This works for me but I must admit a lot of people that I share this with think it is too much effort.
Let's start with the notion that you get the trend right in the longer frame.
1. Always trade in the direction of the trend.
2. Identify pullbacks/retracements to load up your positions (still following the trend)
3. Risk management is key so make sure you don't place more than 10% of your capital at risk on ANY trade.
4. Use "soft" and "hard" stop losses. "soft"= mental stop losses if you are able to trade swings. "hard" stop losses for a straight close of trade without question.
5. Identify a strategy (it can even just be simple Moving Average crossover)
6. BACKTEST your strategy! I have backtested over 100 cluster strategies all the way down to 1 minute time cycles for 20 years on all major FX cross rates. I leave nothing to luck. It is purely quantitative and statistical edge. More than anything, at least you can reach a point where you can say, "yup, I know that 80% of the time, the length of the swing is less than 119 pips". Confidence helps you when you see yourself on a negative position for even 5 minutes. Take out the psychological effects of trading and you will do a whole lot better.
7. Always maintain a summary of all your trades and test for the following:
a. Rolling pip gains (think of it as a P/L of pips)
b. Rolling $ P/L
c. Percentage of maximum swing move (this is quite a quantitative thing to do but it has helped me move my profitability from capturing 30% of the trade move to 65% which is massive in my opinion).
d. Number of trades taken
e. Average pips per trade
f. Number of wins/losses of trades
g. Maximum drawdown
h. Reward to Risk ratio (another important measurement of success).
8. Identify how much money you want to make in a month and set daily targets. Don't over push it. If you hit your target for the day. Stop and review your trades. Don't trade anymore.
9. Have a maximum daily drawdown. If for example, your daily drawdown is $1000 then stop all trades for the day if you lose that much. Don't bother trying to regain your losses, you will more than likely lose more.
Apologies for the long post but all the best. I will admit that commodity markets/ index markets are a lot easier to trade than FX so I will take "baby steps" with FX.
