- Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that will eventually end badly when you find yourself on the wrong side of a strong trend.
- Never lose more than 1% to 2% of your trading capital on any one trade. This means use position sizing aligned with stop loss placement so when you are wrong the loss is not big enough to damage you financially, mentally, or emotionally.
- Never trade anything you do not understand 100%. Do not trade futures, forex, or options until you understand the risk and how they work.
- Trade in the direction of the trend in your trading time frame.
- Only look for low risk/high reward trades or high probability setups , when you don’t have any signals, don’t trade.
- Trade your plan, your system, your signals, the chart, and price action, not your own opinions, bias, or predictions.
- You have to trade the right winning methodology that you are comfortable with that fits your own personality.
- If you do not have a full trading plan with rules on entries, exits and risk management stop trading until you create one.
- The size of your wins and losses ultimately determine your trading success regardless of your winning percentage. No system is profitable with huge losses.
- Your risk management rules will ultimately determine the success of your technical trading system.