The clear adherence to the rules of the trading system - the key to success in trading
Trading system - a set of certain clearly formalized actions, a trading algorithm. Actions of algorithm are based on the technical and fundamental analysis or other important factors.
The trading system should minimize the influence of trader's emotions on the trade. That is, every action a trader must perform based only on his Trading System. The biggest problem is the formalization of signals - it often happens that the TS gives buy and sell signals simultaneously or gives signals that cannot be interpreted.
Basic rules and principles of the trading system
1. It is necessary to determine the time period, timeframesThe time frame is chosen depending on the time of the position. The timeframe is chosen depending on the time spent in the position and the goals set. For example, if you have a pipsewing strategy, we take small timeframes: ticks, M1 and M5, and less frequently M15 and M30. Although in this case it is advisable to orientate yourself on H4 and D1 before trading.
2. Whenever you enter the market, you need to understand when to fix profit or loss. If you are a beginner, it is advisable to set fixing orders. If you have more experience, you can hold open positions until the final logical exit on the trading system.
3. The main and simplest rule of placing orders is target profit (the profit you expect to make) must be several times over possible loss.
For example, a trader trades on Elliott Waves on H1 and H4, the prediction accuracy is approximately 20%, i.e. 80% trades trader loses. The trader has concluded 100 deals, 80 of them were closed on a stop-loss (20 points), the remaining 20 deals were closed with 100 point profit. Total: 20*100-80*20=400 points of net profit.
4. Stability is very important for a trader - you cannot risk large sums, otherwise there is a high probability of losing the deposit for several unsuccessful trades, so do not forget about the rules of money management.
5. Analyze and correct your actions. Keep stock diary, analyze each transaction in detail.