Confusing? So many rules to remember especially when I talk about the fact that the forex markets are random. Well yes, they are a random beast, but these rules will help you build a better foundation and will help you to trade these markets effectively.

The 90/10 Rule signifies the importance of trade management techniques over and above the basic entries and exits you take. Let me explain this in detail. We can compare trade management with driving a car. You can easily start the engine or stop it by turning the key without any training but can you drive the car without any training? The answer is most probably no. Entry and Exit is just 10% of your job the major part i.e. 90% of your task lies in the way you manage your trade and keep it from hitting your stop loss. All at the same time risking the least amount of pips and having a controlled risk profile. The story does not end here getting out at the right level where you do not leave much on the table is also equally important.

All this might sound so easy, but it will test you and will burn you out completely. It is easier said then done. Imagine a situation when you have to pick a top or bottom based on your market analysis and we have to picture this fact that the markets are Random. So they can peak out any level x or y or z. How do you know which level do you exit these markets at - Level X? If yes, what if the markets scale up to y or z? That would be leaving too much on the table and would certainly go against the 10/90 Rule which states that you should learn to manage your trade effectively.

Well, this is where the 99/1 rule comes in. We human beings are slave to our emotions. Emotions which are a deep part of your psychology are not something you can keep aside while you decide to trade in the markets. Managing the way you think, move, reason out things and your beliefs is all the more important. That is why for me, 99% of your trading knowledge is made up of how you handle all these elements whereas on the other hand 1% of the trading knowledge comprises of technical analysis tools and techniques.

If I combine both these rules, I would safely conclude that exiting at a higher level is important but exiting at a level which satisfies your psychology is all the more important. If you are a trader who is comfortable taking 20 pips of profit on each trade and holding for 200 pips drawdown, then that is what will become the underlying rule set of your trade management practices i.e. the 99/1 rule will feed into your 90/10 rule set. Therefore people who have lack of self-control and are emotionally weak will be difficult to mould into professional traders since the part that comprises 99% of their knowledge set is not present. Vice versa, if you are a long term trader and have very limited trading time you would rather prefer taking few entries but would like to hold onto your trades for a long period of time in order to maximize your profits. This is the 90/10 rule speaking about its preferences. Now, how this rule should mould your 99/1 rule and allow you to gather that knowledge which focuses on picking techniques that allow you to scan for high probability pairs and at the same time prepare yourself psychologically to see small but very profitable winners is the key.