Be a Dedicated Trader

  • Dedication will show itself as a consistent commitment to understanding the markets and awareness of just how we are affected by it every day.
  • The dedicated trader uses a journal to chronicle the market and her actions through the day.
  • The trader examines the market in different ways and makes the decision to learn something new every day that makes her a better person and a better trader.
  • The dedicated trader studies after hours. She will review trades, scrutinize charts, and work to discover what she had missed during the work day.

Psychological Risk Management

  • If you’re out of balance, you’re going to make bad decisions, and trading the market is a decision game
    • If you’re overtrading, you’re out of balance
    • If you’re overcommited, you’re out of balance.
    • If your dollar risk is too high, you’re out of balance.
    • If you’re hung over, you’re out of balance.
    • If you’re sick, you’re out of balance.
    • If you need the money, you’re out of balance.
    • If you make too much money, you’re out of balance.
    • You’ve got to take time off. You can’t trade every day.
  • Pay more attention when you account size gets bigger
    • I’ve noticed over the years that when my account has been small for whatever reason, I have been really careful with it. I watch it like a hawk. When my account gets rich, I tend to fall into a habit of neglect. I’m making money. I have profits, and I’m more comfortable. I don’t keep as close an eye on it. That’s very foolish.
  • Take profits out of your account
    • You should spend some profits rather than letting the money stay in your account indefinitely. That’s been important to me over the years. I withdraw money from time to time and take a vacation or buy a new car. From a behaviorist’s standpoint, it gives a sense of reward. It provides conscious and subconscious motivation.

MANAGE RISK

Position Size Limits

  • Trade risk limit
    • Never risk more than 2%-5% of your equity on any individual trade.
  • Simultaneous open positions risk limit
    • The risk on all the open positions together should never exceed 10% of the account.
    • The total risk exposure (to their stops) for all positions should never be more than 50% of your total capital.
  • Consider correlated markets a single position
    • For applying the 2-5% risk per position, consider all the correlated markets as a single position.
  • Gradually build up positions
    • You need to take a decent-sized (up to 1/3 of equity) position to capitalize on markets that are moving for you. Take a small position initially, and if it starts working, build up to a full weighting.
  • Margin limit
    • Total initial margin requirements for the contract size you trade should be no more than 15-50% of your account size. 20-30% to be more conservative. 40-50% to be more aggressive.

I dont care how smart you are, but if you violate these rules, you’re dead.

The Basic Rules:
1.) You must limit your losses. Period.
People who should have never blown out have left the game because they violated their stops.
2.) Let Your Profits Run
There’s only one way for profits to go up.  That is time.  We need time in our trades.  Those who go in and out are destined to failure.  The question is just sooner or later.
3.) You must never plunge.  Ever.
You can overtrade by trading too many contracts, or trading too frequently.
You’ll need to have money management or you’ll blow up.We all read Jesse Livermore’s book, we want to plunge.  When you have that “THE trade” – that’s the loser.  The trade that is most comfortable, is the one that doesn’t work.You’re chasing disasters, and you’re disguising them as chasing winners.

The best traders are not afraid.

They aren’t afraid because they’ve developed the greatest mental flexibility to flow in and out of trades based on what the market is telling them about the possibilities from its perspective. They listen to the market.

The best traders developed attitudes preventing them from being reckless. Confidence and recklessness aren’t the same.  

The best traders truly accept the risk. They have eliminated the tendency to rationalize. 

The successful trader that you want to become is a future projection of yourself that you have to grow into. Growth implies expansion. Learning. Creating a new way of expressing yourself. This is true even if you’re already a successful trader in order to become more successful.  
Chapter 2: 

Taking Care of Your Mental Health

Mental health is your overall emotional, psychological and social well-being, how you feel about yourself and others, your ability to understand your feelings and go through everyday difficulties. 

The Coin Flip Test And Trade Probability -Anirudh Sethi

Since we are human merchants and we like what we do, executing the above-portrayed model would require a ton of tolerance and it would likewise be extremely exhausting. we better utilize a computerized forex-system to execute this coin-choice exchanging model. all we would need to do is truly utilize a guarded hazard the board of most extreme 1% per exchange, on the grounds that a half winning-likelihood would not imply that we would not need to confront 10 or 15 failure exchanges a column! recollect that these probabilities become valid in the long run!

since we like to inhale and encounter the business sectors, and we obviously need to exchange physically utilizing specialized examination or key news, we should now have a more critical investigation of the universe of cash the board, stop misfortune, take benefit, and obviously additionally the satisfactory exchange volume. since section 1 of this article arrangement, we realize how a dealer can ensure his record by straightforward RISK MANAGEMENT counts. this is totally vital and its significance can’t be rehashed regularly enough!

Presently, in the comic, sadly, flipism didn’t turn out to be well for Donald. A coin flip for every choice brought about a progression of incidents for poor Donald. Amusingly, however, so as to bargain out some proper recompense, Donald managed to pursue down the con artist Professor Batty by finding the misrepresentation behind the correct entryway dependent on a coin flip, so maybe the way of thinking holds some legitimacy. In spite of the fact that I don’t really advocate carrying on with a real existence dependent on coin flips, incidentally, coin flips and the hidden factual rules that administer coin flips are especially powerful when applied to certain issues normally looked in the information.

without utilizing any investigation technique each time you open exchange, you have a half possibility that the exchange goes toward you! the reality of the situation may prove that in 10 exchanges it goes 8 or multiple times toward you, or against you… be that as it may, in 1.000 exchanges you will have indirect 500 victors and 500 washouts. you can contrast that with tossing a coin. the more regularly you toss a coin the more you can be certain, that the scientific probability will appear and affirm the half possibility for each side of the coin or every bearing of an exchange. knowing this, all you need to do ist to pick an SL/TP-RATIO of 1:2. for instance 20 pips SL and 40 pips TP. in the event that you currently win each second exchange (half), you will naturally make benefits!

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