No doubt if you’ve been trading for any amount of time then you’ve heard from a number of sources about the critical importance of having and following rules. Trading is a discipline that is fraught with many pitfalls; so we must identify and incorporate rules about preparing, analyzing, processing and executing in order to get the results that we want. The road to getting desired results consistently involves not only following rules, but ensuring that the rules that we have chosen are appropriate. Part of the definition of “rule” is that it is a “governing action” or “procedure.” When you consider “governing action” it really encapsulates the way that rule based trading relates to results oriented trading. Actually, if you are trading either without rules, or if you are not following the rules that you have established then you are gambling. Trading rules represent the procedures and parameters of your thoughts, emotions, behaviors, strategies, setups, entries, stops, money management, trade management, and exits. In this way well thought out rules make the difference between being successful and blowing up your account.
Humans are guided by rules (stories, beliefs, and biases) that they have constructed from early in life. These stories and beliefs form the foundation of your behavior. In fact, as humans grow, they develop a set of typical response patterns to reoccurring events. These typical responses or patterns of behavior are like a compass pointing us in the direction of our goals. These rules are reflected in your every decision. They reflect the lessons learned, and those lessons have created the lenses through which the world is seen and judged – rules about money, privilege, power, worthiness, winning, and losing. So, not only are rules essential to trading, they are also important to maintaining a focus on what’s in your best interest.
For the most part, core rules, i.e., beliefs and biases are out of your awareness. You make important choices based upon these life rules and when you get results that you don’t want, changing those results can be very difficult if you’re not also changing the rules that those results were based upon. In other words, if your choices go unchallenged then the awareness of why you made the choice remain out of conscious touch. However, once the rule is identified, it can be challenged and modified. Also, as you challenge each rule you uncover other assumptions that were based upon that rule to be myth rather than truth. The interesting thing about mythology is that if you believe it to be real, it is not mythology, it is truth to you, even as it doesn’t serve you. Consider this example: trader Dan believes in “doubling down on a trade that has gone against him” because he also believes that it will always come back. This belief becomes truth in his mind and can cause considerable consternation and loss due to the inordinate increase in the risk he has in that trade. This ineffective rule leads to behavior that is not your A-Game.
It’s crucial to ensure that your rules support your A-Game, your highest and best trader while in the markets. That’s why you’ll want to have a list of rules that are geared toward your Internal Data (thoughts, emotions, and behaviors that underlie your trade) as well as your Mechanical Data (setups, price action, indicators, news, economic reports, etc.). In other words, you want to support your trading mind-set and manage your internal emotional state in order to focus with laser precision on what-matter-most in the trade. Below are a number of rules that are designed to support your Internal Data
Move: Flexibility is the key (both literally and figuratively). Learn to change if necessary. If you always do what you’ve always done, you’ll always get what you’ve always gotten. And, if you always think what you’ve always thought, you’ll always do what you’ve always done.Compass
Learn to exit when necessary: If you find that you are violating a rule, exit the trade…even if you are making a profit. If you stay in you are only reinforcing bad behavior. Especially if you are making a profit.
Hope is a 4 letter word: Refuse to take that trader drug “hopium,” it means that you’re gambling and putting your hard earned money up to pure chance. Remember, there is a reason why Las Vegas is full of casino high rises. They don’t call it “Lost Wages” for nothing.
Know your risks: Always calculate your risk to reward ratio and stick to the parameters. This is the way you can have a 33% hit rate and still be profitable.
Be accountable for your performance: Set goals and document your thoughts and emotions (Internal Data) and as well your Mechanical Data (the mechanics of the trade). You are responsible for your own decisions. Own your mistakes.
Mind-Set: Learn to manage your negative emotions and harness your positive emotions (ex. Determination, inspiration, passion, joy, etc.) and understand the emotions of those around you. Always remember what General Patton said: “if everyone is thinking the same then someone isn’t thinking.” Also the famous Buffett quote: “Be fearful when others are greedy and greedy when others are fearful.”
Your Clan (the what-matters-most in your life): There is more to life than trading and investing. Don’t live to trade. Trade to live. Being the richest man or woman in the graveyard does nothing for your quality of life.
