Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that usually ends badly.
- Never lose more than 1% to 2% of your trading capital on any one trade. This means use position sizing and stop losses so when you are wrong the loss is not a big deal.
- Never trade anything you do not understand 100%. Stay away from trading futures, forex, or options until you understand the risk and how exactly they work.
- Always trade with the trend in your own time frame.
- Only look for low risk, high reward, high probability setups , when there is nothing to trade, trade nothing.
- Trade the chart and price action, not your own opinions or predictions.
- You have to trade your own way, the trading style that you are comfortable with that fits you.
- If you do not have a full trading plan with rules on entries, exits and risk management stop trading until you create one.
- The size of your wins and losses ultimately determine your trading success regardless of your winning percentage.
Your risk management rules will ultimately determine the success of your technical trading system.
Archives of “own time” tag
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Emotion, Stress & Trading
I was recently asked by a member to share my thoughts on how I manage the high stress levels and how you keep emotion out of the mix. I will get to the the stress handling in a second, but let me start by addressing “keeping emotion” out of it.
While many traders say they can keep emotion out of their trading, I believe when it comes right down to it they’re being disingenuous. Unless those same traders really employ a completely robotic trading system which requires absolutely no supervision or control, that simply cannot be true. This is one of those things that I’ve seen many traders say to impress others, but in reality it just isn’t possible or even realistic.
When you have real money on the line and have also invested your own time and energy beyond that, emotion will play a significant role in every decision. After all, none of us are trading robots! We all have feelings and egos and therefore our trading and investment decisions will be impacted from those even in subtle ways that you may not even realize. The key is to learn how to use those emotions to your advantage. For some of you, trading completely contrary to your logical fears is an excellent way to make big money in the markets. Just look at all of the people who went short hoping for Hindenberg Omen type crash in August and who’ve been fighting it every step of the way!
As far as coping with stress, we all have to develop our own methods. But, this is what I’ve learned over time. For me, stress comes primarily from three things:
Not having a plan and being out of position in a challenging market
From not staying on top of my work and not sticking to my rigorous routine (usually from unforeseen events like technology issues or personal issues that all of us experience from time to time)
Stress and pressure I place on myself in hitting my daily, weekly, and monthly goals especially when I’m not performing up to my expectations
So, how do I cope with these? Here are a few thoughts… (more…)