1 ) I shall trade with the Trend and never goes against the Trend, unless the Trend shows signs of weakness

2 ) I shall Long at support, Short at resistance and avoid trading breakouts as far as possible.

3 ) I shall NEVER attempt to predict the market because Market should tell me what to do next.

4 ) I shall establish Entry, Stop & Target levels everytime I make a new position

5 ) I shall make sure that Risk taken Must always be lesser than Reward potential

6 ) I shall be willing to Accept the amount of risk to take for new positions

7 ) I shall be willing to Cut loss if there is a need to be.

8 ) I shall be willing to Ride my profits as long as the trend is intact despite knowing that there is short term price adjustments

9 ) I shall not Hold more than 6 positions

10 ) I shall not Risk more than 2% of my total trading capital

Swing Traders Psychology
- Should I buy?
- Should I sell?
- Should I take profits?
- Should I cut loss?

These are some of the questions that destroy trading accounts because the novice traders asking these questions do not have a plan. If you asked a professional trader one of these questions he or she would say, “I don’t know. What does your plan tell you to do.”

So what ends up happening? They get excited and buy at the worst possible time. Then the stock reverses. Fear creeps in and then the stock goes lower… and lower… and lower. Finally the pain becomes too much to bear so they sell taking a huge loss.

Believe it! Now lets look at the psychology behind what happens when a stock does go in the desired direction:

Excitement! Euphoria! Yeah, I’m making money! “I had better sell to lock in these profits since I have had several losing trades in a row.” The trader then ends up selling too soon!

By now I’m sure that you have heard the saying, “Keep you losses small and let your winners run”. Look at what just happened in the above example. The un-disciplined trader has just done the opposite! They have let their losses get big and they have limited their winners!

All of this mental anguish can be eliminated by having a decent trading strategy and the mental discipline to stick with it. Write down a plan for the trade before you trade the stock. Then trade it according to the plan that YOU have written. Remember that you have devised a plan before you got into the trade when your emotions were stable. Now you can trade your plan with confidence.

For most novice traders, it is not their strategy that is causing them to lose money. It is themselves that is their biggest enemy.

“The successful trader is the one who codifies, the one who turns things into rules. Every idea that’s market-worthy must then be tested.”

1 ) I shall trade with the Trend and never goes against the Trend, unless the Trend shows signs of weakness

2 ) I shall Long at support, Short at resistance and avoid trading breakouts as far as possible.

3 ) I shall NEVER attempt to predict the market because Market should tell me what to do next.

4 ) I shall establish Entry, Stop & Target levels everytime I make a new position

5 ) I shall make sure that Risk taken Must always be lesser than Reward potential

6 ) I shall be willing to Accept the amount of risk to take for new positions

7 ) I shall be willing to Cut loss if there is a need to be.

8 ) I shall be willing to Ride my profits as long as the trend is intact despite knowing that there is short term price adjustments

9 ) I shall not Hold more than 6 positions

10 ) I shall not Risk more than 2% of my total trading capital

Losses

Face it: You are going to have losses when you trade. If you don’t have losses, you are not taking risk. If you don’t take risk, you won’t win. Losses aren’t the problem. They are part of the game. It’s how you deal with losses that is crucial. Because if you ignore losses, they will come back to bite you.

This statement sounds really familiar to me. Must have spoke to someone using the exact same words before.

Another abstract from Turtletrader.

If you take a closer look to the % gain to recover, the figure start to expotentiate as the losses percentage increases.

This is the reason why I always want to make sure that when come to losses, I should be limiting myself to lose not more than 20% of my capital.