Professional Trading is Methodical & Systematic
I know a lot of traders want to become full-time traders and they dream of a great lifestyle working 30 minutes a day and lazing by the pool or beach. But how can you expect to reach this dream or goal without first adopting a professional structure to your trading? This includes a rigid trade plan and daily trade routine that identifies and guides you into good trade setups and steers you away from potential bad trades. It’s all about increasing your probability of success. But all that will be wasted if you can’t, first of all, manage your capital professionally!
Most traders want the dream without the professional approach
I have spoken to thousands of traders that are super keen and enthusiastic. The usual comments I hear are: “I promise I have what it takes”, “I will be patient and stick to the plan”, “I never lose” etc, etc. The problem is everyone’s trying to get to the end result without any change to their current approach. Unless you were trained in an aggressive trading environment like I was where you eat, drink and breath trading, all day every day, then I believe you need to get some help. If not from us, from someone, anyone!
As Warren Buffet famously said, “Risk comes from not knowing what you’re doing.”
Let me ask you this question before you start trading like you need to make a million bucks today; do you really know what you’re doing? Do you know how the market works? Are you aware how to manage your capital? Can you assess what the impact of the economic data will be? Do you know what the central bank is doing? If your answer to any or all of these questions is NO then by Warren Buffet’s summation you are a HIGH-RISK trader!
If You Fail to Plan, You Plan to Fail!
Do you know what the biggest difference between Professional traders & Amateur traders is?
Answer: Pro traders know how to take a loss!
When you isolate a good trading opportunity do you place a stop loss at a level that ’empties’ your trading account or at the very least puts your account under serious drawdown and pressure?
The majority of traders I have seen ‘always do’. This is commonplace amongst ‘amateur’ traders! They will not and do not like to take a loss. So, when they set up their trade plan the stop loss is an afterthought. It’s miles away because they don’t want to lose!
Professional traders, on the other hand, have a tight and rigid plan. Supposing the trade goes against them they re-assess what happened and move on looking for the next best trading opportunity. Placing your stop loss at a level that cripples or disables your trading potential IS NOT A PLAN. You are basically PLANNING TO FAIL!
Major Update to Rule #5 of T4T’s Trading Programme
Considering everything that I have seen over the past 12 months I have decided to update Rule 5 of our trading programme to ‘make traders think about their plan’. I’m beyond the point of encouraging traders to think about their trade plan as that has fallen on deaf ears.
So the latest update now reads: “A Valid Stop Loss order must be attached to every open position”
What’s a valid stop loss?
It’s a stop loss order that if hit, the account is still within your current drawdown limits. When you do not have a valid stop loss order attached to your open positions your practical assessment will be suspended immediately regardless if your position is in profit or loss and you will need to be reset to be eligible for funding. If you breach this rule with a Funded Account, your account will be closed immediately, and your outstanding profits will be split according to the profit share.
Example 1: of a Valid Stop Loss Order: Let’s say you have a $2,000 drawdown limit available.
You open a 10 lot position on EURUSD with a 20 point stop loss. Assuming the stop loss is hit the account will lose $2,000.
That’s right on the drawdown limit. That is OK.
Example 2: of an Invalid Stop Loss Order: Let’s say you have a $2,000 drawdown limit available.
You open a 10 lot position on EURUSD with a 25 point stop loss. Assuming the stop loss is hit the account will lose $2,500.
That’s $500 more than the drawdown limit. This is a Breach!
Example 3: of an Invalid Stop Loss Order: Let’s say your long 10 lots EURUSD and in profit $500.
With your current profit included, your current available drawdown limit is $1,500.
When your stop loss is 30 points below the current market price that would equate to a loss of $3,000. That stop loss order is ‘invalid’ because it breaches your available drawdown limit.
So even though the stop-loss order hasn’t been hit, your plan is invalid! We will suspend your account immediately and you will need to reset to be eligible for funding.
To avoid this outcome your stop loss order should not exceed 15 points or $1,500!
Do you get it??
So……Plan the Trade, Trade the Plan
Before you place a trade you should calculate the loss that will be incurred if your stop loss is hit. If it breaches your available drawdown limits then it’s wrong and you need to adjust your stop loss. If we see a trade in play with a stop loss that is beyond the trader’s available limits, we will suspend their practical assessment immediately and you will need to reset your account to be once again eligible for a funded account. This is plain common sense and every trader seeking a funded account should understand and incorporate this plan into their trading. A failure to do so or ignorance with regards not understanding the rules will not be accepted.
We want you to succeed and I believe this rule update will give you a greater chance of success!
Have any questions about this rule change? Please drop us a note in the 247 Trade Zone – Rules of Engagement
General Trading Guide to Points per Lot and Value (as at 27th Feb 2019)
Major Currency Pairs
AUDUSD – 1 point on 1 lot = $10 USD
NZDUSD – 1 point on 1 lot = $10 USD
EURUSD – 1 point on 1 lot = $10 USD
GBPUSD – 1 point on 1 lot = $10 USD
USDCHF – 1 point on 1 lot = $10 USD
USDJPY – 1 point on 1 lot = $9 USD
USDCAD – 1 point on 1 lot = $7.60 USD
Cross Currency Pairs
EURGBP – 1 point on 1 lot = $13.25 USD
EURJPY – 1 point on 1 lot = $9 USD
EURCHF – 1 point on 1 lot = $10 USD
AUDJPY – 1 point on 1 lot = $9 USD
GBPJPY – 1 point on 1 lot = $9 USD
CADJPY – 1 point on 1 lot = $9 USD
EURCAD – 1 point on 1 lot = $7.60 USD
GBPAUD – 1 point on 1 lot = $7.20 USD