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Develop Your Rules

In order to steer your emotions in a positive direction, you must follow certain general rules. To those who have been in the markets for many years, the time-tested and oft-repeated trading rules are well known. In fact, they are so well known that few of us give them sufficient attention.

If you understand these important rules in the light of your personal psychology, you may be more willing to use them. I have found it very useful to keep a list of these rules where I can refer to them often; they help keep me on the right track.

ж Plan your day trades and keep them available for reference. If you are specific, organized, and act on plans, you will avoid costly efforts often caused by spontaneous decisions. A concise day-trading plan will help you avoid the losses that can arise from acting impulsively. In short, plan your trades and trade your plans.

ж You alone are responsible for your success or failure. You must assume total responsibility for results, good or bad. You alone are the vehicle to profits and losses. By assuming total responsibility and not blaming brokers, friends, or market letters for errors, you accept the seriousness of trading. You will learn that the situation is entirely under your own control. This will make you consistent and truthful to your trading system, which is the single most valuable key to success as a position trader or as a day trader.

Never hope that a day trade will go your way; never fear that a day trade will not go your way. Both attitudes lead to unrealistic expectations, emotionally inspired decisions, and negative attitudes. A day trade, once established, will result in whatever market action prevails.

Once the trade has been made, its fate is sealed and no amount of hope or fear will make things different. Hope and fear are two of the greatest enemies of the day trader, fostering only false perceptions. You must avoid these feelings at all costs. If your system says to exit, then do so. Do not carry your day trade overnight unless your system so dictates. Monitor your performance - feedback is important. One of the most important things a day trader can know about his or her system is whether it is working. The only way to know this is by keeping a thorough record of results. This will also provide the feedback necessary to reward you for good trading. At any time you must know how well or how poorly you are doing.

A positive attitude is your greatest asset. A good day-trading system is perhaps only 20 percent of the total picture. A positive attitude may very well compose the balance of successful trading. You must constantly be aware that the enemies of profitable investing and speculation are never absent. The only way to combat the negative effects of losses, interference from others, and poor trading signals is by the maintenance of a positive attitude, regardless of how bad things may seem. I know that this is more easily said than done.

Cultivate effective and positive relationships. We are known by the company we keep. Moreover, we are influenced by those around us. If we surround ourselves with losers, loafers, pretenders, depressives, or whiners, we will not learn any positive skills. If we associate with those who are highly motivated, who seek to achieve, who have ambitious goals, and who are willing to forge ahead regardless of obstacles, then we will acquire similar goals. Personal relationships, as well as business associations, should be cultivated along these general guidelines.