Richard Roda’s Trading Rules for Forex
I must admit, I’m not smart enough to invent these ridiculously simple rules of trade. A large trader gave them to me about 15 years ago. However, I will report to you, they work. If you follow these rules, breaking them as little as possible, you will make money year after year, sometimes more, sometimes less, but you will make money. The rules are simple. But to follow them is not so easy.
“The old rules … but very good rules”
If I learned something in my 17 years of trading, it’s that simple methods work best. Those who need to keep track of the stochastic complex, linear weighted moving averages, smoothing methods, Fibonacci numbers, etc., usually notice that they have so much data before their eyes that they can not make a rational decision. One technique says – buy, another says – sell. One method recommends closing the deal, while the other calls for adding to the trade. It’s like a stamp, but simple methods work best.
1. The first and most important rule is in the bull market, each is supposed to be in a long position. This may sound trivial, but how many of us sold after the first rise in the bull market, deciding that the market took off too far and too quickly. So it was before, and I suspect that it will be so in the future. Thus, we do not get a profit that should have accumulated, but in fact we lose money by being short. In a bull market, you can be either in a long position, or out of the game. Remember, the absence of a position is also a position.
2. Buy something that looks strong – sell something that shows weakness. The public continues to buy when prices have already fallen. The professional buys, because the prices have risen. This difference may sound illogical, but here the force of purchase works. The rule of survival is not “to buy lower, sell high,” but “to buy higher and sell even higher.” In addition, when comparing different stocks within a group, buy only the strongest, and sell the weakest.
3. When setting up a trade, enter it, as if it has the potential to be the biggest deal of the year. Do not enter into trade until it is well thought out, including rules for adding to trading and rules for contingencies to exit the transaction.
4. On minor corrections against the main trend, add to the position. In the bull market, add to trading on a small kickback back to the support level. In the bear market, add to the correction at the resistance level. Use the correction level of 33-50% of the previous move or the corresponding moving average as the first point to add.
5. Be patient. If you are late with the input, wait for the correction.
6. Be patient. Entering the trade, give it time to develop and create the profit that you expect.
7. Be patient. The old adage “You will not lose anything by taking profits” may be the most harmful advice ever given. Taking a small profit is the surest way to the ultimate loss that I can come up with, since small profits are never allowed to develop into huge profits. Real money in trade is made on one, two or three large transactions, which are allowed to develop over the year. You must cultivate the ability to patiently hold a lucrative deal in order to allow it to make real money for you.
8. Be patient. Enter the transaction, give her time to work; give her time to isolate herself from accidental noise; Give her time so that others will see those of her qualities that you noticed earlier than they.
9. Be impatient. As always, small and fast losses are the best losses. Important is not the loss of money. Rather, mental capital is important, which is exhausted when you are sitting with a losing deal.
10. Never and under no circumstances do not add to a losing trade, in order to “average” the position. If you buy, then each new purchase price should be higher than the previous one. If you sell, then every new sale price should be lower. This rule must be firmly adhered to without questions.
11. Do more than what works in your favor and less than that – against. Every day, looking at the different positions in your portfolio, try to add to the trade that has the greatest profit and take away from that trade that is either loss-making, or shows the smallest profit. This is the basis of the old saying “let your profits run.”
12. Do not trade until technical and fundamental factors come to an agreement. This rule will force the clean technicians to cringe. Well! I will not trade until I’m sure that the simple technical rules that I follow, and my fundamental studies are moving in tandem. Then I can act clearly, confidently and patiently wait.
13. If you received a serious loss, take a timeout. Close all trades and stop trading for a few days. Ummo