25 Rules of Trading Discipline – Part 4

trading discipline pt1Welcome back to part 4 of the 25 rules of trading discipline. We are going to talk about the next 5 rules that will teach you how to have a successful and profitable trading days.

Rule #16
If you trade is not going anywhere in a given timeframe, it’s time to exit.

Stock market graphThis rule is all about the concept of cash flow. It is usually the buying and selling which forces a market somehow. When there is an oversupply  of buy orders, it will push the market up. Same for an oversupply of sell orders that will push the market lower.

Whenever price stagnation exists (as usually occurs repeatedly during the entire trading session), the market as well as its players tend to be indicating to us that, presently, they are generally pleased or contented with the existing bid and offer.

You do not like to be in this current market during these times because it is just not moving at all. It is just a waste of time, money as well as mental effort. It is more advantageous to wait patiently for the big move before placing your trade.

Rule #17
Never take a big loss. Only a big loss can hurt you.

Lose Dice Representing Defeat And LossPlease review these previous rules:
#5 Your biggest loser cannot exceed your biggest winner,
#8 You always want to be able to come back and play the next day,
#10 Get out of your losers,
#11 The first loss is the best loss and
#15  Love to lose money.
If you follow the above rules, you will never violate this rule.

You have worked so hard to achieve those small winnings and you do not want the big losses to wipe them out. This will hurt your confidence level in term of psychological and emotional standpoint and it takes time to regain your confident back after these losses.

Rule #18
Make a little bit everyday. Dig your ditches. Don’t fill them in.

increased profitWhen I started off as a day trader, I said to myself that my goal is to make 50 pips per day. Each pip is $1.00, so I will make $50 on the day. It may not sound like a lot of money, but it is a lot to me. Because if really I could make 50 pips every trading day then I will have $12,000 in my trading account by the end of the year. Not bad for a beginner like me at that time.

You will be surprised how fast your trading fund could increase as time passes simply by generating a bit each day. If you’re able to accomplish that you will have $12,000 to spend by the end of the year.

Rule #19
Hit singles not home runs.

winning-tradeHome run means big winner. Everyone want a big winner but will it happen every time you goes into a trade and expecting it to be a home run. Not really but sometimes it could happen and I could only say that I am lucky more than skill instead. So, the advise is never approach a trade with the mind set that it’s going to be a huge winner.

The intent on the trade is to hit singles, that is getting small winners. Sometimes, if you are lucky, your trade may turn out to be a huge winner. Thanks to the unexpected news or result in the market.

Rule #20
Consistency builds confidence and control

rule20 confident manHow wonderful would it be to actually switch on your computer every day knowing that when you follow the Rules, trade with discipline and follow your  strategy, the possibilities of a profitable day is high.

I have had years where I could count on one hand the number of losing days that I had. Don’t you think that this consistency allowed me to be extremely confident? I knew that I was going to make money on any given day. Why would I think otherwise? Making a little bit everyday (Rules #18 and #19) will allow you to trade throughout the trading session with confidence and control.

Remember Rule #9: If you make a little bit every day, then you have earned the right to trade bigger. Thus, by following the Rules of Discipline, your “little bit” can soon turn into much more profitable days.

That’s all for this session. Come back again for the final part of this 5-part series of trading discipline. Stay tune.

If you have any questions about any of the material within the article, leave a comment below.

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