I have traded over eight years now with very bad results on the beginning and slowly making my trading better and better after falling many times. I can tell you with confidence that if you try to apply this rules in your own trading and recognize any bad behavioral patterns you might be stepping on, you will massively improve your performance. Take a look at this list and let me know if you find it’s lacking some important rules that have been important in your own trading.
Focus on the system – You don’t win because you had a good trade, but because you have a good SYSTEM. Concentrate in applying your system flawlessly and the rewards will come in the edge you have from your system, not on a single trade.
Use money you can afford to loose – Although nobody begins trading with the idea of losing money, it’s a fact that you will lose a lot of trades before you start winning constantly. That’s why you need to remove all the psychological stress you can from the equation. If you trade the money you will need to pay the rent next month you are gambling with your mental well being, and a good mental state is vital to your performance as a trade.
Trade demo first – In my opinion you can never know the real expectancy of your system after you’ve tried it, and tried yourself using it, for a long period of time, before committing real money to it. That’s why you should always start trading demo for at least six month before committing your hard earned cash to any one strategy. I know it can be frustrating sometimes to wait so long to see a system unfold, but this way you will have much better chances to enter with the amount of confidence needed to trade with the best possible performance.
Don’t take any one trade personal – It’s easy to get carried away after watching patiently that perfect setup form, then entering the trade with the highest expectations, and suddenly watch it go exactly the other way around you expected and get frustrated or even angry. It is In this situation when many traders decide to double or triple their positions, exit prematurely, change their stops and all this practices that make you break your own rules, and eventually break your account, changing what was supposed to be a perfect trade for a complete disaster. Remember that you, or anyone, can NEVER know what the market is going to do. No matter how great the setup is, if it doesn’t go in your favor, calmly take the the loss and move on to the next trade.
Don’t trade if you are emotionally weak – Sometimes we had a bad day, we feel angry, we had a fight with our wife (or husband), we feel sick, we got fired. Whatever reason that is making you angry or depressed might influence in a bad way on your trading. Although it’s impossible to always be living a happy perfect life and we are always having at least some minor trouble in our life, it’s important to recognize those moments were it’s better to just step aside for the day, or the week, from the markets and not take any trades.
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