The stock market is like the wild west. You dont control it. The only thing that you can exercise is self control through your trading rules and self discipline. We have talked a bit about self discipline, but not about the the trading rules.
Trading rules are the collection of the trading method and the rules that you apply on your trades using that method.
No matter what type of trading you’re doing (swing trading, day trading, long-term trading), you’ll need to come up with your own set of rules to keep your trading structured. The problem is most people don’t want to make up their own rules, because if they did they would have to take responsibility for their results. And, as we all know, most people don’t want to take responsibility for their action. But, as we all know, the only way to be successful in trading is to take 100% responsibility and act in our own best interest.How should your rules look like?
Here are some samples :
- Every trade is a pair. A trade order and a stop loss order (manage the risk)
- Stop trading after 3 losing trades and step back to analyse (never dig your own grave)
- I will exit each trade whenever it makes 30 points profit- I will use the valid signal that my trading algorithm gives (or the method that I decide to use)
- never what a analyst on a broadcast show says.
- Avoid or reduce the trades in lean periods like holiday weeks.(volatility will be high).
- Enjoy trading and take responsibility for each of the wins and losses in all your trades.
One thing that is common in trading is the temptation to not follow your rules just this one time. This comes from the very real possibility of the exciting results that are possible. This is the trap that many new traders (and some experienced ones too) fall into. This trap is easy tofall into because many people have a terrible fear of missing out on a big move.
Follow the rules that you have decided to follow or of the trading environment that you have subscribed to. Thats a make or break approach to success in trading.Once you've defined your rules, you must execute them flawlessly. Which means following them to a "T". You may set up your compliance score card and rate yourself on each trade, whether you followed all the rules in each trade? Measurement of your compliance will give you immediate feedback on how flawlessly you are executing your rules.
Its important to separate the outcomes of the trades from the fact whether your execution was flawless or not. Many a time we mix the two up. Its important to keep the review process after trading hours and not mix that up with the outcomes during trading. Outcomes are the result of market movement and we dont control that.
So there is no point beating yourself up with the results of unsuccessful trades. Fix that in reviews of your trading method after market hours and treat that as a different corrective step.Well defined trading method rules and flawless execution are part of your daily operational success. The review of the outcomes is a post trading exercise meant to fix issues in your trading method. Keep the two separate always!
sources : Email
Trading rules are the collection of the trading method and the rules that you apply on your trades using that method.
No matter what type of trading you’re doing (swing trading, day trading, long-term trading), you’ll need to come up with your own set of rules to keep your trading structured. The problem is most people don’t want to make up their own rules, because if they did they would have to take responsibility for their results. And, as we all know, most people don’t want to take responsibility for their action. But, as we all know, the only way to be successful in trading is to take 100% responsibility and act in our own best interest.How should your rules look like?
Here are some samples :
- Every trade is a pair. A trade order and a stop loss order (manage the risk)
- Stop trading after 3 losing trades and step back to analyse (never dig your own grave)
- I will exit each trade whenever it makes 30 points profit- I will use the valid signal that my trading algorithm gives (or the method that I decide to use)
- never what a analyst on a broadcast show says.
- Avoid or reduce the trades in lean periods like holiday weeks.(volatility will be high).
- Enjoy trading and take responsibility for each of the wins and losses in all your trades.
One thing that is common in trading is the temptation to not follow your rules just this one time. This comes from the very real possibility of the exciting results that are possible. This is the trap that many new traders (and some experienced ones too) fall into. This trap is easy tofall into because many people have a terrible fear of missing out on a big move.
Follow the rules that you have decided to follow or of the trading environment that you have subscribed to. Thats a make or break approach to success in trading.Once you've defined your rules, you must execute them flawlessly. Which means following them to a "T". You may set up your compliance score card and rate yourself on each trade, whether you followed all the rules in each trade? Measurement of your compliance will give you immediate feedback on how flawlessly you are executing your rules.
Its important to separate the outcomes of the trades from the fact whether your execution was flawless or not. Many a time we mix the two up. Its important to keep the review process after trading hours and not mix that up with the outcomes during trading. Outcomes are the result of market movement and we dont control that.
So there is no point beating yourself up with the results of unsuccessful trades. Fix that in reviews of your trading method after market hours and treat that as a different corrective step.Well defined trading method rules and flawless execution are part of your daily operational success. The review of the outcomes is a post trading exercise meant to fix issues in your trading method. Keep the two separate always!
sources : Email
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