Here is the list of my trading rules based on my own
- Wait for the signal bar to close
It often happens that a lower timeframe price action reverses when completing a candle and lets say a strong bullish breakout bar turns into a bearish pinbar in the last minutes of the 4-hour candlestick. Or the other way around with a good reversal bar getting stretched into a long body candle to signal a successful breakout. Wait for the close of the signal bar and look for an entry level on the tactical timeframe afterwards. Patience yields a good entry price most of the times. The best practice perhaps is to separate the signal bar from the entry bar.
- Do not disarrange time frames
Once a position was entered go back to the signal (or intermediate) timeframe otherwise the market will shake you out early since your decisions will be disturbed my market noise. You can still monitor the tactics timeframe but be careful not to over manage the trade.
- Do not put your stop order too close to an obvious level
Institutional traders have the notorious habit of gunning for stops. Leave a safety buffer between your stop and the obvious price level. If you get too close and reveal yourself they will shoot you out and by the time you realize that you’ve been tricked the market will move back in the direction of your trade.
Do not take profit just because a pullback is anticipated
— I had to rephrase this rule —
Do not take profit just because you see the move is pausing
It is hard to get back in a fast trending market as the pullbacks are usually shallow and short-lived during an extended strong move. If you trade with the trend it is okay to give up part of your gain as your goal is to stay with the trend for a more profitable exit.
- Do not trade for a revenge
Stop trading for the day in a given currency pair if you get stopped out the second time on the same day. This way you can take
a breather before you start making decisions again. Otherwise the market will continue to kick you around and will stop you out again
and again. source: The Revenge Trading Method
- Avoid the temptation to increase trade size
A series of bad trades will not end just because the trade size is bigger. It neither will help to recover faster. In fact it is likely to increase the damage to your account. This is one of the top mistakes in money management.
- Allow two attempts for one setup
The market is always trying to do something twice (see Al Brooks on this) and so should you. In case of an early entry the market may offer a second entry and usually at a better price level. If that second attempt fails drop the setup as the short-term trend is likely to continue against you.
- Second entry
If the momentum is too strong reaching a new high/low which then provides a signal, consider a second signal for a safe entry. Usually this would be a failed test of the new price extreme.
- You don’t have to trade
Don’t force yourself to trade. If you don’t find a low risk setup or you face indecision just remain on the sideline and do nothing.