| 1. |
Have a Game Plan: Know how and where you are
going to enter the market. Know the risk you are willing
to take on each and every trade. Know when you are going
to take losses and where you are going to make profits. Have
an idea of where the market meets your objectives and an
exit strategy. |
| 2. |
Use Money Management Techniques: Good money management
means you know your profit objective and the odds of being
right or wrong, and controlling your risk. |
| 3. |
Use Protective Stop/Loss Orders: When you enter the market
have a defined stop/loss order in place to limit your loss
in the event that your market analysis was wrong. Never use
a mental stop and rationalize the market movement once it’s
breached with the mentality that the market will eventually
rebound in your favor, your first loss is always the smallest. |
| 4. |
Don’t Take Small Profits and Let Your Losses
Run: Often the result of no game plan and not using pre-determined
stop/loss orders this can result in missed opportunities
at large profits. |
| 5. |
Don’t’ Overstay your Positions: The common
mistake of failing to take profits at a pre-determined level
because you’re trying to get every last penny out of
the trade. This mistake can be overcome through the use of
trailing stops or automatically taking profits at a price
objective. |
| 6. |
Never Average a Loss: A typical approach in this manner
is that you bought a commodity and it dropped lower, you
figure that since it was a good buy at the low level it is
a better buy at the even lower level. This can be disastrous
if the market continues against you. Have a strict rule against
averaging a loss unless your game plan calls for buying the
market at lower levels with an unmovable stop/loss order
to take you out of all contracts if it does continue to move
against you. |
| 7. |
Never Meet Margin Calls: Margin calls are met because people
don’t want to admit being wrong and take a loss. These
should never have to be made and are the result of not following
these rules. |
| 8. |
Don’t Increase your Commitment with Success: Don’t
increase your exposure as you become successful. This can
be overcome by not allowing your percentage commitment to
increase as you realize profits and still maintaining your
stop/loss discipline. |
| 9. |
Don’t Overtrade your Account: This occurs when you
risk a large percentage of equity on a single trade. Try
and stick with a rule that you don’t risk more than
a certain percentage of your equity on any trade regardless
of the possible upside or of your certainty. |
| 10. |
Remove Profits from your Account: Don’t let the size
of your account drive your trades. Have a pre-set point at
which you remove equity. |
| 11. |
Stick to your Strategy During Market
Hours: Try and develop
your trading strategy before the market opens and once again
stick with your game plan. Don’t let fear, greed, and
emotion drive your decisions during the day. |
| 12. |
Be Patient: Sometimes it is best to sit out of the market
for a week or two and wait for the profitable trade opportunity
to come along. Do not expect to make money on every trade.
Do your homework on the markets and stick with your strategy. |
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