The Forex Traders Ten Commandments

So you want to be a trader yeah? A successful one I hope. Well if so, then you want to be aware of some important rules.

These rules can be used to help reduce excessive mistakes leading to undue losses in trading. I call them the ten commandments of trading because once you can fully learn to follow them properly then making money from trading is much easier, however if you choose to ignore some of them most likely you will run into trouble.

This is by the way for the Forex market, however can be applied to all types of markets.

forex ten commandmentsForex Traders Ten Commandments

  1. Always look at overall trend. If the overall trend is up then simply put only look for buys, don’t trade both ways unless you are sure you are at major top like a daily resistance. It is just not worth the risk otherwise. Make sure to identify the overall trend and then stick to it until the overall trend is suggesting a change. To evaluate trend changes I suggest using what I refer to as trend evidence.
  2. Always know your Risk First.
  3. Always know your attainable Reward and make sure reward potential is much more than the risk before considering trade.
  4. Keep Account draw down to less than 10%. Draw down is fine, but not at the expense of your whole account so keep it in check..
  5. Sell at highs ( retracements )
  6. Buy at lows ( retracements )
  7. Keep to your own personal exposure rules to limit risk in the market.
  8. Use a stop loss that is where you are definitely wrong.. It is always better to focus on winning trades rather than losing trades, so either hedge the bad trade ( optional advanced money management ) or cut losses when you know you are wrong.
  9. Lock in profit when a trade goes your way more than a 1 to 1 risk to reward.. This can be a small lock in of around 5 to 6 pips if you are going for a desired target, but either way lock it in, it is better to risk profit than to let a winning trade go into loss.. would you not agree?
  10. Let your winning trades run. To manage a trade long term I suggest taking partial profits at management point levels on the way to a long term target area or keep adjusting your stop loss manually into the profit zone..  If managing using stop loss then be aware that if the market is moving quickly to adjust your stop loss quickly and that if the market is moving slowly to then adjust it slowly.

Okay, so there you have it. It is not like rocket science or anything, it really comes down to good money management where you are sometimes willing to take a small loss. And do not worry so much, be positive, losses happen, it is the overall gain that is important.

About Timon Weller

Timon Weller is the professional Writer and Trader behind the blog Forex Reviews. Timon Weller is also a professional Teacher of Price Action Trading and creator of the popular Training Series teaching people how to trade Price Action effectively called The Engulfing Trader. For other Forex Training available here at Forex Reviews click here.

For more on Timon Weller Click Here. To Learn more about How to Trade the Market and get updates Click Here.


  1. Perhaps you could do a video on hedging trades.

  2. Richard says:

    Hi Timon,
    Thanks for your video once again. Always looking forward to receive you email posting.
    I have a question regarding rule#7. Could you elaborate more, ie where should the take profit and stop loss whenever your hedge?

    • Hey Richard,
      Hedging is an advanced optional method of reducing risk in the overall market. In a way, it is a whole other concept / training in risk management where it involves a trader thinking outside the box in a big way and is not something that could be explained easily in a comment or email without being possible missread. In a way, it would to be better demonstrated in a book with many examples or a video training series. In the past many people get this optional form of management wrong and especially in where to place a hedge and why often hedging can give a second chance and increase probability in trading where normally a trader would of taken a initial loss, it helps by reducing the risk of expected loss. The process of the hedge also needs to executed with rules similar to another trade ( so discipline is key ) that is if wrong a second time then first expected risk amount would be excepted from original entry as well.

      Overall it is a great topic and a topic that I delved into for many years and tested over many years as well. If done right with extremely good discipline is a highly effective way of reducing risk phenomenally, however one slight miscalculation in discipline then a trader can actually lose more money by not following the rules of the hedge principle in the first place. In other words if followed exactly is extremely effective, if followed slightly wrong and a trader takes profits too early or too late then a trader is going to fall into a deeper a trap of more loss.

      However like I said it is effective optional method of risk management once major structure is understood fully and if a trader follows extremely good discipline as well.

