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TRADING RULES

rules-mind

The hardest lesson I have had to learn is to “Act in my own best interest”. And to overcome and correct things like:
1) trading without a stop
2) refusing to admit I am wrong and to get out of a losing position
3) trading for the sake of trading
4) chasing entries (going long on the top tick, shorting on the bottom tick)
5) revenge trading (after a series of losses)
6) trading while sick or tired
7) trading without a plan (entry, exit, money management rules)
8) …
Anytime that I am in a position and either don’t know why I am, or what my profit target is, or what my stop loss is, etc. – I am not acting in my own best interest and have always struggled to close out the position immediately.
The times I have without any further hesitation, it turned out to be a wise choice and saved my butt from significant losses (more so than I already incurred).
The bottom line is that you will do much better in this profession if you can answer YES to the question – “Am I acting in my own best interest”?

Money-Mind-Method

Mind: The key to winning is inside the Mind. As Master of your mind, you have to manage and understand your emotions very well. It is extremely important to understand not just the individual’s psychology, but also the crowd psychology of the markets. To become a successful trader, you must have sheer perseverance and discipline.

Method: There is no Holy Grail in the search for the perfect method to trade. Follow the wisdom of ‘Plan your Trade and Trade your Plan’. A good trading plan should cover your entry, exit and position sizing requirements. My method consists of discretionary trading techniques that combine both fundamental and technical analysis, in addition to my own proprietary automated trading system. Coming up with a good trading plan requires lots of market experience, as you modify, conquer and solidify your trading techniques. Don’t be duped by charming salesmen selling get-rich-quick-without-effort secret recipes. 

Money: Overall profit/loss depends on money management. The first goal of money management is capital preservation. If you lose 10% of your capital, you have to make 11% just to break even. If you lose 40%, you need to make 67%, and if you lose 50%, guess what? You have to make 100% just to recover! So before you think about making big money, first you got to think about not risking your capital unnecessarily. Money management is too important to be overlooked.

4 Types of Traders

The first type of profitable discretionary trader is the one who has a natural feel for the market.  When you talk to one of these traders and ask them about their trading at some point you’ll hear them say something about ‘feeling the market was this way or that….’. These are traders who over the years have acquired a lot of implicit knowledge of the market and its participants. They understand what moves markets and they also have the required self-trust to act on their ideas and to protect themselves when they are wrong.  Their personalities allow them to have the self-trust to know their limits and believe in their capabilities. We could call them a ‘natural born trader’; and there are very few of them. Although Jesse Livermore eventually blew-out, he’s an example of this rare type of natural trader.

 The second type of profitable trader – or more accurately temporarily profitable – is the lucky trader; the trader who’s P&L is currently in an up swing but they’ll soon be negative. Often these traders either got lucky with a number of trades and can not replicate it, or they learned the habit of holding onto losing trades and they got lucky when those positions came back. This accounts for the largest number of “profitable traders” – but for these traders the money often leaves faster than it arrived. (more…)

In Search Of Emotional Discipline

 emotional-discipline
 
 
 
 
 

  • An intra-day watch list keep you organized, focused, and ready to ACT
  • Trading specific candlestick patterns forces you to be consistent in your observations
  • Trading 15 min bars allow the market enough time to marinate and develop patterns
  • 15 min timeframe give you the opportunity to calmly stalk your prey and not rush to judgement (more…)
  • 100% You will lose Money

    You are entering a position out of EMOTIONS or ANTICIPATION at wrong price level in a WRONG scrip with GREED or HOPE with no pre-entry exit in the place – even worst, once in a trade, riding the position with HOPE without STOP LOSS even if it goes against the entry – adding more to average down in the entirely wrong trade – at last running out PATIENCES and out of FRUSTRATION booking huge LOSS.

    Even the position is in PORFIT there is no STOP LOSS or pre-entry EXIT in place – exiting the position abruptly in FEAR booking just a small profit with FEAR that market may take this small profit too – these random small profits unable to compensate earlier big losses!

    To cover big losses you try more and more RANDOM trades and above process continues – end result it challenges your EGO and creates more FEAR, more AGONY – cycle continues with small profits and big losses – until account is wiped off.

    Risk Management for Traders

    RISK-MANAGEMENT

    • Your first loss is the best loss.
    • Let winning positions run and cut losing positions short. The market is always right.
    • I finally understand why Kirk always says risk management is the most important thing.
    • Always know your exit. Before any trade is made, you must always identify your stop beforehand and then follow it without hesitation if it triggers.
    • Patterns and trends matter more than I thought…paying attention to them can provide better entry/exit points.
    • Patterns and measured moves are key but you have to wait until a pattern is triggered and the trigger holds.
    • Being patient and waiting for confirmation instead of trying to anticipate market movements.
    • Risk is greatest when everyone who wants to buy has already done so – Apple is the latest example!
    • Position sizing is my first and last line of defense.
    • Leverage is for losers.