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In this final section of the course I would like to lay out what I consider a crucial aspect of trading: the

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Golden Rules of Trading. They are a compendium of rules that have served me well over the years not

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because they have increased my profits, but rather because they have potentially limited my losses.

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As I always say trading is all about minimizing risk and that's precisely the point of these trading

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principles.

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I used to get burnt over and over and over in my early stages of trading on Fridays, and I couldn't
figure out why – I would find a valid entry from a Technical Analysis point of view but somehow the
trade would turn belly up throughout the Friday afternoon/evening.

Thanks God my mentor (a Hedge Manager trader) finally explained me what the heck was going on:
profit takings! You see, as London close is approaching on Friday, London-based institutional traders
that are showing some healthy profits for the week might be closing their positions before leaving their
trading desks for the week. You know, holding a position open over the weekend is always risky as
you're exposed to any political or economical event without having the capacity of closing your
position until market opens up again on Sunday evening. Therefore, many traders prefer to cash out
prior the weekend and since their orders are just so enormous, they can easily spike the chart and
turn it around violently (taking your stoplosses out in the process).

In the other hand, if non of that actually happens, the most likely market condition to witness of Friday
afternoon/evening is a sideways range bound market: no-one wants to open new positions before the
market closes down and the chart remains flat-lined for the rest of the day. So, either you have a spiky
chart or a dead-quite flat chart. Either way, you don't want to be positioned in such market, do you?

Moral of the story: stay out of the market post-London noon.

Ch8.GoldenRule1.video01_FridayTradingFinal.swf Ch8.GoldenRule1.video02_ProfitTakings.swf

As a general rule of the thumb, on Fridays there are only two type of acceptable setups:
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 London Open Breakout type of trades that trigger within the first two hours of London

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session.

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 3SMA trades off the very short time frames such as the 5m and 15m charts. Basically, these are

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scalping trades that aim for 20'ish pips moreless.

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But, quite frankly, don't feel guilty if you begin your weekend on Thursday night. I personally do it

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many times!

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I personally stay out of the market during any significant festival date because volume is very thin
during those days and therefore all those lovely levels of support/resistance I base my trades on are
easily breached as there is no-one in the market to defend them. Trading from a Technical Analysis
point of view on a thin volume market is extremely difficult and risky: sideways ranges and chaotic
spikes out of the blue are not unusual during those times, so it's best to not get involved at all.

To be more concise, my no-holiday-trading policy is particularly enforced during:

 Bank Holiday dates such as the 4 th of July, Easter (Holy Thursday, Good Friday and Easter
Monday), Labor Day, President's Day, Thanksgiving Day, etc.
 August: the whole month of august is very thin on volume as most of the institutional traders
are baking themselves silly at a Caribbean beach. Also watch out on July because of the same
reason: either stay out or reduce your lot size if you're trading in July.
 Last week of December and first week of January: Christmas time, and thus the same
principles apply – many institutional players are on holidays and volume is thin.

The Interest Rates announcement is the single most important news to hit the wires in the economic
calendar. Indeed, interest rates the are the main driving force in the currency exchange markets
as enormous amounts of capital flow across the planet seeking the highest yield, and the day the
announcement is released (specially if a rate change is expected) the market holds its breath in
expectation and thus it's prone to horizontal market conditions with narrow trading ranges prior the
release. Moreover, it's not unusual to see a 100-pip spike within seconds upon the news.

Let's assume the Interest Rates for Australia are coming out today. In that case, as a trend trader who
profits from lively one-directionally-biased markets, I will not consider any entry on any of the AUD-
crosses until the news are released.

Look what happened on the 6th of June upon NZD Interest Rates decision...
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Another example of the same thing, this time around in was the GBP Interest Rates.
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Be careful to not enter a double position on different currency pairs that are related to one same

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currency, and thus doubling up your risk.

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For example, let's imagine you're long on GPBJPY and we get a valid long entry signal on EURJPY. If

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you take that signal you will be effectively doubly-exposed to any news announcement, event or

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market sentiment shift related to the JPY. That's always risky because if the JPY strengthens all of a
sudden for whatever reason, both your two trades will score a loss. You see? One market direction
change has caused you two losses. That's unacceptable in my opinion. So, if you're long on GBPJPY,
I would not take any further trade on any GBP or JPY cross unless my stoploss on that initial trade
(GBPJPY) has already been secured and moved to breakeven or better.

It's just common sense guys – always minimize your potential risks, alright?

Never bet against the longer Time Frame guys, they are more significant than shorter ones. That's
why one of the setup requirements (chapter 1) we follow is to verify that the longer Time Frames show
no conflicting signals. Take no long entry against long term resistance, or no short entry against long
term support, ok?

You might want to re-read the 1.3 sub-section on chapter 1 on this topic.

If you don't quite see the “beauty” of a setup right as you pop out the chart, then search no longer
because it's just not there. I have come to realize that my winning trades are usually those that jump
in front of eyes immediately after opening my charting platform. If, in the other hand, I
bloodhound the chart seeking for an entry to take like a vampire scouting for fresh flesh, it usually
turns sour on me.

Learn to appreciate the fact that successful trades also hold a “beauty” or “harmonic” behavior. The
setup must be recognizable within the first few minutes of analyzing the chart. Therefore, don't
overanalyze, don't draw ten trendlines and levels of support/resistance. No sir, you want none of that.
In my opinion, clean setups and clean charts produce the best trades. The more lines you need to throw
at a chart in order to discover a trade, the higher the chances that trade will be a loser.
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Like I said, if you don't quite see the “orthodox beauty” of a possible setup within the first couple of

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minutes of staring at a chart then look somewhere else.

