We all cheat a bit somewhere if only to ourselves.
Trading works best with rules. These rules can come from a mentor as you are learning your trading style and how to use technical indicators, charts and a brokerage platform. Rules can come from a quality educational program like WBHQ Trading U. Trading with rules is how most of the successful investors and traders stay successful. You do want success, yes?
Write the rules down and learn to follow the rules. If you leave the rules to your memory, no matter how sharp your memory is, you will find a way to bend, rewrite, adjust on the fly. This is simply a part of the creative brain, the ego that says “I’m right”. Become a rule follower. Test the rules through practice before ever funding a trade
When you become comfortable with rules that have already been tested and your confidence starts replacing your fears, then take a look at the rules and make adjustments for your specific risk tolerance if needed.
So, what rules are we talking about?
1. Rules or guidelines for your overall Trading Business plan. Rob Roy refers this as the legs of his Trading Stool.
2. Rules or guidelines for your trading schedule. We all have other things on our life schedules. Be clear when you are going to trade and stick with it.
3. Rules or guidelines on your “Why” for trading. Most traders are looking for cash flow, but there are other reasons to use trading as a business.
4. Rules or guidelines for each trade setup, i.e. Moving Average Cross
5. Rules or guidelines for each technical indicator settings you are using. What moving average settings are you using?
6. Rules or guidelines for managing your trade. What do you do when the trade moves against you?
7. Rules or guidelines for your trade exit. Do you exit the whole trade at once or scale out?
8. Rules or guidelines for documenting your trades and learning from the notes. Do you keep your trade records handy so you can review them and learn what works and what doesn’t?
There are many schools of thought around the human mind. Taking the Id, Ego and Super-Ego version about human thought process, the ID is the base instinct level; “Fight or Flight”. The Ego is where you mediate or rationalize between the base instinct and the Super-Ego. The Super-Ego is where your idealized self image is formed and where the rules are. (I have taken liberty at the short definition of these stages and do not mean to shortchange the full education on thought process)
If you do not write down the rules and follow them, you will be able to justify any action you take in trading and wonder why trades are not working as well as you visualized. You will cheat the rules if you only keep them in your head. We humans can rationalize just about anything.
Learn for a mentor who understands rules and can provide these for you in the trading education offered. WealthBuildersHQ.com is one such place to learn. No more cheating yourself!