i'll put them down in point form...simple english... no unnecessary pulling of wool over eyes...
a) know what you are trading....know as much as you can lay your hands on....eg. you choose Citibank as a stock you wana buy or sell... know C's business, know how it's making money and how it lost billions recently...know that indian chief...know C's price from the day it started trading...know when C will be announcing dividends....know the historical dividend payouts...know the employee size worldwide...know what are the common products/services C is offering to consumer clientele....better still, know how they syndicate major loans to corporates...know C like you know your girlfriend...you are afterall spending money on this trade...know C as if you wana get into C's pants...
if you trade futures, know the rules of the game...start time, end time, what econ data move the futures, know the daily volumes, know the price volatility, know when it expires, know what happens if you left the position into expiration, etc...
if today, your friend propositions you to invest $10K in his business, i bet you will sit him down for days asking him all sorts of questions about this investment...right down to knowing if his mother is also invested in this venture.. so, why would you do any different when putting down $10K on a trade position?
you want to know everything you can know about your choice of trading vehicle...
b) have an entry and exit plan....well before you commit a position, NOT after.... by doing so, you would not have to react to news/unexpected events that move prices...
c) know how much you are willing to lose... if you set a predetermined amount of losses you are willing to accept, you will be better prepared to handle such losses when they occur and they will.. this is as assured as death itself...no one ever not loses on some trades...
d) know how much profit you want out of the position.... very often, traders will stare a substantial paper profit deplete as price reverses...stoned cold...and finally cut off at breakeven or even at a loss.... why does this happen? 2 words...planning and greed.... rather, the lack of planning to exit when profit reaches a target....and greediness clouds the mind of the trader thinking that price will shoot for the moon in a day....
let's face it...no one will ever know where prices will go to... maximum profits will be known only in hindsight...
so, it's ok to exit a position when a target profit is reached...even if after that, price continues to choo choo on.... the job and objective is reached...be contented and move on to the next trade...
e) know your trade timeline.... scalp? swing? position? coffin trade? each different approach has its different tactical approaches and considerations...know them all very well....don't make the mistake of using a fork to drink a bowl of soup...
f) 3 strike rules.... just as in baseball, a batter is allowed only 3 strikes before he gets thrown off the plate... similarly, if you find yourself stuck in a rut and losing streak...step away...dont force the issue... you are not at your best psychologically to make a good next trade....take a break...a day or a few days...go bowling...go watch a movie...take a short trip....read a book....do anything that is not remotely connected to trading...let your brain reboot and your emotions heal....
some people start the day with a preset loss amount...if that happens, all trading stops...some set weekly loss amounts...and if that is reached...next week is a self imposed holiday...
the markets is a almost a 24/7/250 affair....it'll wait for your return....as long as you still have the ballistics to throw at it...
g) keep the objective in mind... different people trade for various reasons...for most people, the only objective is to make money...and if this is the reason, start the trading day reminding yourself of this ....before you finger trigger happily hit the "order' button... have good reasons to make that trade...use fundamental or technical reasons, it dont matter...but jolly well have good reasons for making that trade...
at the end of the day, be grateful and happy if you make some money.... you've attained your objective....but if you made a loss, was it within the parameters? if so, be grateful, you had been disciplined to fight another fight another day....
h) don't be obtuse..be flexible... often, we take it personally when market proves our initial trade opinion wrong...we may even feel inadequate if we get a string of losses...we may begin questioning our abilities and skills...while it is good to be mindful we need to improve, it is not necessary to harbour any anguish within ourselves... it is debilitating and self destructive...adds no ounce of good to our endeavour to profit from the market.. we must be mindful of our ego and emotions when trading...leave them aside...we must try to be as emotionless as we possibly can...granted that it's a difficult task... we must train ourselves to see that at times, we are utterly wrong and accept the fact... you are your worst enemy...conquer this and you conquer your worst nemesis in this market...
there's no such thing as paiseh..no face...supposing i said the market will tank..but for the last 3 months, it went rocket up.... i want to face up to the mistaken opinion...and move on... so what if everyone else laughs at me? as long as i bring the bacon home...i've done my job as a trader...
finally, know that this is a business that requires a lot of effort and continuous learning....and to be successful at it eventually, you must have very good reasons to believe this is worth your time, money and perseverance....you must enjoy this process...
HUat HUat everyone
your thoughts? additional comments? i want to learn from you....thanks in advance...
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