3) Never Average Down - At one point in my trading career, I wholeheartedly believed averaging down was the way to go. I WAS WRONG! I will never consider this option going forward.
4) Do Average Up - This principle I currently do not follow. However, I believe this is what ultimately separates the top trend-traders. Psychologically, this is extremely tough to do. I am currently working on gaining this knowledge. Precisely, the times to do it and the time not to do it and just take your profit. I think you can be profitable without this tool; however, I think you can go into a whole new level if can master this technique.
5) Know your Trading Costs - Trading often, results in a LOT of costs $$$. I was always aware of the costs but it never sunk into my brain until I started doing back-tests. At that point, I would test a year of trades and see what half or even one additional pip cost per trade and it is amazing what you have to overcome to be profitable. Let's run through an example...you trade 20 times a month. Your cost is 2 pips. You trade mini lots of $10,000. Your account balance is $3000. So 20 trades per month x 12 months = 240 trades a year. 240 trades a year x $2 per trade cost(2pips spread) = $480 cost. You have to make 16% per year just to break even!!! In essence, you need to make 36% per year just to hit 20% profit per year. That is only 20 trades a month. Heck ,a lot of Forex amateurs trade 20 times in one day. Seriously, in a previous life, I would occasionally trade 100 - 200 times in one month. Needless to say I have seen the light and I don't run against the wind. Instead I run with the wind at my back, it is a lot easier.
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