Remain Consistent: Do not adjust a strategy, a rule or principle in order to conform to the market. Instead, let the market conform to your strategy. Have a target, set a rule, let a particular part of the market conform to this rule, follow the rule without deviating. “If you stand for nothing, you’ll fall for anything.” Alex Hamilton
Remember, trading from your highest and best self is all that matters to getting your desired trading results. The trading trenches are not a place to venture into unprepared and unfocused. Trading is a 90 – 95% mental game and if you don’t have mental and emotional tools it is like driving a nail in with your fist, it’s not only very painful, it will cause you a lot of damage as well. So, let your rules be the compass to your trading… having the right tools for the job of constructing consistent trading results is the key. This and many other important concepts to trading successfully is what we teach in the “Mastering the Mental Game” Online and On-location course at Online Trading Academy. Ask your representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”
Happy Trading.
Humans are guided by rules (stories, beliefs, and biases) that they have constructed from early in life. These stories and beliefs form the foundation of your behavior. In fact, as humans grow, they develop a set of typical response patterns to reoccurring events. These typical responses or patterns of behavior are like a compass pointing us in the direction of our goals. These rules are reflected in your every decision. They reflect the lessons learned, and those lessons have created the lenses through which the world is seen and judged – rules about money, privilege, power, worthiness, winning, and losing. So, not only are rules essential to trading, they are also important to maintaining a focus on what’s in your best interest.
For the most part, core rules, i.e., beliefs and biases are out of your awareness. You make important choices based upon these life rules and when you get results that you don’t want, changing those results can be very difficult if you’re not also changing the rules that those results were based upon. In other words, if your choices go unchallenged then the awareness of why you made the choice remain out of conscious touch. However, once the rule is identified, it can be challenged and modified. Also, as you challenge each rule you uncover other assumptions that were based upon that rule to be myth rather than truth. The interesting thing about mythology is that if you believe it to be real, it is not mythology, it is truth to you, even as it doesn’t serve you. Consider this example: trader Dan believes in “doubling down on a trade that has gone against him” because he also believes that it will always come back. This belief becomes truth in his mind and can cause considerable consternation and loss due to the inordinate increase in the risk he has in that trade. This ineffective rule leads to behavior that is not your A-Game.
It’s crucial to ensure that your rules support your A-Game, your highest and best trader while in the markets. That’s why you’ll want to have a list of rules that are geared toward your Internal Data (thoughts, emotions, and behaviors that underlie your trade) as well as your Mechanical Data (setups, price action, indicators, news, economic reports, etc.). In other words, you want to support your trading mind-set and manage your internal emotional state in order to focus with laser precision on what-matter-most in the trade. Below are a number of rules that are designed to support your Internal Data
Move: Flexibility is the key (both literally and figuratively). Learn to change if necessary. If you always do what you’ve always done, you’ll always get what you’ve always gotten. And, if you always think what you’ve always thought, you’ll always do what you’ve always done.Compass
Learn to exit when necessary: If you find that you are violating a rule, exit the trade…even if you are making a profit. If you stay in you are only reinforcing bad behavior. Especially if you are making a profit.
Hope is a 4 letter word: Refuse to take that trader drug “hopium,” it means that you’re gambling and putting your hard earned money up to pure chance. Remember, there is a reason why Las Vegas is full of casino high rises. They don’t call it “Lost Wages” for nothing.
Know your risks: Always calculate your risk to reward ratio and stick to the parameters. This is the way you can have a 33% hit rate and still be profitable.
Be accountable for your performance: Set goals and document your thoughts and emotions (Internal Data) and as well your Mechanical Data (the mechanics of the trade). You are responsible for your own decisions. Own your mistakes.
Mind-Set: Learn to manage your negative emotions and harness your positive emotions (ex. Determination, inspiration, passion, joy, etc.) and understand the emotions of those around you. Always remember what General Patton said: “if everyone is thinking the same then someone isn’t thinking.” Also the famous Buffett quote: “Be fearful when others are greedy and greedy when others are fearful.”
Your Clan (the what-matters-most in your life): There is more to life than trading and investing. Don’t live to trade. Trade to live. Being the richest man or woman in the graveyard does nothing for your quality of life.
