Originally posted on 01/31/2011:

There are some "rules" for all traders:


1) Discipline - you have a system STICK TO IT, never ever bend the rules. You might get lucky a few times, but, in the end you will get burned.

2) Bank Management - you should know what your liability is for each bet. Never bet more than 5% of your bank on any trade, preferably set your liability lower at 1 to 2 % (preferably 1%!). I am talking about knowing how much you are prepared to lose if it all goes up, not what your stake is! Once you have set this figure, never deviate from it (see below).

3) Prepare to lose, because you will, we all do. What are your reactions to losing? What are you going to do if you have 5 straight loses, and you will! Not everyone can mentally cope with losing. Some will ramp up the next bet (Fibonacci series, Martingale, or whatever) and may get lucky and recover but eventually will kiss their bank goodbye. See Bank Management above, never change the size of your bet to recover a loss.

Losses are inevitable. Analyse a loss to ensure that you applied your system correctly, and if you did, have faith that your system will win through in the end. The paper-trading you did before you jumped in should have given you confidence that the system works. if you don't have solid faith in the system, why are you using it?

4) Know your exit points - profit - again from the paper-based system test you should have a solid feel for the number of ticks profit that is a reasonable target.
5) Know your Stop-Loss. So you have calculated your maximum loss, you know where you want to get out and "green up". Where do we place the Stop-Loss (a.k.a Stop) The answer is it depends! You have to know yourself and your attitude to risk.

5) Stakes. Always start small until you are happy with how to calculate your exit points. Once you are comfortable with trading remember your bank management target
6) Noob mistake #1. Never, ever hold on to a losing trade in the hope that the Gods will smile on you and turn the trade around. You will be amazed at just how quickly not getting out at $10 loss suddenly becomes a total stake loss.

7) Noob mistake #2 is holding on to a winning trade for just a few more dollars. Most likely to happen in the "If i just make $5 more cents I will get out as this recovers 50% of my previous loss" scenario - WRONG! Forget all previous trades (easier said than done, believe me), the only trade of interest is the current one! If it is right to get out for 10c profit, take it!

8) Noob mistake #3 is not marinating detailed records. You should know what trades you entered, why you entered them and what happened.

9) Noob mistake #4 is trading when your mind is in the wrong place; just had a major argument, feel depressed, or worst of all DRUNK! You have to have a positive mental attitude, if you don't, take the day off!