I read an article by Douglas E. Zalesky in SFO magazine back in 2006. It is a great list of rules traders should read.
Here I am listing out 25 rules of trading discipline discussed in his article. I think it is good to spend a couple of minutes every day to go through the list before start trading.
25 Rules of Trading Discipline
- The market pays you to be disciplined.
- Be disciplined every day, in every trade, and the market will reward you. But don’t claim to be disciplined if you are not 100 percent of the time.
- Always lower your trade size when you’re trading poorly.
- Never turn a winner into a loser.
- Your biggest loser can?t exceed your biggest winner.
- Develop a methodology and stick with it. don’t change methodologies from day to day.
- Be yourself. Don’t try to be someone else.
- You always want to be able to come back and play the next day. Once you reach the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
- Earn the right to trade bigger. Remember: if you are trading poorly with two lots you must lower your trade size down to one lot.
- Get out of your losers.
- The first loss is the best loss.
- Don’t hope and pray. If you do, you will lose.
- don’t worry about news. it?s history.
- Don’t speculate. if you do, you will lose.
- Love to lose money. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly.
- If your trade is not going anywhere in a given timeframe, it?s time to exit.
- Never take a big loss. Only a big loss can hurt you. Please review rules #5, #8, #10, #11 and #15. If you follow any one of these rules you will never violate rule #17.
- make a little bit every day. dig your ditches. don’t fill them in.
- Hit singles, not home runs.
- consistency builds confidence and control.
- Learn to sweat out (scale-out) your winners.
- Make the same type of trades over and over again? be a bricklayer.
- don’t over-analyze. don’t procrastinate. don’t hesitate. if you do, you will lose.
- all traders are created equal in the eyes of the market.
- It’s the market itself that wields the ultimate scale of justice.
Full article in SFO [PDF] : The 25-Point Mantra: Discipline for Day Trading
This blog post is also part of my Back to Basics of Trading Series, feel free to check it out.