A friend of mine recently asked me if I could give him a few rules for assessing a good technical trade.
I told him that there are very few rules, as I understand the term, involved in trading.
To me a rule is something that is always true.
Trading is about probabilities. The only thing that I have ever found to be always true is that nothing is always true. We have to trade in a world of probabilities, not certainties.
However there are some guidelines that may help with the probabilities:
1. Observe the size of oscillations for the timeframe you are going to trade.
2. Expect to capture no more than 80% of the average oscillation value in a trade.
3. Look at the spread (difference between bid and ask). You must make the spread before you make any profit at all.
4. If 80% of the oscillation is not at least twice the spread, you are better off in Las Vegas. It should be 3 to 5 times the spread to give you a decent chance of profit. The higher the better. I personally consider four times a general minimum.
5. Set a stop loss price and a target price that make sense and stick to them. This is where so very many traders go wrong. Small losses are a part of trading. If you let a trade go past your target price, at least move you stop to that price. Profits are too precious to sacrifice in the name of greed.
A few comments about number 5:
A trader can, and must from time to time, accept small losses. That is what stop losses are for. Use them and use them diligently. A bad trade seldom gets better with time.
Then there is the old saying, let your profits run. True, but do not let then reverse and vanish. When you have hit your target price, set it as a stop, profits are too precious to let slip away.
If you make three to four times your loss on each profit, you can be profitable with an average of 50% good trades.
Use a good momentum indicator and if the market you are trading reverses its direction for your time frame it is a good idea to get out of any long trade quickly. The secret to successful trading is as much avoiding losses as it is making profitable trades.
Exchange rates table is provided by DailyForex.com - Forex Reviews and News
Live currency cross rates is provided by DailyForex.com - Forex Reviews and News
Live indices widget is provided by DailyForex.com - Forex Reviews and News
Live commodities widget is provided by DailyForex.com - Forex Reviews and News
Author & Trader
Thanks for the method !! Very solid, very logical entry and exit and genius SRV’s !!Denis DRussia
….very impressed with the whole philosophy – both personal and trading, expressed in the book. I will read and revert !!Richard DUSA
Great system – couldn’t trade without it !!Frank YDavid, Panama
the SRV’s are spot on !!Tom CUSA
I trade the US Bond Markets exclusively – amazed at the accuracy of the SRV’s !!George SNew York, NY
“The SRV’s are amazingly accurate”.Tony Texas
- May 2017 (1)
- January 2017 (1)
- December 2016 (3)
- September 2016 (2)
- August 2016 (2)
- July 2016 (2)
- June 2016 (5)
- May 2016 (1)
- April 2016 (2)
- March 2016 (1)
- February 2016 (3)
- January 2016 (3)
- December 2015 (1)
- November 2015 (3)
- October 2015 (5)
- September 2015 (5)
- August 2015 (2)
- July 2015 (5)
- May 2015 (1)
- April 2015 (1)
- March 2015 (1)
- January 2015 (1)
- November 2014 (1)
- October 2014 (1)
- August 2014 (1)
- July 2014 (6)
- June 2014 (3)
- May 2014 (5)
- April 2014 (2)
- March 2014 (2)
- February 2014 (2)
- January 2014 (10)
- December 2013 (11)
- November 2013 (20)
- October 2013 (13)
- September 2013 (14)
- August 2013 (10)
- July 2013 (26)
- June 2013 (16)