25 Rules of Trading Discipline – Part 2

trading discipline pt1Welcome back for Part 2 of our rules on trading discipline. So, what do you think of the first 5 rules in Part 1? These are simple rules to follow but it depends on how well we follow them. I should say that once a while, we may forget what we need to do and that causes our trade to lose instead of winning. Frankly, I do have such occasion that happen to me as well because we tend to lose our concentration when fear and greed interfere with our trading decision. Well, we need to cultivate this practice into a habit by following these rules as much as possible to maximise profit for our investment. Ok, let’s continue with the next 5 rules.

trading-planRule #6
Develop a methodology and stick with it. Don’t change methodologies from day to day.

What it means here is you must have a proven trading plan (or methodology) that works, and help you in making profit most of the time. Then this is the one proven methodology that you want to stick with.

In the beginning, you may have several methodologies but do not know which one to use. Thus, you might have to test them one by one. In the end, you have to select one that works for more than one-half of the trading sessions. That is, more winning trades than losing ones.

be yourselfRule #7
Be yourself. Don’t try to be someone else.

In the past 2 years as a part-time trader I never traded more than a 5 mini-lots on any single trade. Sure, I would like to trade more than 5 mini-lots per trade just like a pro. But, I was not able to pass the emotional or psychological barrier when dealing with such a bigger lot size.

I think that it is alright because I knew my comfort zone was somewhere between 1 to 5 mini-lots per trade. If I will to trade more than 5 mini-lots, I would kill the trade because I could not trade with the same skill level that I have with 2 to 3 mini-lots. It means that I could not handle that size emotionally. So, be yourself and learn to accept your comfort zone on which trade size you are comfortable with.

I will be backRule #8
You always want to be able to come back and play the next day.

As we know, there is no guarantee that we will always make money every day so we have to be cautious not to lose more money than we can afford. Do you have this experience that when you want to trade and not being able to do so because the fund in your account has run low and the system will not allow you to continue unless you top-up with more funds.

I had this experience before. So, I decided to place a daily downside limits on my performance. I will limit my daily loss not to exceed $100. Once this limit is violated, I can logout of my trading system and call it a day. Because I can always come back the next day.

winning-tradeRule #9
Earn the right to trade bigger.

I like this rule as it is really a good rule for new trader. Many new traders think that since they have $5,000 equity in their trading account, they have the right to trade 10 or 20 mini-lots. Is it so?  Ask yourself, have you trade 1 mini-lot successfully, if not what makes you think that you have the right to trade 10 mini-lots?

When I was a new trader, I did the same and in the end, I blasted my account. The advise to all new traders is that you should start small and see consistent result before moving one level up. You should show yourself a trading profit for 10 consecutive trading days by trading 1 mini-lot only. Then, you have earned the right to trade 2 mini-lots for the next 10 trading sessions.

Remember if you are trading poorly with 2 mini-lots you must lower your trade size down to 1 mini-lot.

get out of loserRule #10
Get out of your losers.

You are not a “loser” if you have a losing trade. But, you are loser if you do not get out of the losing trade if you have a gut feeling that the trade is no good. Sometimes, you will be surprise on how accurate your gut feeling is as a market indicator. So, believe in your gut feeling, if you think that the trade is no good then it is probably no good. Time to exit.

Every trader tend to have losing trades throughout the session. A typical trading day for a normal trader consists of 33% losing trades, 33% break evens and 33% winners. If you exit your losers very quickly, you will lose less. So, if you have either lost or break even over two-thirds of your trades for the day, you still go home as a winner.

Time to take a break and I’ll come back for the next 5 rules. Stay tune for Part 3!

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


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