A professional trader in my opinion is someone that has been trading successfully for a relatively long time (3+ years) and has maintained account growth through adverse market conditions.
A trader that has made a bucket load of money overnight is not a professional in my opinion, they are a lucky trader…
Professionals make money in favorable market conditions and control risk and exposure in unfavorable conditions.
So how do you know when you’re in favorable market conditions?
Successful Traders Have A Rule Based Trading Method
I’ve been fortunate enough to speak to thousands of Forex traders in various stages of their journey.
Being a part of one of the top Forex Trading Schools has gave me unique insight into key factors that advance traders closer to achieving their goals.
I’ve came to this conclusion for myself and other successful traders I’m surrounded by…
More Rules = More Consistent Success
This is especially true for new traders just getting started in Forex.
Having clear cut rules keeps you on the sidelines when the market is not dancing to your rhythm. At the same time it helps you recognize when there are opportunities to slip in and out of the market grabbing pips and reducing exposure.
What Rules Should You Develop?
Traders that are making money consistently typically have 3 main sets of rules.
- Rules For Entry
- Trade/Money Management Rules
- Rules To Exit The Trade
The more defined your rules are the better you will understand how your system is performing in any given market condition.
Subjective, or discretionary traders often become too emotional and uncertain about trading decisions.
Emotions of uncertainty can ultimately destroy a traders confidence, which then leads hesitation or missing good trades altogether. Most of the negative emotions associated with trading can be avoided by having clear rules in place!
Developing A Rule Based Trading Software
The FxPM software is by no means the holy grail to Forex Trading. There is no holy grail in trading, and if someone says they’ve found it, run the other way.
However, many of the rules mentioned above are built into the FxPM Software to add a level of simplicity to defining trading opportunities.
This allows a new to trader start out on the right foot, and an advanced trader can improve their results by visualizing more data in a simple to view format.
Lets take a look at a few Position Entry rules that the FxPM software helps us clarify.
Price Action Band Shades
The Price Action Band Shades that are built into the FxPM Matrix allow you to see Overbought and Oversold market conditions at a glance. This gives FxPM traders very simple criteria to create rules and help base trading decisions on.
Aggressive or more active traders may take trading positions in the middle “neutral” zone. Typically their position sizing is significantly reduced because win/loss ratios are not as high in the middle zone.
More often traders prefer taking trades in either the Green Buy Zones or the Red Sell Zones. Win ratios are much higher in these areas.
Waiting for trading opportunities in the Buy and Sell zone forces patience and discipline, one of the hardest things to master as a full time trader.
Mastering patience and discipline takes some traders years to develop. This platform helps solve that problem the moment you start trading with the Forex Matrix.
Dynamic Fibonacci Indicators
When it comes to pinpointing high accuracy rule-based entry points, Dynamic Fibonacci clusters like the ones in the image below are the secret sauce to FxPM’s renowned reputation for high accuracy entries.
Creating entry rules around how you enter a 1,2,3,4, or 5 column Fibonacci cluster will greatly increase your success ratio.
Some of our trader increase or decrease position size, manage their stop loss more aggressively, or let profits run longer depending on the strength of the level.
Adding another layer to your entry criteria helps weed out the mediocre setups.
Trade Management Rules
Creating detailed rules around your trade management largely depends on your trading personal trading style.
With that said, here are a couple solid principles that should always be followed no matter what style of trading you adopt.
- NEVER Widen Your Stop-loss
- NEVER Risk More Than Half Of What You Stand To Gain
Those two rules alone will keep you out of trouble.
Another major advantage of the FxPM Software is that it automatically places your predefined Stop-loss and Take-profit for you which eliminates unnecessary mechanical steps.
Creating Trade Exit Rules
Much like money management, these rules will largely depend on your individual trading style.
Some examples our traders use are when the 1 minute trend indicators start to go against our position.
You can learn more about The Forex Trend Indicator Here.
Other examples of fixed trade exit rules are simply taking profit when your 1:2 or 1:3 risk/reward ratio is met.
Trading with a Rule Based Trading System has huge advantages over discretionary trading.
Professional traders will disagree on many things when it comes to Trading strategy and methodology, but one thing we will all agree on is that rule based trading helps ensure long term trading success.
It will allow you to keep emotion curbed to the sidelines and focus on executing your strategy based on your well thought out and planned rules.
What rules do you have in your trading plan? Share in the comment section below!
For over 9 years I have been trading Forex and working closely with Armando Martinez, the Founder and creator of The FxPM Software to develop FxPM. It is our goal to develop a Forex Software that not only simplifies trading decisions but also delivers institutional performance to the retail trader.