Archive | 8:17 pm

25 Disciplinary Rules in Day Trading.(II)

27 Nov

6. Develop a methodology and stick with it. Don’t change methodologies from day to day. It is requaired to write down the specific market prerequisites (set-ups) that must take place in order for them to make a trade. I don’t necessarily care what the methodology is, but I do want to make sure that you have a set of rules, market set ups or price action that must appear in order that you will take the trade. You must have a game plan. If you have a proven methodology but it doesn’ seem to be working in a given trading session, don’t go home that night but try to devise another one. If your methodology works more that one-half of the trading session, then stick with it.

7. Be yourself don’t try to be someone else. In all of my years as a trader I never traded more than a 50 lot on any individual trade. Sure, I would have liked to be able to trade like colleagues in the pit who were regulary trading 100 or 200 lots per trade. However, I didn’t possess the emotional or psychological skill set necessary to trade such big size. That’s ok. I knew that my comfort zone was somewhere between 10 and 20 lots per trade. Emotinally I couldn’t handle that size. The trade would inevitably turn in to a loser because I could not trade with the same talent level that I possessed with a 10 lot. Learn to accept your comfort zone as it relates to trade size. You are who you are.

8. You always want to be able to come back and play the next day. Never put yourself in the precarious position of losing more money that you can afford. The worst feeling in the world is wanting to trade and not being able to do so because the equity in your account is to low and your brokerage firm will not allow you to continue unless you submit more funds. You require to place daily downside limits on your performance. For example, your daily loss limit can never exceed $500. Once you reach the $500 loss limit, you must turn your PC off and call it a day. You can alalways come back tomorrow.

9. Earn the right to trade bigger. Too many new trader think that because they have $25.000 equity in their trading account that they somehow have the right to trade five or ten e-Mini S&P contracts. This cannot be further from the truth. If you can’t trade a one lot successfully, what makes you think that you have the right to trade a 10 lot? Remember: if you are trading poorly with two lots you must lower your trade size down to one lot.

10. Get out of your losers. You are not a “loser” because you have a losing trade on. You are, however, a loser if you do not get out of the losing once you recognize that the trade is no good. It’s amazing to me how accurate your gut is as a market indicator. If, in your gut,  you have the ideea that the trade is no good then it’s probably no good. Time to exit. Every trader has losing trades throughout the session. A typical trade dayfor me consists of 33 percent winners. I exit my losers very quickly. They don’t cost me much. So, although I have either lost or scratched over two-thirds of my trades for the day, I still go home a winner. (others will follow)

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