Easier said than done sometimes, but if you bear the following trading rules in mind, it should help you overcome the new traders trap of running losers too long and cutting winners too soon. Print this out and stick it on your monitor!
I have developed these rules over many years, it pays to stick to them. Remember that history often repeats. Those that forget the past are compelled to repeat it. We will always have cycles – boom and bust, greed and fear.
1 – Run winners – if they go blue fairly quickly HOLD IT! Make sure you are entering at key levels rather than randomly. The highest profits are made in trades that show a profit right from the start. Enter your trades at key levels, even if it means waiting for the market to come to that price (even if you don’t think it will).
2 – Cut losers quickly. Set stop and leave it
3 – Don’t chase the markets – wont always be your day. If in wrong frame of mind – LEAVE IT
4 – If first trade of the day loses – LEAVE IT
5 – Don’t add to losers. Do add to winners.
6 – Stay unemotional and detached. Win or lose, the strategies work over time. If they don’t then you need to change the strategies.
7 – Keep a trading diary. Detail why you entered the trade/what strategy/how long you held it for/the outcome
8 – Markets are never wrong – opinions often are
9 – Only enter a trade after the action of the market confirms your opinion and then enter promptly
10 – No one strategy is right 100% of the time. Backtest and adapt to changing market conditions.
11 – If it was easy, everyone would do it and we would all be trillionaires. Its hard but…… You can do it!