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Please Share Your #1 Trading Rule You Adhere to with Discipline

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Good post MMS. I rate every trade with 3 numbers (1-3); the first for the entry; the second for the initial adjustment of stops and limits; and the third number being for any trade management required after that. So an ideal trade is a 333.

 

Here is my take on the #1 trading rule. I wonder if it is a rule at all. I think the number 1 thing in trading may be something that I haven't truly mastered myself.

 

The most important thing is to love your money losing trades and your drawdowns as much as your winners and winning periods. If you can achieve that then fear can disappear and all the discipline issues become much much easier.

 

So, the golden rule of trading: Love your losers and your winners equally flying-heart-icon.png

.

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Hey Guys, New here. Been trading independently for 5 years. Mostly equities and a little forex. Nice community you guys have going here.

 

I just wanted to toss my two pennies into the cup on this one if you don't mind. I believe psychology is huge in trading and so my answer to this question is about how I deal with that from day to day and I have to say that just viewing things in this way has been a great help to my trading. My number 1 rule is this, when trading never desire a win or a loss, simply desire an outcome.

 

Pretty simple right? Sounds pretty impotent I know. But in my opinion this is so helpful to me because it helps me to circumvent the highs I feel when I have a good play as well as the lows I feel when I have a losing play. Because my desire is to simply have an outcome I am fine with getting stopped out and consider it a very healthy part of my trading.

 

I could talk about it all night, but that is the basic idea.

 

Best,

Gabriel

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Trading +20 years and most of that profitably.

 

#1 rule for me is to "never ignore key market events" (e.g. international economic calendar, global events, breaking news and closing times of other key markets).

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Good post MMS. I rate every trade with 3 numbers (1-3); the first for the entry; the second for the initial adjustment of stops and limits; and the third number being for any trade management required after that. So an ideal trade is a 333.

 

Here is my take on the #1 trading rule. I wonder if it is a rule at all. I think the number 1 thing in trading may be something that I haven't truly mastered myself.

 

The most important thing is to love your money losing trades and your drawdowns as much as your winners and winning periods. If you can achieve that then fear can disappear and all the discipline issues become much much easier.

 

So, the golden rule of trading: Love your losers and your winners equally flying-heart-icon.png

.

 

I must apologize Kiwi, I had not seen your post on this before I wrote mine. It seems our answers both put winning and losing in the same category. Good post.:)

 

Gabriel

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I definitely think you're all onto something here. And, I think most beginner traders would read this and be a bit shocked...."embrace your losers?" No way, it's all about winning.

 

But experienced traders realize that the old mantra from George Soros rings true, it doesn't matter how often you're right or wrong, it matters how much you make when you're right, and how much you lose when you're wrong.

 

I like the idea of welcoming your losers. Embracing them. Trying to stay balance as possible. Don't get too high on winners, and try not to get low on losers. Even keel. It is very, very difficult to do but the best traders find a way to stay neutral on their trades.

 

I personally like to remind myself when I'm derailing on this to remember that each losing trade puts me that much closer to my next series of winners. And, I'll go back over my spreadsheet of trades and remind myself how many times I did hit a losing streak but look what happened after. Always good things. That helps me talk myself back off the cliff....

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Good post MMS. I rate every trade with 3 numbers (1-3); the first for the entry; the second for the initial adjustment of stops and limits; and the third number being for any trade management required after that. So an ideal trade is a 333.

 

Here is my take on the #1 trading rule. I wonder if it is a rule at all. I think the number 1 thing in trading may be something that I haven't truly mastered myself.

 

The most important thing is to love your money losing trades and your drawdowns as much as your winners and winning periods. If you can achieve that then fear can disappear and all the discipline issues become much much easier.

 

So, the golden rule of trading: Love your losers and your winners equally flying-heart-icon.png

.

 

yup... there is a lesson in every trade, especially the losing trades.

you've got to embrace them to learn them.

 

Those Who Do Not Learn From Their Lessons Are Doomed to Repeat Them.

Edited by Tams

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On getting the head around losing trades, a great piece of advice is not to think about them in terms of individual losses but as part of a series of trades.

 

Once you understand and accept that there will be losses, its a matter of reminding yourself with these losses there will be wins, and that is what you are after. Every business has them, from inventory losses, spoilage, drilling mines that dont work until you hit the mother load, reasearch and development. Its all a matter of 'tricking' yourself in how they are perceived.

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Practice letting winners run. By letting smaller winners retrace and stop you out break even, instead of always grabbing anything that's green, you eventually learn to capture those big winners that can pay for several losing days in a single trade.

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A favorite rule of mine that I was reminded of this week after a particularly crappy day is to review your trades, assess if there was anything you could have done different, compartmentalize it, and walk away. Do not take it with you for the rest of your day. Don't take it out by being short with your family or friends. Don't beat yourself up and cry about the market's conspiracy against you. Don't take it personal. Then, come back strong tomorrow, fight hard and make it back. In the end, it's not going to do you any good to beat yourself up and those around you.

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........ and make it back..

 

Sorry to pick a few words out of your post, but I never try to "make it back". That can lead to revenge trading or the mindset that the market took it from me and I want it back. :crap: :) Been there, done that.

