Dear FX Top Gun, There’s an old story about an old mountain man who made a living back in the late 1800’s selling raccoon skins. Of course to sell the skin, he had to convince the raccoon to part with it, which the ‘coon usually wasn’t willing to do alive. This particular trapper had an unusual way of going about the whole deal. He’d take a large can and punch a little hole on the top that was just big enough for a raccoon paw to fit through. Down inside the can he’d drop a couple of shiny metal slugs and then securely attach the can to a tree. Well, you know the story… along comes the raccoon, and being curious about the shiny metal at the bottom of the can, he reaches in to grab it. When he tried to pull it out, his little paw, now combined with the slugs, was too big to get out of the hole. So, that poor, dumb ‘coon was stuck. As long as he held onto the shiny metal slugs, he wasn’t going anywhere. Here’s an odd thing about the whole deal… The old mountain man discovered that simply dropping one slug down in there was not enough. Maybe it didn’t shine well enough or make enough noise – I don’t know. But to entice the raccoon, he had to put at least 2 slugs down inside the can. Every afternoon the mountain man would come along with a single-barreled shotgun and round up his hides. Now, you would think that looking down the barrel of that shotgun would motivate the ‘coon enough to let go of the slugs and get out of there. But it didn’t. He’d hold onto those 2 worthless slugs for dear life… and in the process he’d have to part with his fur. How To Avoid Losing Your Hide There’s a powerful lesson in that story. It’s what I call the “2 to 1 Law” and I see it all the time in Forex trading. The “2 to 1 Law” goes something like this… Before you even think about getting into a trade, you should have multiple indicators all in your favor. You must have at least 2 good reasons to enter the market… and, of course the more positive indicators, the better. Suppose you have 5 separate indicators that you look at in your particular strategy. Before you enter a trade, 2 of those indicators should confirm that you stand a chance at not losing your hide on the deal. Under no circumstances should you reach into the market with just one good indicator… no matter how compelling that one indicator is. Ok, that’s on the opening position… what about exiting? You only need one indicator to motivate you to get out. That’s the “2 to 1 Law”… 2 reasons (or more) to get into a trade, but only one reason to get out. Here’s How It Works… Ok, let me give you a quick example and then a simple formula to help you live by this basic law. In my Institutional Forex System II, I teach a method of using Fib levels and pivot points as main indicators to simply see if a trade set up is close. If price is approaching one of these levels, we have a possible trade set up. If there is double support/resistance, meaning a fib level and a pivot point are near the same price, that is two indicators right there telling us to enter (See Secret #9 for more details on this strategy). We could also have other indicators in our favor such as buy/sell pressure, net position of the banks, keltner channels, etc. On the flip side, if only a pivot point occurs, but all the other indicators are not confirming the direction of our trade, it is not a valid entry. When you are looking at profit targets, just one of these indicators is good enough to exit. So, if all other indicators still show positive for our trade, but we are coming up against another pivot point, that pivot point price is a valid exit point for our trade. Now For The Simple Formula… Any trading strategy should look like this: If A, B AND C occur, then ENTER If A, B OR C occur, then EXIT Two Mistakes and One Huge Mess Most of the time, what I see is this: A trader gets a number of indicators in their head and starts looking at the market. Their eye catches one positive indicator and the adrenaline starts pumping and they start seeing dollar signs floating in front of their eyes. So they reach into the can with both hands and grab on. First mistake. Now, once they are in, they begin to mentally justify their position… even when things start dropping out the bottom. They keep their mind fixated on that one reason why they got in, even though now there are 2 or 3 or 4 reasons why they should get out. That’s the second mistake… and at some point it will be their last. Remember… 2 (or more) good reasons to get in, but only one reason to get out. After all, you don’t want to be stuck holding the can looking down the barrel of a financial shotgun. In a situation like that you could lose your hide.
Here’s To Your FX Trading Success, 
DC Bonta, The world’s #1 FX money manager 
*************************************** Editor’s Note: In a rare move, DC Bonta has recently announced that he is going to offer 200 individuals the opportunity to have DC personally manage their FX accounts and trading. DC’s past 3 year positive return track record is: 301.7%, 305%, 343.5%. For details on this exclusive offer, click here now. ***************************************
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