I then joined this forum in 2006. I have been trading FX and futures this entire time. I have since earned a bachelors in finance, but other than that, I still just trade for myself.
This stuff has probably been done to death on this forum, and will bore most of you, but here are the most important things I learnt from experience alone (NOTE: most of this stuff relates to normal day-trading strategies, not wacky, experimental methods):
1) Trading is boring in the long run.
2) Never risk more than a couple of % of your account per trade (duh, but i thought i'd say it anyway just in case if there are 2 or 3 people somewhere in the world who still don’t do this)
3) The outcome of individual trades is completely irrelevant. Only in their collective form do they matter.. Win or loss, it is completely irrelevant. Your last win means nothing. Your last loss means nothing. Your last 2 wins mean nothing. Your last 2 losses mean nothing. Only in their collective form do they matter. If you understand this, you will feel zero emotion. If you can’t wrap your head around this when you’re actually trading, then stop trading.
4) Once your order has been filled, there is no turning back (i.e changing the trade plan or your strategy in general). If you have realized you have made a mistake mid way through a trade - too bad. If you changed your plan mid-way through and you were lucky enough to still win the trade, then you should still mark it in your journal as a loss. The only excuse to close a trade outside your predetermined trade plan is when you realize you have made a technical error, e.g - you pressed "buy" instead of "sell" or you made a typo in your limit price. The following is NOT a valid excuse: "I think I should have entered 3 pips lower, so i will change how i manage this trade, just this time". Remember that hindsight is 20/20.
5) Unless you have just changed your strategy, then the merits of your next potential trade is always assessed independently from the outcome of your last trade and other trades before that. Always.
6) Finally and probably most importantly... There is only ONE time that you can re-evaluate your strategy / trading plan:
- When it becomes clear that you are consistently losing.
Therefore, this means that you DONT re-evaluate your strategy:
- Right before a trade
- Right after a trade
- Because you lost your last trade
- Because you won your last trade
- In the middle of a trade
- Near the end of a trade
- When you’re starting to get bored of your strategy
- When you're sitting on the toilet
If you change even a small aspect of your strategy, it is a big deal. Don’t do this lightly.
Hope this post is useful to someone.