Trade With A DISCIPLINED Plan
Be sure that you have a plan in place BEFORE you start to trade. The plan must include stop and limit levels for the trade, as your analysis should encompass the expected downside as well as the expected upside.
Cut Your Losses Early and Let Your Profits Run
This simple concept is one of the most difficult to implement and is the cause of most traders demise. Most traders violate their predetermined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position.
Do Not Marry Your Trades
Once a trader is in a position he/she tends to analyze the market differently in the �hopes� that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true of losses.
Do Not Bet the Farm - Do not over trade.
I generally agree with you, except for #2. Sometimes you have to let your losses run, knowing that in the longer-term, the trade will swing your way. You have to take a look at the bigger trends involved to see if, just maybe, your “bad trades” will come around.
Yea #2 is debatable. If you use a mechanical system than I agree that your losses should always be less than your winners. However with longer term trades, as long as you are properly capitalized you should be able to weather huge swings against you without any stop loss. Remember, I said you must be properly capitilized. There’s a good lesson on it in the school. It’s the last college lesson I think. Talks about leverage and margin. Definitely read that!
I’m a full time student at UTM, so I’m forced to spend an ample amount of time in the library. Fortunately or unfortunately I spend a great deal of that time on daily basis studying and reading about forex. So I trade with caution as much as possible on every single trade. And yet I’ve experienced that most of my losses are because I held on far too long on a loosing trend. Always fooling myself into thinking what the market will do next. I know its emotionally disturbing when you’re negative is getting larger and larger, and it gets that much harder to exit. But money saved is money gained! My recent bad experiences were on EUR/JAP and EUR/USD! Be objective and let the market tell you what to do, and don’t get mad at it by trying to get revenge. I think having the right psychology is as important as knowledge. In any case I hope that I didn’t intrude on anyone’s discretion, I just thought I should mention. Thanx.