There are many different rules a trader may apply to either the analysis or the trade but we have three rules we use at Dynamic Trader which are amongst the most important.
- Trade with the trend
- Trade with an edge
- Capital preservation
Trade with the trend is a logical approach to technical trading but often ignored. We find trading the trend is less time intensive and far less stressful. Trading the trend will improve your results in the long run. A simple method is to look to only buy above the 200 moving average and to only sell below the 200 moving average.
Trade with an edge is something that can only be achieved with education and experience. We always have an edge for every trade we trigger by looking at only high probability set ups. Traders are often addicted to action and fail to spot the true high probability trades by getting involved in the markets when they should be standing aside. This rule truly separates the smart money from the dumb money.
Capital preservation is simply controlling the risk by utilising the appropriate portion of the trading account to each trade. Some traders take huge risks hoping to hit it big on a single trade. This method is a sure fire way of blowing up the account as soon as the traders luck runs out (which it will). We risk specific amounts on each trade and never use more than 3% on any one trade.
Improve your trading today by entering only in established trends that offer high probability set ups and preserve your capital by risking small but staying in the trend for longer.