Trader’s Tips: 12 Iron Rules for Trading Discipline

July 13, 2017 14:00

Trading is an art. But trading can also be a science in a way. In Forex trading, discipline means following your trading system rules strictly and precisely. I dare say, religiously. Back in the days when I started out as a trader, over 95% of Forex traders were losing, not because they didn't have a good trading system or because they didn't learnt the right techniques. Traders lose because they fail to follow their trading system rules. They lose because they have no discipline. Great education and clear rules regarding who can provide Forex trading services have changed the way things are, and my opinion is that today the percentage of losing traders is much lower.

The biggest problem in trading currently is maintaining discipline. Importance of Forex Discipline and Patience is an article that covers the essential parts, but today, I will get straight to the point and provide you with tips that I sincerely hope you will benefit from. Let's cut it to the chase!

Trader's Tip #1: The Market Favours You and Pays You to Be Disciplined

You are paid to be disciplined. The rule of thumb is that discipline equals increased profits. Knowing when and when not to trade is crucial. Sometimes, not having a position equals to having a profitable position.

Traders Tip #2: Don't Allow Your Biggest Loser To Exceed Your Biggest Winner

Maintaining a log of your trading sessions and if, for example, you know your biggest win on the day is 50 pips on a pair, never allow a losing trade to exceed those points. Allowing a loss to exceed your biggest gain is a net loss on two trades, which is not good.

Trader's Tip #3: Stick to Your Guns

What I learnt many years ago from my own experience and what my trading buddy, Gary, once said is absolutely true. Trust yourself and believe in your methods. If you have a proven methodology, but it doesn't seem to be working in a given trading session, don't go home that night, trying to devise another one. If your methodology works more than one-half of the trading sessions, then stick to it.

Trader's Tip #4: Be a Long Distance Runner, Not a Sprinter

Forex and CFD trading requires you to be in a good mental condition. You are like a marathon runner. You don't want to lose your breath. You want to stay on track for many more years to come. The worst feeling in the world is wanting to trade and not being able to do so because the equity in your account is too low, and your brokerage firm will not allow you to continue unless you submit more funds.

Trader's Tip #5: Trade Intraday

Over the years in trading, I have never met a successful speculator, and that is someone who invests without firm evidence. It is impossible to speculate and win consistently. Don't be a speculator. Be a trader, have a strategy, follow price action, and use short-term trading judgements.

Short-term trading is the answer. Intraday, intraweek, and scalping. The probability of a winning day or week is greatly increased if you trade short-term, that is, small wins and even smaller losses. Join my live trading webinars and see that making pips works best when you trade short-term.

Trader's Tip #6: Learn to Love to Lose Money

Without losing, there is no winning. Losing is an essential part of the business. This rule is crucial. Traders might think I'm crazy. I'm not. What I mean is accepting the fact that you are going to have losing trades throughout the trading session. Get out of your losses quickly, respect your SL. If you can't accept losses, I'm 100% sure that you will fail in Forex trading. Respecting this rule should save you a lot of trading capital and make you a much more consistent trader.

Trader's Tip #7: Hit and Run

Hit single, not home runs. Just as I don't know a single successful speculator, I don't know any trader who goes into a trade expecting to hit a home run and then actually becomes a millionaire. You should never approach a trade with the idea that it's going to be a huge win and make you rich overnight. You might occasionally have a big win, but it usually happens because luck smiles upon you. My intent on the trade was to produce a small winner (20-100 pips), but because I had the trade on, and at the same time (as luck would have it), unexpected news came, I unwittingly had a huge win (300+ pips on a single trade in a single day).

Trader's Tip #8: Follow the Traders You Trust

Always learn from the more experienced and interact with trading talents. Observing veteran traders allows you to understand their decision-making and thought processes with regard to trading decisions.

Following other traders in real time gives every trader – beginner or advanced – the ability to learn with a hands-on approach, avoiding dry theory.

Trader's Tip #9: Learn to Scale Out

Hold your wins. Scaling out of your wins is a good way to increase the average win per trade. Setting your losses to your pre-defined risk parameters helps maintain a longer term winning rate. I do not recommend scaling out your losses. If the trade size is more than one lot and it is a losing trade, you must exit the entire position at your set risk loss.

If your trade size is more than one lot and it is a winner, it is best to exit a portion of your position at your first price target. If you trade with protective stop-loss orders, you can amend an order by raising or lowering the stop price, depending on whether it's a long or short position, to the initial trade entry price. You are now essentially trading with a break-even stop position of the remaining portion of your trade.

Trader's Tip #10: Respect Market Hours

Trading during major market hours is extremely important. If you are a newbie trader, our award-winning MT4SE will provide you with the Session indicator that shows which trading session you are currently in. Trade during London, New York, or Tokyo sessions. In my opinion, London and New York overlap works wonders. Volatility is your friend. During Tokyo sessions, definitely focus on HSI, Nikkei, and GBP/JPY – my favourite pair to trade.

Trader's Tip #11: Rinse and Repeat

Believe in your system. Trust your guns. Rinse and repeat. Be a bricklayer. Execute the same methodology – brick by brick. Develop positive habits.

Trader's Tip #12: Forget about Big Losses

Big losses will hurt you. They will impact your trading psychology in a negative manner, preventing you from having a winning day. They wipe out too many small wins that you have worked so hard to achieve. You might become a gambler. It takes a long time to get your confidence back after taking a big loss on a trade. The spiral of doom is imminent.

So, try to harness the power of making good habits in a positive direction. I'm sure that if you manage to overcome discomfort, gut feeling, and insecurity and often go against yourself, at the same time respecting the iron hand of discipline, there will be no limit to how much you can succeed and develop as a trader.

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