The success that a trader achieves in the markets is directly correlated to one’s trading discipline or lack thereof. Trading discipline is 90 percent of the game. The formula is very simple: Trade with discipline and you will succeed; trade without discipline and you will fail.
Form a Profit Thesis Then Test If Your Profit Thesis Has Been Violated
Most traders have no idea what a profit thesis is, let alone how to form one.
Form a profit thesis before a trade. When you are wrong, get out immediately. When you are right, don’t get too greedy. Be content with small winners and accepting of small losers.
When You Are On A Losing Streak, Lower Your Trade Size
Most traders always invest the max regardless of how they are trading. Always lower your trade size when you are trading poorly. All good traders follow this rule. Why continue to lose on a $1,000 per trade investment when you could save yourself a lot of money by lowering your trade size down to $500 on your next trade? If I have two losing trades in a row, I always lower my trade size down. If my next two trades are profitable, then I move my trade size back up to my original size.
Think of it like a baseball batter who has struck out on his last two times at bat. The next time up he will choke up on the bat, shorten his swing and try to make contact. Trading is the same.
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