Remain Consistent: Do not adjust a strategy, a rule or principle in order to conform to the market. Instead, let the market conform to your strategy. Have a target, set a rule, let a particular part of the market conform to this rule, follow the rule without deviating. “If you stand for nothing, you’ll fall for anything.” Alex Hamilton
Remember, trading from your highest and best self is all that matters to getting your desired trading results. The trading trenches are not a place to venture into unprepared and unfocused. Trading is a 90 – 95% mental game and if you don’t have mental and emotional tools it is like driving a nail in with your fist, it’s not only very painful, it will cause you a lot of damage as well. So, let your rules be the compass to your trading… having the right tools for the job of constructing consistent trading results is the key. This and many other important concepts to trading successfully is what we teach in the “Mastering the Mental Game” Online and On-location course at Online Trading Academy. Ask your representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”
Happy Trading.
Editors’ Picks
EUR/USD remains offered below 1.1600, seems vulnerable near multi-month low
The EUR/USD pair struggles to capitalize on the overnight bounce from the 1.1530 region, or the lowest level since November 2025, and lower for the third consecutive day on Wednesday. Spot prices slide back below the 1.1600 mark during the Asian session and seem vulnerable to slide further.
GBP/USD slips below key averages as geopolitical risks mount
GBP/USD fell about 0.35% on Tuesday, settling around 1.3350 after slipping below the 200-day Exponential Moving Average for the first time since early December. The pair has pulled back sharply from its late-January high near 1.3870, shedding over 500 pips in a series of lower highs and lower lows.
USD/JPY retraces to near 157.50 amid Japanese intervention fears
USD/JPY pulls back to near 157.50 in the Asian session on Wednesday as bulls turn cautious amid Japanese FX intervention fears following the recent rally to a nearly six-week high, reached Tuesday. Meanwhile, reduced bets for an immediate BoJ rate hike undermine the Japanese Yen, while the flight to safety benefits the US Dollar's status as a global reserve currency amid expectations for a less dovish Fed, keeping the downside limited for the pair.
Editors’ Picks
AUD/USD stays deep in red near 0.7000 after Aussie GDP, China PMIs
AUD/USD struggles to capitalize on the previous day's bounce from an over three-week trough and remains heavy near 0.7000 in the Asian session on Wednesday. The pair shrugged off upbeat Q4 Australian GDP print and mixed Chinese PMI data. Rising Middle East geopolitical tensions continue to weigh on investors' sentiment, benefiting the US Dollar's safe-haven status at the expense of the higher-yielding Australian Dollar.
USD/JPY retraces to near 157.50 amid Japanese intervention fears
USD/JPY pulls back to near 157.50 in the Asian session on Wednesday as bulls turn cautious amid Japanese FX intervention fears following the recent rally to a nearly six-week high, reached Tuesday. Meanwhile, reduced bets for an immediate BoJ rate hike undermine the Japanese Yen, while the flight to safety benefits the US Dollar's status as a global reserve currency amid expectations for a less dovish Fed, keeping the downside limited for the pair.
Gold rebounds ahead of US ADP, will it last?
Gold finds renewed Asian bids and retests $5,230 early Wednesday after the heavy sell-off on Tuesday. The US Dollar stands tall amid escalating Middle East tensions and reduced dovish Fed expectations. Gold defends $5,000 or 50% Fibo level after facing rejection at the 78.6% Fibo resistance at $5,342 amid bullish RSI.
Bitcoin, Ethereum and Ripple struggle for direction as consolidation persists
Bitcoin, Ethereum and Ripple prices trade with a cautious tone at the time of writing on Wednesday as upside momentum continues to fade across the broader crypto market. BTC remains within a parallel channel, ETH struggles below key resistance, while XRP remains fragile within a descending channel. These top three cryptocurrencies by market capitalization continue to struggle to establish a directional bias amid the consolidation phase.
Energy shock 2.0: Why rising Gas prices could hit the Euro Premium
Even without a confirmed, sustained disruption, the mere risk to a key global energy chokepoint is enough to inject a significant premium into European Gas markets. And for the Euro, that matters.
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