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The Day Traders Rules for Success

J had an aunt in Yucatan

Who bought a python from a man

And kept it for a pet

She died, because she never knew

These simple little rules and few

The snake is living yet. hilaire belloc

Day traders are no different in their unwillingness to follow rules than are most traders. The good news is that if the day trader fails to follow the rules of successful trading, his or her end will come swiftly and decisively. The consequences will be quick and the lesson will be a definitive one. There will be very little waiting or wondering. Why is this good news? I say it's good news because when you break the rules of profitable day trading you'll get your feedback promptly. And this will give you an opportunity to change and to learn, provided you want to. The position trader, on the other hand, may often need to wait many weeks or even months before he or she realizes that a faux pas has been committed. And this will slow the learning process significantly.

It is impossible for me to overemphasize the fact that consistently profitable traders, and in particular, consistently profitable day traders, are great because they have mastered the discipline of trading as well as the necessary and reliable mechanical aspects of day trading. Throughout this book I have emphasized the great importance of self-discipline as a trader. Clearly, the weakest link in the chain of trading is the trader. There can be no consistent success without a mastery of self and self-discipline. There are many opinions as to what constitutes discipline. And there are many different opinions as to how one may undertake the often arduous and self-effacing task of acquiring self-discipline.

Different traders, different writers, and different behavioral analysts will give you distinctly different opinions, all based in part on their observations and experiences. But take care if you heed any advice you are given by someone who has never traded. Unless the individual who is giving you assistance is a professional psychologist, counselor, or behavioral therapist, take all points of view and all directions of assistance with a few grains of salt.

Know that the following suggestions and observations have been tempered and shaped by nearly 30 years of trading, market analysis, research, and observation. My trading has exposed me to every conceivable type of market and every conceivable type of news event. My trading has taken me to the highest of emotional highs and the lowest of emotional lows. I have been on all sides of the trading fence. I have broken practically every rule in the book, and I have even broken rules that were not in the book. My own losses and failures have forced me to develop an arsenal of time-tested methods, attitudes, opinions, and procedures, which I now share with you. The best way for me to convey this information is by listing, not necessarily in order of importance, what I have discovered.