So when it comes to trading i always tell people a plan is important-
But what is a Trading
Plan?
1. Establish a plan and define specific risk and profit objectives before
trading. Maintain the necessary discipline to
follow that plan through both good and bad times. Successful traders will
agree
that discipline contributed more to
their success than their trading philosophy itself. Remember that the key to
any
plan is how well it holds over time.
2. There is no "sure thing", and there is no trading system that is 100%
accurate. Your goal, as a trader, is to use
the tools available and try to develop an edge. Base your trades on sound
fundamental and technical reasoning,
rather than on hunches and long shots. If you can develop an edge,
however
small, over time you will be successful.
3. A trader must be able to admit they have made a mistake. Do not become
emotionally or financially committed to a
losing trade. Avoid the pitfall of becoming emotionally involved with any
trade.
4. An investing edge is only part of the equation. A trader should
diversify
sufficiently so that the growth in equity
can be consistent and the likelihood of a catastrophic loss can be
diminished.
The lower the percentage of a trader’s
account dedicated to any one trade the greater the chance of the trader
being
successful. Even if the trader has a
perceived investing edge, it is unwise to run the risk of ruin, and bet it
all
on one trade. The goal is not only
to make money, but also to be able to continue to make money consistently for
an
extended period of time.
A trader must learn the basic concepts and the importance of money
management.
5. Lack of experience in the market causes many traders to make the mistake
of
taking small profits and letting losses run.
Fundamental trading wisdom dictates the exact opposite. When in a winning
trade,
be patient and fully capitalize on the
success. The trading axiom is, "cut your losses short and let your profits
run".
6. A trading system does not have to be difficult, time consuming,
complicated
and stressful in order to be profitable.
In trading systems, as in many other things in life, simple can be better
(www.stressfreetrading.com).
7. As a trader, be cautious, and never let greed take control of a
winning
position.
8. Be aware that declining volume usually indicates the market is not
accepting
higher or lower prices, and this could
indicate a market turn.
9. Learn from your trading mistakes. Never make a trading mistake without
asking
yourself why.
10. Do not make trading decision based solely on margin requirements, and
always
trade within your capabilities.
Remain true to your trading plan and follow the trading style that works
best
for you.
11. Do not trade markets that you don’t understand. Trade with confidence
and
conviction. Trade only with risk capital,
and be aware of the risk of losing. Divide your capital into 6 equal parts
and
never risk more than one-tenth of your
capital on any one trade.
12. After a long period of success or a period of profitable trades, try
to
avoid the natural tendency toward increasing
your trading activity. Conversely, use self-discipline when a trade goes
against
your position. Take your loss and wait
for another opportunity. Never increase your trading after a loss.
13. Avoid getting into the market because you are anxious from waiting
and/or
out of the market because you have lost your
patience. Never over trade and adhere to your risk management rules
14. Do not make a trading decision to buy just because the price of the stock
is
low or sell just because the price is high.
Never change your position in the market without a good reason that is based
on
a fundamental or technical rule indicating
a change in trend.
15. Trade the most active stocks and refrain from trading the slow moving
markets. Trade "at the market" whenever possible
and try to avoid a fixed buying and selling price.
16. When the market is moving with your position and you are using a stop
loss
order, then raise your stop loss so as to
lock in your profit. Protect yourself against the possibility of turning
a
profit into a loss.
17. The "trend is your friend," and never buy and sell if you are insecure
of
the trend according to your fundamentals and
technical rules. If you are in doubt, then exit the market. Only trade when
you
feel confident with your trading strategies.
18. Trade in five or six different stocks at a time, so as to avoid tying up
all
of your capital in any single stock.
19. A trader should establish a "surplus account" after a series of
successful
or winning trades. The goal is to retain
the "surplus account" for times of emergency or panic
20. It is difficult to try and guess where the top and bottom of the market
is,
instead let the market prove its top
and bottom.
Mark Crisp
http://www.stressfreetrading
.com
