By Derek Gilroy
With the beginning of a new year upon us, we thought it would be useful for us to go over a few rules for trading in the new year. Although every trader needs to be able to read a chart and act fast, keeping discipline and holding your emotions in check is in tantamount (es: equivalent) to successful trading.
END OF YEAR REVIEW
Every successful trader keeps a log of their trades throughout the year so that they can go back and review to see what they did well and what they did poorly. There are five outcomes of every trade: big loser, small loser, scratch, small winner and big winner. By reviewing your trades, you can see what went wrong on your big losers and eliminate them in 2009.
IMPLEMENT TRADING RULES
If you don't have rules for trading already in place, you need to implement them now. This can include, but is not limited too, strict risk to reward rules; daily limit losses; not trade before reports; maintain discipline and keep emotions in check to name a few.
By enforcing strict risk to reward rules for yourself, you are essentially taking emotions out of the trade. If you have your stop and exit already in place, any market moves or news that comes out on your market should not affect your trade.
When I began my trading, one of the more important rules that I followed was to have a daily limit for losses. There will be days where no matter what the trader does, they will be wrong. It happens to everybody. The key here is not to let those days completely wipe out your account. If you have a certain amount you are willing to lose and don't go over that, you will always leave yourself enough capital to live and fight another day.
Anybody who has spent time watching markets knows that reports (Fed meeting, EIA inventory report, NAPM, etc...) can have an immediate and dramatic affect on markets. It is always better to establish a position after the report and leave some money on the table and then to get run over and have no way to get out.
One of the most important rules in trading is to maintain discipline, which is easier said than done. Sometimes this will mean doing something that you don't want to do or which feels abnormal. The main reason for this rule is a loss of discipline will translate into a loss of money.
Although there are many different ways to trade as there are traders, one thing they all have in common is that you have to keep your emotions in check. If you are trading off fear or greed, you are not trading with your head. This will only lead to losses.
There are numerous other valid trading rules out there and we would encourage you to explore them all. We have just listed a few that we will feel are the most important. If there is anything we here at Trendphonics can do for you, please let me know.
Semoga bermanfaat.
ES
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