Monday, April 24, 2017

Golden Rules For Trading Forex

June 8, 2013 by  
Filed under Forex FAQ & Latest Post

In the forex faq today, we have a question from one of our fellow traders asking me for the golden rules for trading forex everyday.

Below is the question

Hi Lee,

Thank You very much about the generous attempt: Here is the Question: Everything seems to be inevitable and How can we get rid of the ‘analysis paralysis’ while taking the trade. Pl. specify’the golden rules’ that can be followed every day.

Best Wishes and Thank you again.

I believe that there are quite a number of you here in this blog suffering from the problem of analysis paralysis. Franking speaking, this problem only occur to those of you who do not have a working strategy on hand.

Without a working strategy on hand, you will not have the confidence to enter a trade and tend to continuously trying to analysis the market to look for a decent entry. If you have a reliable strategy on hand, you will enter a trade once the setup is according to your trading plan.

Therefore if you were to ask me to suggest a way to help you get rid of your analysis paralysis problem, it is to get yourself a working and reliable strategy that has been proven to work.

As for your second question on the golden rules to trading. I must say that what I am sharing you below is purely based on my own opinion.

My Golden Rule Number 1: Only enter a trade that is 100% according to my trading plan.

My Golden Rule Number 2: Always allow the profit to run to my target

My Golden Rule Number 3: Always shift the stop loss to breakeven when it is certain pips in my favour.

Let me elaborate more on the above 3 rules. For rule number 1, it is very important for us as a trader to have the discipline to stick to our trading plan. There are times where you may be tempted to enter a trade that is not according to your trading plan but you must overcome this problem if you want to really make money in trading.

The only way you can make money in trading is to stick to a reliable strategy that produces more profitable traders than losing trades and has a high risk reward ratio.

As for rule number 2, a lot of trader tends to cut short their profit fearing that the market might just reverse and take back all the profit. However if you do not allow your profit to run to its maximum target, how can your strategy produce good risk reward ratio.

As for rule number 3, capital protection is what a professional trader is interested in. New traders tend to be interested in makingĀ  profit but experience traders tend to be interested in protecting their capital to trade another day.

Therefore you must have the habit to protect your capital when the price has moved certain pips in your favour.

I hope that I have answered your question and do feel free to ask me more question via the comment section below.


7 Responses to “Golden Rules For Trading Forex”
  1. Cristina L. says:

    Hi Mr. Lee:

    Thanks for sharing your rules!

    Question about the 3rd. Rule:

    Do you move SL to BE in discretionary way?

    Or do you have specific rules to do it: e.g. when profits is equal to SL, or when profit is 50% of SL, or when it has more than 20 pips in profits?


    • Lee Kelvin says:

      Hi Cristina

      For every strategy, there is a set of breakeven rules. The breakeven points are tested before they are used in my strategies.

  2. Yong Kim Soon says:

    My earlier email on time frames refers. Do you have specific time frames for specific strategy for instances: 1. Break the Bands Strategy; 2.Forex Piggyback Strategy; 3. etc. Appreciate if you could explain. Thanks.

    • Kelvin says:


      For the break the bands strategy, I have tried them on the 15 minutes and hourly chart only and therefore will recommend my students to trade on these 2 time frames only.

  3. sudarshan says:

    i want to know which time frame to use for easy intra day session with ur 20 ema and 50 ema retrace technique with supporting 5 3 3 stochastic indicator

  4. Piet says:

    Hi Kelvin, Thx for your comment on analysis paralysis. You hit the nail on the head. However, I think analysis paralysis for the unexperience goes further (like myself). Even with a tradeplan and a good strategy is not a quarantee to have optimum results. To enter the market is like jumping randomly into the ocean. Let me explain what happened a few day ago with me. I traded the Eur USD and profit 10 pips. In retrospect, at the same time the GBP AUS gained more than 2000 pips. Now back to analysis paralysis, what is lacking is a systematic aproach to the market every day to highlight the high propability high potential and low risk oppetunities. Now I am asking you how can we scan the market (100 plus pairs) at the beginning of each day to isolate the high potentials and take it on with a good trading plan and strategy? Speaking for myself, if I am backed by the above, analysis paralysis will disappear and replaced by faith and confidence and much much more profit. Thanks for the opportunity to speak my mind.

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