      It is however not recommended to attempt as a learning approach to trading and more a way to approach the market once passed many advanced aspects such as what is gone over in The Engulfing Trader and then using as a possible option of reducing risk. Optional as well as some traders cannot handle hedging due to there personality and optional also as in some countries hedging is outlawed. Interestingly, enough though in those same countries banks and institutions hedge all the time to reduce risk, that limit of hedging being off limits is more so for the retail trader.

      The country I am referring to as having restrictions here is the US. Every other country in the world pretty much hedging is completely legal and not restricted in anyway. A common reason why also, if hedging gets any flack as a advanced way of reducing risk is usually from a US bias on that one where it is regulated and against the new terms of retail trading. Mind you, hedging used to also by legal as well in the US, this was a change that happened over time. This is not to say that people in the US cannot get around this hedge rule, they just need to do it by using two separate brokers or two separate sub accounts like in brokers like Oanda.

      Let me know if this is a possible risk management topic that you would want me to delve into more detail on in future.. Such as in future training, etc.


  3. Hey Timon….thank you for the reminder on point #9……I just graduated into live trading this week and have an open short trade on GBP/AUD thats been going well but I can see some resistance shooting up as the day progresses. As you suggested I just locked in my profit on this one. Hopefully it keeps moving and I attain the whole goal but at the very least its a nice win….In case we don’t speak, have a great weekend!

  4. Hi Timon,

    Not quite sure what hedging is but have heard of the term before, ie, hedging your bets! I will probably not use this method though because I would feel like I am constantly losing and gaining at the same time on the trade, sometimes for the better and sometimes for the worse. I much prefer a stop loss with low risk and low exposure.



    • Hey Phil,
      Yeah I understand that one, hedging in anyway itself is a completely optional form of advanced money management. I would recommend more so now the hard stop when wrong as well.

  5. Denis Yeo says:

    Thanks Timon.

  6. Mshelia says:

    Thanks Timon can you throw more light on #3

    • Hey Mshelia,
      With number three I am referring to evaluating potential reward from trade setup and making sure that risk is much less than the potential reward on every trade setup. A really important aspect in trading. This is an aspect of training and not an easy one to answer in a comment. I will say though, that I go over this aspect in detail in the training series at the website called The Candlestick Training Series.

  7. 4 I assume you meant risk 2.0% not 20%

  8. Thanks Timon. Great article. Locking in profits (#point 9) is essential ; especially in currency markets where price zigzags and retraces as a matter of course.

  9. Its like the 10 commandment in the bible, but Jesus further broke it down to 2 most important, so Timon which 2 are the most important. (Just kidding).
    Timon nice article you’ve always been of help with your weekly analysis can’t do without it every week before trading.

  10. I have looked at and experimented with various hedging strategies and am convinced that risk can be dramatically reduced. The problem is working out a strategy and rules that are consistent. Could you please give me the details of what strategy you use. Email me if it is a bit long or complicated.

  11. Timon………..i always always always always use a stoploss. I am not at the pc much and i have watched friends trade without them. Some no longer have acounts. Liked the rest of the article though 😀

    • Hey Martin, I agree. Just to clarify, when I am referring to using a opposing hedge trade as a management option I am referring to using in the same way as a stop loss.

  12. William says:

    Thanks a lot Timon.

    Regarding #10, do you mean we shouldn’t set target for our trades and always trail the stop? More successful overall? What about entering 2 trades always? one trailing the stop and one e.g. 1:1 target?

    • Hey William,
      Yeah good question, I will correct that one, I am referring to not closing trade early before it hits its long term target and instead manage trade on the way to the long term target area. I suggest traders to manage a trade by taking partial profits at management levels ( or optionally lock in stop loss manually ) on the way to a long term target area.

  13. William says:

    Hi Timon,

    Just another question, on which timeframe this strategy works best? 4h?


  14. Thxs Tim great advice, as always god bless

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