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A very important rule! The psychological damage of seeing a winning trade turn around and
becoming a loser is enormous, much more than if a trade went belly up from the very beginning. That's
why I don't hesitate to exit a position and cash out however many pips I have for the day if I notice
early signals of weakness in a trade. And that's exactly where in-trade management comes in play as
explained in the previous chapter.

So, I repeat: if a winning position begins to show weakness, pull the profits off the table, forget about
that trade, reload the gun and search for the next opportunity.

Let's watch a video in where I violated my own rule. Trust me, I wasn't the happiest man on Earth that
day...

Ch8.GoldenRule7.video01.flv

Always keep in mind which is your setup chart, meaning which time frame you're trading off.
One common mistake among novice trades is to base their Technical Analysis studies on one time
frame, and then apply price targets, stoplosses and time scopes off another time frame, usually a larger
one.

If your set up chart is the hourly or the 30-minute chart, always keep in mind that you're getting
yourself in an intraday trade, and therefore your target or stoploss should be hit within the day. If price
takes more that a fistful of hours to reach either, beware: you might be riding a momentumless wave,
or perhaps you might have miss-picked your entry/exit levels. Trades based on the hourly or 30-min
chart rarely produce targets larger than 50 pips, or stops larger than 30 pips. Conversely, if you're
trading off the Daily chart, expect the trade to remain open few days and with a target/stoploss above
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the hundred pip mark. Don't try to trade the Daily chart shooting for just 50 pips or tightening your

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stop to a mere 25-pip risk.

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Following, I'd like to show you one of the live trades from my archives: it was an intraday trade taken
off a setup based on the 30 mins chart. That trade, 5 hours later, was still butting about entry levels

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with no clear direction, thus I decided to close it out manually. You see, if you are taking an intraday

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trade, your target price should be reached within the trading session, or at least the trade should

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clearly point towards your target. If it doesn't, it means that you're riding a momentum-less swing and

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it might not be a bad idea to get out for the time being.

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Ch8.GoldenRule8.video01.swf

A trader is not a battlefront soldier - A trader is a sniper.

A trader doesn't unload the whole cartridge shooting around Rambo-style like a madman – a trader
waits, and waits, takes a break to drink a beverage, sits tight and waits some more until the one very
target he's been aiming for all along squares right in the center of his telescopic visor… and then, only
then, he shoots one single bullet. He needs no more...

Patience is a trader's number one virtue. It is crucial to wait for perfect setups; don't take second
rate trades. There is nothing wrong in closing your trade station early in the day if no setup tickles your
interest from the first go. Professional traders do NOT trade every day. They know when to shut
down their trading stations and go out in the sun if there's no decent setup in the charts that day. Have a
look at my trading blog and you will see plenty of entries along these lines: “Hello guys – I don't see
anything special in the charts, so no trade taken today”.

Overtrading and lack of patience is one of the main problems for novice traders. You must wait
and sit tight until a truly proper setup appears. With the proper money management and a sound
system, one good trade a week is more than enough to buy you an excellent living, so don't rush
yourself into trades.
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Hear this out guys: long term trading success will not come by scoring many winners but rather

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by cutting your losers to a healthy minimum. If you manage to minimize the number of losers, or at

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least to minimize the monetary loss when a trade turns sour, you're in the right track for long term

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success.

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Always remember that trading is not a sprint - it's a marathon. And the marathon winner won't be the
fastest runner but actually the man who distributes his energy reserves the best throughout the whole
race. Do not search for reasons to take a trade – search for reasons to not take that trade. Number one
priority is not to make money – it's capital preservation.

Just as I explained few paragraphs above on the 8.7 sub-section, in-trade management as explained
over the chapter 6 is crucial for long-term success. Being able to realize fast enough when you're trade
is losing steam will allow you to axe down those potential lossers fast enough so the harm onto your
accout is quickly limited. Many newcomers don't understand how utterly important is to actively read
price action on an open position, so please guys don't make the same mistake. Like I always say, your
job as a trader is not about scoring full home-runs but rather to minimize losers. If you minimize
potential losers, those few winners you will score here and there will take care of the rest for you.

Now I will show you a real trade that looked dandy handsome at the beginning but, as the chart was
unfolding in front of my eyes, I perceived some warning signals of a serious loss of momentum and I
was able to jump out of the sinking boat quick enough to avoid scoring a loss!

Ch8.GoldenRule10.video01.flv

Novice traders often believe that trading is about predicting the next move. They say "I think it's going
up" or "it's gotta go down from this point, it cannot keep going up forever!". Unfortunately, trading is
certainly not about prediction: no-one has a clue what price is going to do, not even professionals.

You do NOT need to predict, but you do need to react. You must wait for price to clearly point out its
next move before jumping on board. That's why I wait for the pullback+continuation aspect after a
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breakout, in order to VERIFY that the breakout has indeed pulled through. If I entered right as price

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pipped through the breakout level I would be simply trying to guess the market's next move (in this

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case the breakout). That's not what successful trading is about. It's important to wait for verification of

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such breakout via waiting for the pullback+continuation aspects before considering the entry.

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In the same line of thought, I am not hasty to enter as price retraces back to the Dynamic Area of

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Support/Resistance. I keep myself from predicting the creation of the next swing by waiting for the

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reversal formation plus a retracement trendline break as explained over chapter 3. You see guys? I

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don't just enter as price hits that area of dynamic support/resistance - if there is no reversal formation

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unfolding in the trigger chart, I take no position.

So, remember: trading is not about predicting the next move - it's about reacting quickly to the
move that's already appearing on your chart. Please guys, print out this last sentence and stick it
next to your monitor, because it's one of the top-10 truths of trading.