The 10 laws for trading success

Thank you for subscribing to our free Tradeciety newsletter. This eBook accompanies the webinar
which you can access at: https://tradeciety.com/webinar/

I have been trading actively for over 14 years and coached hundreds
of traders over the years. In this eBook I condensed the ten most
important tips that I have seen will make a huge difference in the
development of new or struggling traders.

95% of all people who get started in trading fail. At the same time, 95% of all those people read the
same books, visit the same websites, and follow the same advice.

If you want to have different results, you need to approach trading differently.

The quote above is the reason why this eBook and the webinar don’t just repeat what has been said
so many times on the internet. My goal for this eBook is to present a different view on what holds
traders back and what to focus on instead.

Start Reading

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#1 The perfect RRR
RRR stands for Reward:Risk Ratio and it is one of the most important metrics in trading. At the same
time, a lot of misconceptions surround the RRR.
The biggest misconception is that a higher RRR is generally better. Although it is true that a greater
RRR would mean that the trader may realize larger winning trades, it comes at the expense of your
winrate.

The greater the RRR, the lower the winrate.

Just think about it for a moment and let us use some common sense. A large RRR is achieved by
either setting trade targets that are farther away or by using stop loss orders that are closer to the
entry.

When the target is far away from the entry, the price will have a much harder time to reach the
target. And when you set the stop loss close to the entry, the price will be able to reach the stop loss
much easier. Both cases lead to a lower winrate.
In the screenshot below, we can follow the logic. Compare the 2:1 RRR to the 6:1 RRR on the right. Of
course, if the price would reach the 6:1 target level, the trader would realize a much larger winning
trade. However, the price has a much higher chance turning against the trader before the target is
reached. At the same time, the holding time for the trade will go up significantly and holding on to
winning trades for extended periods of time is also incredibly challenging for traders. Most trades are
better off aiming for a much lower RRR – at least during the first few months.

When I work with traders, I generally recommend shooting for a much lower RRR than they would
normally. A low RRR means that the winrate will go up and this will help traders build confidence

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faster and feel better during their initial trading months. The more confident you feel, the better
your trading decisions usually will be and your growth as a trader will be accelerated.

#2 Trade into the higher timeframe direction

Trading into the higher timeframe direction and with the higher timeframe trend usually leads to
much better trading results because the price moves faster into the trend direction.

In my trading, I use, among other things, the 50-period moving average from the higher timeframe to
determine the general trend direction.

And once I have identified the higher timeframe direction, I go to my lower timeframes to execute
the trades.
The higher timeframe also allows me to determine potential target levels and helps me understand
how far the trend still may go.

In my http://dailybiastrading.com/ multi timeframe trading strategy, you can learn all about my
trading approach by combining higher and lower timeframes. I go as low as the 15-minute timeframe
to execute my trades. And do not forget to use the promo code ‘webinar’ to get a huge discount!

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#3 Protect your stop loss
Most traders struggle with using stops in the right way and many even believe that stops should not
be used at all. Obviously, this could not be further from the truth and a stop is a must-have.
When it comes to using stops, you can instantly improve the effectiveness of your stops by applying a
simple but powerful rule: place your stop loss behind technical barriers.

Technical barriers can be moving averages, trendlines, support/resistance or strong swing points. By
placing your stop behind those levels, the price will not reach the stop as easily. And if the price does
reach your stop loss, it shows a significant move against your trade and it is generally better to be out
and minimize the loss.

#4 Maximize your winners

As I mentioned in point 1, holding on to winning trades is one of the greatest challenges traders face.
A study by FXCM confirms this and they found that even though the more than half of trades were
closed at a gain, traders still lost money.1

This happens because traders cannot close losses when they should – see previous point 3 – and they
exit their winning trades too early.

Avoiding micro-management, the constant need to fiddle with your trade, is a major reason why
traders exit winning trades too early and leave money on the table.

1
https://www.fxcm.com/markets/education/traits-successful-traders/

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An easy way to overcome this negative bias is to reduce screen-time. Just by looking at your trades
less, you are less tempted to mess around with the trade.

My challenge to you: for the next 30 to 40 trades, adopt a completely passive trade management
approach and after you have set your stop and target, don’t touch the trade again until the price has
either reached the stop or the target level. Then, evaluate the performance and I can guarantee that
you will learn a lot of new things about your trading strategy, price moves, trending behavior and
much more.

#5 Build a complete system

Most traders spend all their time and energy on trying to find the ‘perfect’ entry. And they
completely neglect the other aspects of a trading strategy.

What happens next? Those traders lack confidence and once in a trade, they don’t know what to do,
how to behave and what to expect. Those traders then attribute their bad trading results (wrongly)
to an imperfect trade entry strategy because that is the only thing in their mind that matters for
realizing winning trades.

Instead, you should build a complete trading strategy. The diagram below shows you what goes into
a complete trading strategy.
In my trading courses, I always provide you with complete trading systems, with rules for every
aspect.
If you are looking for a great strategy, I would recommend my Ultimate Price Action course package.
You get the most bang for your buck (3 trading courses, dozens of videos, many trade studies,
checklists, and precise rules). And by using the promo code ‘webinar’ you can save quite a lot on
your purchase.

