It’s been a long hard road that I have travelled. Many lessons have been learnt, not by paper trading, but by losing real money. I have read dozens of books, and experimented with several methods. One thing is certain. You never cease to learn while dealing with the markets. Somewhere along the road, the fog lifted, and it became clear what needed to be done to succeed. Here is a brief summary of my philosophy.
1. Don’t try to get rich quick.
2. It is impossible to predict the future, but you can assign probabilities to your assessment of the likely turn of events. When you spot a low-risk trade, be sure to take it. Missing a trade after you have spotted it is bad trading.
3. Don’t be surprised by a loss, but be sure to limit it to your pre-determined stop (unless the market gaps, in which case you have to salvage it as best as you could).
4. Give your trade a chance to develop. I have known the emotion where one can’t wait to put on a trade, and the moment it is on, he/she can’t wait to get the hell out of it!
5. Don’t confuse activity with good trading. It is not necessary to be trading every day.
6. Trade with the trend.
7. Wait for the best opportunity for success to present itself, and when it shows up, be sure to act.
8. Choose a position size that will enable you to survive a series of losses without throwing in the towel too soon.
9. Your past trades have absolutely no bearing on how the current trade will work out. So it is best to completely forget the past.
10. Thank heavens you don’t have to trade to put bread on the table. Else it will be too stressful.