When such occasions arise when it’s worth taking a contrarian view, the markets often snap back sharply (and profitably).