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Shut Out the Input of Others - Play Your Game by Your Own Rules

Should you allow yourself to be exposed to, pandered to, and intimately influenced by the many fantastic claims for perfect trading systems and "Holy Grail" seminars, then you will be diverted on your road to success. There is nothing wrong with attempting to improve on what you are doing, but the act of endless searching will distract you from your goal. Don't get sidetracked on your journey. If you are confident with your trading methods and rules, then use them and profit by them. Persevere and ignore the claims and opinions of others as much as you can.

Those who purport to have better systems, better methods, foolproof indicators, outstanding results, and fail-safe risk management will constantly barrage traders with their claims. Before you give any of these serious attention, make sure that what you're doing is not better. Every system you test, every seminar you attend, every piece of software you buy, and every path you take may prove to be a costly excursion away from your final destination. Each takes time, effort, and money. And these are the most precious commodities in the world. They are limited resources not easily replaced.

Therefore, I suggest you find a methodology and commit to it for a predetermined length of time. And during this period of time do not allow yourself to become distracted by anything else, even if it means that you need to close your eyes and ears to the magazines, newspapers, and mail you receive.

Take Your Losses When Your Signals So Dictate - Don't Make Excuses!

Riding losses is the worst thing a trader can do. Not taking a loss when you should take the loss is the worst thing you could do. I have stated repeatedly throughout this book that the single worst offense a day trader can commit is to carry a position beyond the end of the trading day, particularly if it is a losing trade. At times a profitable trade carried overnight may become even more profitable on the next opening. This issue has already been discussed objectively as the FPO exit (first profitable opening) and the nth profitable exit. But a losing trade usually gets worse if not closed out. If you fail to exit a trade at the end of the day, then you are violating the essence of day trading and you therefore risk exposure to everything that a day trader seeks to avoid. Do not, under any circumstances violate this cardinal rule regardless of what the excuse or excuses may be.

But what if you are locked into a position due to a limit move against you? In such an event you have no choice but to carry your position. You could spread a position off (take an opposite position in a different contract month if possible) in order to avoid the exposure; however, there is still danger, even in a spread. Remember that you are either a day trader or you are not a day trader. There is nothing wrong if you choose not to be a day trader. But note that you must not change horses in midstream, since this will, in the long run, cause you losses. In the short run, you may be very pleased with the results. But in time, your lack of discipline will haunt you.

In the event of a limit move in your favor, you may be tempted to hold your position overnight, expecting that there will be more profits in the morning. Even this is a dangerous procedure because a limit move in either direction on any given day does not necessarily guarantee follow-through in the same direction on the next day. You will note from some of my research in the preceding chapters that holding a day trade until the nth profitable opening may in certain very specific circumstances prove more profitable on than exiting on the close of the day. But note that these are very specific conditions that are related to the day-trading systems and indicators being used.

My research has shown that over the next several days there may be follow-through; however, what happens between now and then may wipe you out. I have already given you certain very specific conditions under which a day trade may be kept overnight, but beyond these suggestions, I emphasize once again that a day trade must be closed out by the end of the day unless there is statistical evidence to support carrying the trade overnight or to the nih profitable opening.