Many expert traders have learned a number of lessons from the school of hard knocks or otherwise. They take these lessons to heart and they utilize what they’ve learned in a number of ways to ensure that they gain more pips than experience the next time around.
One way that traders do this is by creating a trading constitution. A trading constitution is probably exactly what you would expect; it is a set of rules and guidelines meant to help govern trading decisions. It is a compilation of personalized orders of conduct that tell the trader how they should act in a particular situation based on past experiences and what they know to work best for their trading personality and goals.
With this said, part of what makes this constitution so important is that it is solely their own. The guidelines are based on what they need to be successful in the market. It is based upon their trading style and how they tackle market movements. At the same time, some parts of one trader’s constitution might resemble that of another, but you’ll rarely find two traders with constitutions that contain exactly the same rules. It all comes down to the little ways that we are different in the Forex arena. Some have more risk tolerance than others. Some know that they will have to act a certain way as they hold a long position while others acknowledge that they will enter and exit the market quickly for fewer pips while placing more trades. Others know their emotional control limitations and they recognize that they must take certain steps to keep their emotions in check.
While talking about trading constitutions, I will share some items on mine with you. I personally do not trade more than three currency pairs at any given time. It is not worth it for me. I know that I have the best control over my trades when I limit how thin I am spread, so my constitution says that I will not trade more than three pairs at one time. Also, if I happen to lose two trades in a row, I sit out of the market for one entire trading day. This allows me to re-evaluate the market and enter again after I’ve given myself time to see more of the current movement and to conduct a fresh technical analysis on the moves. If I lose more than 200 pips in a month, I am automatically done trading for the month. This is because I am obviously not seeing what the market is trying to tell me about its upcoming direction, so I take a step back once again. This also relates to sticking to my equity management plan which I see as a valuable protector of my financial investments.
As you can see, some of these rules might not make sense to you. To others, it might make perfect sense. Either way you look at it, it is the formula that allows me to optimize my time spent trading in order to reach my Forex goals.
Expert traders find that their trading constitution is a way to turn the fantasy of success into a scalable formula for success and for this reason, I believe that having a non-negotiable constitution helps traders remain in control of their trading outcomes throughout a number of trading situations.
By Joshua Martinez of Market Traders Institute(www.markettraders.com)Get the 5 most predictable currency pairs