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#6 Master one strategy first
I once had lunch with a hedge fund trader in Singapore and we talked
about trading systems. He explained that most of his colleagues, him
included, only trade one single strategy.
Being a one-trick-pony can be a very lucrative skill in trading.

Trying to master one thing, instead of spreading yourself too thin, helps
you be significantly more focused and allows you to make progress much
faster.

#7 Your perfect timeframe

I get the question ‘what is the best timeframe?’ a lot! And I wish that I had a better answer. But the
truth is that it always depends on the trader, his/her circumstances, and the emotional profile.

As a day trader, you need to sit in front of your trading charts hours at a time. And if you have a
regular day job, this is simply not possible for most. At the same time, day traders have to be
emotionally very resilient because you have to shake off a string of losses quickly and still trade at
your best.

All my trading courses are structured in a way that I help traders find their right fit. And because I
have helped hundreds of traders who still have regular 9-5 jobs, the strategies always work if you do
not have that much time available.

#8 The most important trading tool

Very rarely do traders agree on what ‘should be done’ or what the ‘optimal way’ is.

But when it comes to record keeping and having a trading journal, everyone agrees that this is a must
for any trader.

I could have collected dozens of quotes regarding having a trading journal, but here are the three
most interesting ones I have come across:

1 - “Trading without a diary is like shaving without a mirror.” Dr. Alexander Elder,

2 - “If you can’t measure it, you probably can’t manage it. Things you measure tend to improve.” Ed
Seykota

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3 - “Successful traders know that a consistent and systematic review of their daily trading activities is
the direct path to growing and improving.” Dr. Van Tharp

Just ask yourself, do you remember your last 10 trades? Nothing? How about your last 5 trades?

If you are like me or most other traders, remembering your last trades is just impossible. And if you
can’t remember your past trades, how are you going to learn and grow?

Although most traders will say things such as ‘losses teach you lessons’, without a proper journaling
and review process, you are doomed to repeat the same mistakes.

That is why we at Tradeciety created the Edgewonk trading journal. It is an online trading journal
software for traders of all levels. There is even a free plan if you just want to give it a try.

#9 The Holy Grail for success

“Compound interest is the eighth wonder of the world. He who understands it earns it… he who
doesn't… pays it.” A. Einstein

One of the main reasons why so few people ‘make it’ and become long-term successful traders is
because of their expectations. Trading is not a get-rich-quick scheme and it will take much longer
than most people realize.

Having wrong and unrealistic expectations quickly leads to frustration when those expectations are
not met. Furthermore, unrealistically high expectations almost always to leads to increased risk-
taking and increase the chance for blowing up your whole trading account significantly.
However, the traders that give themselves time and
don’t rush it, have a realistic chance to make it.
Give yourself 2, 3, or maybe even 5 years to learn
the craft and your trading strategy. If you are not
rushing, you will approach your trading from a quite
different angle. You will make better decisions, are
not driven by short term results and emotions will
not become such a large obstacle.

You can then leverage the power of compound

interest as well. The graph shows compound
interest at work. The red graph shows a growth
curve with compound interest whereas the blue
line represents simple interest.

By allowing your account to grow slowly, reinvest your profits and maybe even add to your trading
account, you can make use of compound interest and let it work for you.

Slow and steady wins the race.

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#10 Avoid unforced errors
“In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost.” Eric Falkenstein

What does this quote tell us? Amateur tennis players lose because
THEY are the ones losing points by hitting the ball into the net or
playing it out of bounds; what Falkenstein calls unforced errors. The
professional players simply return the balls and let their opponents
do the mistakes.

This quote is so powerful when applied to the trading context.

Unforced errors in trading relate to breaking your trading rules.

No one is forcing you to enter too early, chase the trend, revenge
trade, be too greedy with your exits or over-trade. Just by avoiding
making unforced errors, most traders would see a significant
improvement in their trading performance.

Final words
So, what now?

I provided a lot of tips and this may sound overwhelming for some – I totally understand. Thus, I
would recommend picking 2, 3 or maybe 4 points from the 10 laws and slowly integrate them into
your trading. See how it goes and evaluate if you see an overall improvement in your trading. Then,
fine-tune your process and keep tweaking your strategy.

And if you want to kickstart your trading career, use the promo code ‘webinar’ to get a huge
discount on my trading courses and strategies.

I would recommend starting with the Ultimate Price Action Strategy Package first. You get a lot of
ready-to-use trading strategies, dozens of trade studies and a lot of value.

Then, get the Daily Bias course as the perfect add-on. The Daily Bias is a multi-timeframe trading
strategy and very popular among my traders as well.

Finally, for those that want to work on their trading psychology, I have prepared a very
comprehensive Trading Psychology Course with 22 lessons and 22 workbooks. This course is the
perfect fit for the trading strategy courses.

The promo code ‘webinar’ can be used for all trading courses!

And if you have any questions, you can send me an email to rolf@tradeciety.com – I answer all
questions personally!

www.tradeciety.com – Learn. Trade. Earn.