3. Thou Shalt Not Trade “Kamikazes! (shorting Higher Highs or buying Lower Lows).” These
can look SO good, but because momentum is against you it’s like trying to push a Sumo
wrestler out of the ring.
4. Thou Shalt Not Trade Too Many
Contracts for your Account Size. If you lose more money
than you are comfortable with, then you will trade badly. Everyone, even the best traders,
go through periods of days, weeks, and occasionally even entire months of losses. You
need to keep your losses per trade and per day small enough that you can financially
survive a major losing streak without having to refund your account.
5. Thou Shalt Not Trade for the “Action.” Trading is a business, not an extreme sport! Like
any good businessperson, your primary objective is to increase your bottom line.
6. Thou Shalt Guard Your Capital; it is your lifeblood. Without it you can’t trade.
7. Thou Shalt Never Try to Recover Losses. When you have a losing trade, that money is
gone and the trade is done. Trying to get the money back by bending your rules will only
result in more losses. Remember, your rules are what make you money. They’re what is
proven to give you the high-probability trades.
8. Thou Shalt Not Worry About “Missing the Boat.” Your goal is not to catch every move, in
fact you won’t and no one does. Your ONLY objective is to trade your rules, and take the
money the market will give you each week according to those rules. Even though we talk
about “trading the market, in the strictest sense you cannot trade the market, you can
only trade your rules.
9. Thou Shalt Not Place Your Stops Too Close. If you are doing this it’s an excellent
indication that you are not in the right frame of mind for trading and you should not be
trading right now. You can’t trade scared. Stops should be placed where the pattern you
are trading would be broken, and no closer. You must give the market room to wiggle. It
doesn’t move in a straight line. Allow for the bids/asks of individuals to move the market
around messily within your trading setup.
10. Thou Shalt Not Take Profits Too Soon. It’s nearly impossible to make money based on
win/loss ratios alone.
Scalping is for the true pros, mostly the
floor traders. Your money
will be made by having a respectable
win/loss ratio (in the area of 40%-60%) and having
your winning trades be larger than your losing trades. Be patient with the trends and let
them ring up big money for you.
