Developing rules and sticking to them

Throughout this book, I stress the importance of setting rules for yourself and sticking to those rules. I just can't stress enough what a good practice that is for any trader. Making and losing money on the market is a very emotional experience, and one of the main reasons some traders lose big when they should lose just a little (or even win) is that they let their emotions take control of their trading. You can help take emotions out of the equation if you develop trading rules and adhere to them no matter what happens.

Create a set of trading rules for yourself, and stick to those rules. Include rules such as the following:

1 When to get into trades

1 Where to place stops in various trading situations 1 What amount of money to risk on trades and investments 1 When to get out of trades, either with a loss or profit

Write down your rules and keep them handy for a quick review when you're in the midst of a trade, and you're having second thoughts about what action to take.

I've been trading for a long time, and I can say without reservation that creating and adhering to a set of trading rules is the best way to reward yourself both personally and financially for the effort you put into the markets. I always follow the rules that I've set for myself, and although it may sound crazy, at this point I'm more proud of my rules than I am of my profits. All traders have to come up with their own sets of rules that talk to their trading style and comfort with risk, and you should keep that in mind and jot down potential rules as you explore the contents of this book.

Chapter 2

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