Forex Trading Articles

THE 5 FUNDAMENTAL TRUTHS OF TRADING &
THE 7 PRINCIPLES OF CONSISTENCY

From: Forexmentor Team
©2006, Currex Investment Services Inc.

Dec 28, 2006

The following principles are taken from the “Trading in the Zone” by Mark Douglas and we suggest printing them out and reading them everyday, so that eventually they become part of your beliefs.This is one of the books that MUST be on your trading bookshelf:

The 5 Fundamental Truths of Trading:

1. Anything can happen.

2. You don’t need to know what is going to happen next to make money.

3. There is a random distribution between wins and losses for any given set of
variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one thing
happening over another.

5. Every moment in the market is unique.

The 7 Principles of Consistency:

1. I objectively identify my edges.

2. I predefine the risk of every trade.

3. I completely accept the risk or I am willing to let go of the trade.

4. I act on my edges without reservation or hesitation.

5. I pay myself as the market makes money available to me.

6. I continually monitor my susceptibility for making errors.

7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them.

In "The Disciplined Trader" for example, Mark Douglas points out that typical traders often avoid creating principles and rules, because they simply do not want to take responsibility for the results of their trading. If you know exactly what you are going to do and under what conditions, then you would have something, by which to measure your performance, therefore making yourself accountable to yourself. This is exactly what most traders don’t want to do. They would rather keep their relationship with the market somewhat mysterious, which creates a real psychological paradox for traders, because the only way to learn how to trade effectively is to make oneself accountable by creating structure, but with accountability comes responsibility.

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