RULE #1) ~ Cut your losers; let your winners ride.
One important thing that every new trader must know before entering this highly profitable business is that life is not perfect, even in Forex land, and you should always know one fact: YOU WILL HAVE LOSING TRADES.
Every Forex trader does. The key to being a consistent, predictable, reliable trader is to, at the end of the day, add up more wins than losses. And, when you KNOW(based off your trading rules), without a doubt, that YES, indeed you are, in a losing trade, don't keep losing money (lowering your stop loss) just to *prove you are right* or your rules are wrong (however you want to look at it).
All traders have to face it you can't turn a donkey into a ferrari. You can't change the strips of a zebra and you can't turn chicken poop into chicken salad. The best trades are usually "right" immediately (the techniques, rules, methods and strategies you can learn in my website will be your best indicator for just what a "right" trade really is).
Remember, people have been trading the markets for a hundred and sixty years. The smart traders know there's going to be another trade. Cut your loses short and compound those winning positions.
RULE #2) ~ Thou Shall Not Trade the Forex Without Placing a Stop-Loss Order.
When you place a STOP order, right along with your ENTRY order, via your online trade station, you've just automatically prevented a potential loss from "running" too far.
Before initiating any trade, if you haven't already figured out at what point you would be wrong and would want to cut your loses or, at the very least, reevaluate your position from the sidelines, then you shouldn't be putting on the trade in the first place.
Show me a Forex trader who doesn't use stop-loss orders and I'll show you someone who loses a lot of money.
by Adrian Pablo
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