- Do not wait for perfect signal, which is likely to come late.
- Best edge over the others is to have a very high level of discipline.
- Observe money management rules.
- Keep good records and review them.
- When a group agrees that a certain trade looks good, it is usually time to go the other way.
- Boiling markets are less rational, creating opportunities for calm pros.
- Quiet markets are more efficient, making it more difficult to take money from others.
- Any fool can enter a trade but it takes knowledge and experience to find good exit points.
- Discussing open trade with others is one of the most subversive behaviors, which is why a disciplined trader does not do it.
- Day trading is more expensive and demands higher degree of concentration but losses are generally smaller.
- Penny stocks are unsuitable for day trading.
- Day trading stocks must be those with high liquidity and volatility.
- Stops must be placed immediately after entering a trade. Most traders must place actual stop orders; only the pros of proven discipline may be mental stops.
- 2% stop loss rule on any trade. Aim for a risk/reward ratio of at least 2 : 6.
- Record your account size at the beginning of the month. Stop trading when your equity dips 6% below that level, stay out for the rest of the month.
- Putting on bigger trades in an attempt to recoup losses is typical amateur behaviour.
- Overtrading means risking too much for your account.
Trading for a Living
- You need to base your trades on a carefully prepared trading plan and not jump in response to price changes.
- You need to know exactly under what conditions you will enter and exit a trade.
- Write down your reasons or rules for entering and exiting a trade and rules for money management.
Link:
Momentum Trading with Discipline
No comments:
Post a Comment