The collection of my trading experience is really this: I've learned that being a profitable trader is all about managing a specific mental state while trading. Most traders never end up making consistent money until they achieve that frame of mind from which to operate from. In sports, it's called the zone and the sad truth is that I know more traders that have blown up their accounts once (if not more) before becoming consistently profitable.
So with this, I have come up with a collection of some of my trading rules from which I constantly refer back to in order to maintain that professional zone.These rules are not meant to make me conservative or hesitant. On the contrary, trading takes guts accompanied by some hard rules that allow us to embrace risk and take the necessary chance required in order to pursue the trading gains. That is, traders feel more compelled to take a chance because they know they are also going to fight to protect their capital base. Those are the ones that won't freeze and lie helpless as their capital is lost.
People constantly ask me what it takes to be a great trader and the answer I always give is quite simply, longevity. You show me a trader with longevity and chances are good you will see a great trader and every great trader has a rule base from which they operate. I encourage you all to read and interpret this list as it best applies to your own personal trading goals and objectives.
1. Trading is simple, but it's not easy. If you want to be a trader leave hope at the door. Focus on specific setups and stick to your stops.
2. Trading should be boring. Thrill seekers and impulse traders ultimately will fail. It's not a question of if, it's a question of when.
3. Be extremely in touch with your emotions. Irrational thoughts are every trader's pitfall. If you are yelling at your computer screen or pleading with your stocks to move a certain direction, you have to ask yourself, is this rational?
4. Watch yourself if you get too excited. Excitement increases risk because it can cloud your judgment.
5. Be patient and wait for prices to come to you. Chasing prices only increases risk.
6. If you come into trading with the idea of making big money, you are doomed. A greedy mentality is responsible for almost every trader blowup.
7. Don't focus on the money. Focus on executing trades well. If you are getting in and out of trades rationally, the money will take care of itself.
8. Never let a day trade turn into an overnight trade. An overnight trade should be planned as an overnight trade before the trade is even entered.
9. Professionals always take losses. Being wrong and taking a massive loss can damage your own belief in yourself and your abilities. If you can't trust yourself to stick to your predetermined stops, who can you trust?
10. Poor traders always think, How much can I make on this trade? while exceptional traders always think, how much money can I lose on this trade? Traders who control and manage their risk take money from the traders who are thinking about the BMW they are going to buy.
Best of luck in your trading endeavors. Make sure you go into battle with a plan in place. A planned trader is a profitable trader.