Why you need to have rules in your trading career

27 ביוני

Hello,

The importance of rules cannot be underestimated in any business. This must not be different in trading/investing since it must be viewed at all times as a business.

Below are my rules as a wave trader. Wave trading is a trading strategy that combines technical analysis with Elliott Wave Theory to identify and predict future market movements. This approach involves analyzing market price patterns to understand the cyclical nature of market trends and capitalize on these patterns for trading opportunities. Below is an example of how markets move in waves



Rules are very important (Our trading rules)

Identify Impulse & Correction

The first step in trading is to identify the impulse and correction phases in the market. An impulse phase is characterized by strong, directional price movement, indicating a clear trend. Corrections, on the other hand, are smaller, counter-trend movements that typically follow an impulse. By recognizing these phases, you can better understand the market's structure and prepare for potential trading opportunities. Below is an example of impulses & corrections identified


Identify the Pattern Formations

Once you have identified the impulse and correction, the next step is to look for specific pattern formations. These patterns, such as head and shoulders, double tops, or triangles, provide clues about future price movements. Understanding and recognizing these formations can significantly enhance your ability to predict market direction and make informed trading decisions. Below are patterns identified that can be tradeable


Most of these patterns can nowadays be identified for you using Tradingview under indicators, metrics & strategies.

Identify Entry Points

After identifying the patterns, the next crucial step is to pinpoint entry points. This involves determining the optimal moment to enter a trade based on your analysis of the market. Entry points should be chosen carefully to maximize potential gains while minimizing risk. Look for confirmations, such as breakouts from patterns or specific technical indicators, to ensure a higher probability of success. Below is an example with a risk free entry



We shall be looking in another post on different types of entries.

Look for Targets

Setting targets is essential for effective trading. Targets help you establish your profit goals for each trade and ensure that you remain disciplined in your approach. These targets can be based on various factors, such as previous support and resistance levels, Fibonacci extensions, or measured moves from the identified patterns. Clear targets allow you to exit trades strategically and lock in profits.

Below is our clear target for the entry we made with a clear stop loss as well



Look for Exits in Case the Trade Doesn't Go Your Way

Not all trades will go as planned, so it's vital to have exit strategies in place for unfavorable scenarios. This involves setting stop-loss levels to limit potential losses and protect your capital. By defining these exits beforehand, you can remove emotional decision-making from your trading process and adhere to a systematic approach, ensuring long-term success and sustainability in your trading business.

I trust that these rules can help you in your trading journey. You can think of having them written somewhere. That way you can look at them & follow them for each trade you make.

All the best