 

Better to just treat each trade and each day as a separate event. The market does not care about each of us and will allow us (or not) to win or lose. Well that and whether we trade our plan properly.

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I agree, we discussed further up revenge trading, etc.... my intent was to say there's always "tomorrow" -- there's no need to panic and get down and out about it. I'm totally with you on avoiding the revenge trades and it's a "right" the market must give it back. Wrong attitude.

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This is a great thread to read through. I have a couple of rules that are really important to my success as a trader.

 

1) Trade my system as it was designed to be traded. What I mean by this is to try and avoid discretionary decisions while trading. If my system was designed to put the odds in my favor then I need to trust those odds. The minute I try to outsmart the system I might as well throw those odds out the window. A rule that I have in place for myself is to track my little system tweaks if you want to call them that. If I can't be right 2/3 of the time on any filter our discretionary decisions then I need eliminate those ideas from future sessions.

 

2) This one might be the most important to me. I have to analyze my performance after each session. This goes for both the winning sessions and the losers. Trading gives me great flexibility in that I don't have a boss sitting there telling me what to do. Problem with that can be I don't have a boss there telling me what to do. It is up to me to hold myself accountable.

 

It's easiest for me to do this by documenting my trades in a spreadsheet at the end of each session. I walk through each trade in detail. Did I execute my system correctly? Did I follow my trade plan religiously? These are a few questions that I ask each day. I will also write a few quick notes analyzing my perormance including giving myself a grade for the day. It is important to review this journal often to make sure you can correct any bad habits that begin to form. I try to do this on a weekly and also end of the month basis.

 

If you can't be disciplined in your trading you won't be around for long. You might get lucky for a few weeks or months but it will eventually catch up with you.

 

I could go on and on with this topic but I'll stop here.

 

Cuttshot

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Don't confuse your personal needs with the needs of your trading. "He who learns to walk away, lives to trade another day." I think it is important to have clear stopping rules. For me, I want to take what the market will give me as opposed to trying to impose my personal needs on my trade decisions. Somedays it will be less, others it will be more. I can accept a losing session if my rules tell me it's time to quit.

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Don't trade with a lack of confidence. Or put another way, do what it takes to develop an iron clad confidence in your trade method. If you don't have confidence, you should take that as a sign to step aside until you figure out the problem. Scared money is lost money.

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Well said amcan. The biggest reason traders fail is due to trading without confidence. The problem is you won't have confidence that your system will recover when it hits a rough stretch. I'm currently sitting with winning percentages between 65-74% right now on the markets I trade. I'm thrilled with the results but even winning 75% of the time means I will have losing trades mixed in and even some losing sessions. Losing trades or losing sessions don't bother me at all because I know long term the odds are in my favor.

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Well said amcan. The biggest reason traders fail is due to trading without confidence. The problem is you won't have confidence that your system will recover when it hits a rough stretch. I'm currently sitting with winning percentages between 65-74% right now on the markets I trade. I'm thrilled with the results but even winning 75% of the time means I will have losing trades mixed in and even some losing sessions. Losing trades or losing sessions don't bother me at all because I know long term the odds are in my favor.

 

How did you get the odds in your favor? Insider trading?

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I think 'cuttshot' was trying to point out that the odds are in his favor when he trades since he is above the 50% level - and actually in his case above the 65% level so everytime he puts on a trade he has the odds in his favor that it will succeed.

 

At the same time, the odds tell us that you have to be prepared to lose once, twice, five times in a row, etc... in fact at about a 65% win ratio it is not uncommon to get a 7 trade losing streak so it's important to be prepared for that and just have faith in your system assuming up to that point it has provided a consistent winning percentage.

 

That's how I try to approach it as well -- some days can be quite painful but I try to remind myself about all the recoveries from drawdowns that came before.

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I think 'cuttshot' was trying to point out that the odds are in his favor when he trades since he is above the 50% level - and actually in his case above the 65% level so everytime he puts on a trade he has the odds in his favor that it will succeed.

 

At the same time, the odds tell us that you have to be prepared to lose once, twice, five times in a row, etc... in fact at about a 65% win ratio it is not uncommon to get a 7 trade losing streak so it's important to be prepared for that and just have faith in your system assuming up to that point it has provided a consistent winning percentage.

 

That's how I try to approach it as well -- some days can be quite painful but I try to remind myself about all the recoveries from drawdowns that came before.

 

What do you do when it stops being above 50% or 65% and how much time will you give it to determine if the odds are no longer in your favor?

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I think Cuttshot and MadScientist offer a great clue into what it takes to be successful on a consistent basis as a trader. Mighty Mouse does ask a very important question too. To me, obviously, there are no guarantees that a market or system will continue to trade the way it does and no one knows for sure when the tide will turn or if it has turned. I have certain key stats that I monitor and I use a tool that looks very closely at my trade data. I can see when key stats start to drop off and while it might fall into the 'art part' of trading, I think if you remain vigilent and don't become complacent, the trader instinct will have you always looking for improvement and keep you on your toes. No easy answer though to a very good question. But all we can do is go with a system that wins more than it loses and try to put the odds in our favor on each trade. That's really all we have control over (that and risk management) afterall.

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