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Trading Dilemma: “Creating and Sticking to your Fundamental Trading Rules”

 

by Robin Dayne 

When traders go off, and into an emotionally bad trading pattern, most likely they are breaking their trading rules. They become stubborn instead of keeping focused. Traders break their rules when their focus changes and emotions take over. They forget why they’re trading. Re-focusing on why you trade can create enough leverage to break a bad pattern and get back on track. Solution: Create trading rules, and enough leverage to change your focus Whether a novice or advanced trader, developing a personal set of trading rules that work for your style of trading, is essential. The primary goal of rules is to minimize loses and maximize profits. The second goal is the discipline to stick to your rules and learn from them. Rules can also be referred to as trading “distinctions.” Use them as a foundation for your trading and to get you back on track. Keep a journal of all your rules, and read them before each trading day. Work to make them second nature. (Like driving a car. You don’t think about it, you just do it)

  1. Evaluate your trades at the end of the day and add to your rules.
  2. Capturing rules for why you win a trade is as important as the why you lose at one.
  3. Sticking to your rules creates the discipline to protect your money
  4. Answer: What is the consequence if I don’t stick to my rules? (make it painful) And what is the benefit if I do? (make it pleasurable)
  5. Use the answer to “Why are you trading” to re-focus you back to adhering to your rules. Ask and write down, why am I trading? (If your answer is money try again. That’s a “vehicle” to get you the things you really want. “What will the money give you?” THAT will determine the real leverage you can use.

Example: I coached a trader who kept breaking his rules and losing. So I asked him, “Why are you trading?” He said, “The money” I asked, “What is the money really for?” he said to give my daughter the best possible life” So, his daughter was his leverage and what was most important to him. So, he put a picture of his daughter on the trading screen with a question next to it that said. “Is this trade going to get what I need for my daughter?” He read this before each trade or if he wasn’t following his rules. It created enough leverage for him to control his emotions and stick to his rules. It changed his focus. He trades, to this day, the same way and is very successful. What is your leverage? Use it when you need it.

Robin Dayne,
http://www.robindayne.com/

Topics: Forex, Futures, Minis, Options, Psychological | No Comments »

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