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Chapter 29, Part III. Dealing Directly With Trading Plan (Finally!) Page 7

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 27, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Here I would like to help you a bit with risk management and offer you a very simple but effective rule that could be very useful for newbie traders who have not created their own money management system just yet. Later probably you can do it better.

    “Do not risk more than 2% of your current account value in each trade. Preferable risk is 1%”

    This rule gets together points 5, 6 and 7. Let’s suppose, that you system tells you to place your stop by some predefined way. You may calculate 1% from your assets, and then determine lot size

    Second is “3-period” rule. This rule has much deal with the 4th point. We’ve discussed it ones:

    “If market does not show expected price action within 3 periods after your entry and your position is in current loss – give up the trade and exit”

    For instance, you intend to trade hourly Butterfly and enter short, but during 3 hours market has not shown reversal price action and you have small current loss on it. It’s better to close it. Although you probably will miss some potential profitable trades – this approach will save you much more that you will miss.

    A nice habit is to write the major point right on the chart and keep it before your eyes. Here is how it could look like – an example of butterfly that we’ve traded in our daily/video researches:


    Chart#1 | 4-hour EUR/USD Butterfly trading with plan
    [​IMG]

    Pipruit: It looks not too difficult… Besides, we’ve studied already how to deal with patterns and other tools.
    Commander in Pips: Right, but there is a lot of use from it. First you will be focused on a process by trying to match what is happening and what you’ve appointed in the plan – to not miss necessary action in time. Second, you clearly understand what you are trading – this lets you precisely determine expectations about target, failure point and stop loss placement.
     
    #1 Sive Morten, Dec 27, 2013
    Lasted edited by : Oct 9, 2016
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