MY Forex Success Principles

I have studied, traded, calculated, forwarded tested, back tested, re-invented the wheel, stopped, started, traded passionately, traded mad, traded carefree and more, in the Forex market for a lot of years. All that hard work and effort has recently boiled down into some absolute truths for me. Truths that will be a foundation for the way I now trade. Following are some of those principles that will carry me to the next level and onto major success:

1) Discipline - I used to read many books and articles about discipline being important for a trader. When I read those sections in books, articles and blogs, this is what I heard in my own mind....blah, blah, blah, blah blah, 'all I need is a good system', blah, blah, 'I know what I need to be successful', blah, blah, 'some of this book is good', 'this part I don't need, it doesn't apply to me', blah, blah blah, 'oh good next chapter, this will be good'. Seriously, I never understood the discipline part of trading, it never clicked, until now. This is one major break-through I had starting 12/13/2009. I think the problem comes in because a lot of books don't explicitly explain what 'discipline' actually means. However, you get top traders that say this is the most important thing in trading. I now understand. Let me explain what it means to me and probably should mean to you if you are a trader. It simply means to follow a trading systems. Kind of vague description, let me continue...it means:

• Choose a trading system - meaning choose a market to trade, timeframe(s), entry method, exit method, money management. This can be a totally discretionary system. For example, flip a coin at 4:00pm every day and go long on heads with the EUR/USD with a 50 pip stop and 60 pip take profit. Whatever the system, write it down and trade it exactly perfectly. No extra crap trades that don't follow the system.
• Track Your System - Now that you have a 'system' you need to open up a spreadsheet and track every trade. I mean every trade for that system! The entire reason for this task is to prove to yourself that you have a statistically proven system. How do you know once you have a statistically proven system? The answer is you need to know about statistical probability, game theory to prove what success you had on those trades is luck or skill. In most cases you need 200+ trades to get an idea if your system is luck or skill. Just because you are on trade 20 and things don't look good, does not mean you need to throw out your strategy. That is where statistics comes in to help you figure out if you should start the entire process again or keep going with that strategy. Many times I have had problems with my strategy and I had to change a parameter. As a result, I started a new spreadsheet and started the calculations from the beginning. If you don't track your trades, it is my opinion that you need to get a new hobby. Unless losing money is considered just the cost of having fun, then at that point, have fun.
• Focus - you must focus and trade your strategy perfectly. You cannot get emotionally wrapped up if you have losing trades. That is just valuable information about your system. If you have too many loser, as determined by statistics, then you need to move onto a new system. The sooner you figure this out the sooner you will get a profitable system. This is why a demo account or very small account will help you get past this period with minimal loses.

To be continued....