10 Powerful Principles for Profitable Trading

Regardless of the quality of your trade entries and exits, it is the overlying principles that you use in your trading that will determine your success. Here is the big picture that will help you become a better trader starting right now.

1. When you enter a trade, you should already have a 50/50 chance of being right on the direction after entry due to randomness. Your first job is to bring your win rate up to a higher success rate than randomness.
2. You need to structure your trades so that your wins are big and your losses are small. A stop loss will keep your losses small, and exiting your winning trade with a trailing stop will enable you to have big wins. Big wins and small losses can make you profitable even with a 50% or less win rate.
3. Trade a position size that you are comfortable with holding, even if it means losing money. Keep your internal emotions in check at all times.
4. Set your stop loss far enough away from your entry so you are stopped out when you are wrong, not due to the normal range of price action.
5. Trade inside a time frame you are comfortable with.
6. Trade a method that matches your market beliefs.
7. Enter only when your stop loss and your price target give you a great risk/reward ratio, where the risk is worth the reward.
8. Exit a trade when the risk/reward begins to skew against you.
9. Trade quantified signals that work historically, and don’t rely on anyone’s opinions or predictions.
10. Never lose more than 1% of your trading capital if you are wrong. Your wins can be as big as you can make them.

30 Reasons Most Traders Don’t Make Money

The common held belief in the trading world is that 90% of traders are not profitable long term. This was based off some old studies of brokerage accounts. I read the original source article long ago in a trading book that referenced it. Other more recent studies seem to have found that the failure rate could be as high as 95%. What causes the majority of profits to go to such a tiny minority of winners? I asked this question in my facebook trading group and  received these answers:

1. Lack of homework on what works.
2. Inability to manage stress.
3. Allowing big losses in your trading account,
4. Quitting when they learn trading isn’t easy money.
5. Inability to trade volatile markets.
6. Inability to emotionally  manage equity curves.
7. Trading without a positive expectancy model.
8. Never committing to one trading strategy.
9. Changing trading systems.
10. Trading based on opinions.
11. Not managing position sizing.
12. Not managing the risk of ruin.
13. Searching for a Holy Grail instead of a winning system.
14. Over thinking their trades.
15. Reactive trading decisions based on internalizing emotions.
16. Trying to pick tops and bottoms and miss the trends.
17. Trading with leverage without understanding the risks.
18. Trading on margin without understanding it.
19. Over trading.
20. Trading with an account too small.
21. Trading without a plan.
22. Trading without stop losses.
23. Not understanding what it takes mentally to be a trader.
24. Setting stops too tight.
25. Setting stops in obvious places.
26. Having only small winners.
27. Buying what looks cheap.
28. Selling short what looks expensive.
29. A lack of discipline.
30. Taking tips.

1	क्या काम करना है पर होमवर्क की कमी।
2	तनाव का प्रबंधन करने की असमर्थता।
3	अपने व्यापार खाते में बड़े नुकसान की अनुमति देना।
4	जब लगे की पैसा बनाना आसान नही है तो भी ट्रेडिंग की कोशिश करना।
5	अस्थिर बाजार में व्यापार करने की असमर्थता।
6	भावनात्मक रूप से घटती इक्विटी का प्रबंधन करने की असमर्थता।
7	एक सकारात्मक उम्मीद भरी क्रियाविधि के बिना ट्रेडिंग।
8	कभी भी एक ट्रेडिंग रणनीति के लिए प्रतिबद्ध ना होना।
9	ट्रेडिंग पद्धति बदलते रहना।
10	ट्रेडिंग राय पर आधारित करना।
11	लॉट के आकार का प्रबंधन ना करना।
12	बर्बादी के खतरा का प्रबंधन ना करना।
13	विजय पाने वाली पद्धति के बजाय पवित्र-प्याला के लिए खोज करना।
14	जो अपने ट्रेड है उनसे परे सोचना।
15	ट्रेडिंग निर्णय अंदरूनी मनोविकार के आधार पर पुनः क्रियाशील होना।
16	सबसे ऊपर और नीचे लेने के लिए कोशिश करते रहना और ट्रेण्ड को खो देना।
17	लिवरेज के साथ जोखिम को बिना समझे ट्रेडिंग करना।
18	मार्जिन (सीमा) को बिना समझे इस पर ट्रेडिंग करना।
19	बहुतायत में ट्रेडिंग करना।
20	एक छोटे खाते से ट्रेडिंग करना।
21	एक योजना के बिना ट्रेडिंग करना।
22	स्टॉप लॉस के बिना ट्रेडिंग करना।
23	यह क्या लिया मानसिक रूप से एक व्यापारी होने के लिए समझदारी ना होना
24	स्टॉप को बहुत तंग लगाना।
25	स्टॉप को आसान स्थानों पर लगाना।
26	केवल छोटे विजेताओं को ही लेना।
27	खरीदना को सस्ता देखना।
28	शॉर्ट सेलिंग को महंगा देखना।
29	अनुशासन की कमी।
30	सुझाव लेते रहना।

30 Of The World’s Best Trading Rules

Here is the inconvenient truth about successful trading. It’s work.

Trading is more than just numbers — it is a three dimensional fight that rages primarily inside the traders themselves. Missing any crucial element can ruin a trader quickly. The trader must first develop a robust trading system that fits their own personality and risk tolerance. Then they must trade it with discipline and faith consistently through ups and downs.  But that’s not all. Risk exposure must also be managed carefully through position sizing and limiting open positions. The risk management has to be able to carry the trader through the losing streaks and enable survival for the chance to even make it to the winning side.

Here are thirty rules that can help the new trader survive that first year in the trading the markets or take the unprofitable trader much closer to profitability.

Trade with the right mind set.

TRADER PSYCHOLOGY

1.    Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.
2.    Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.
3.    You must have a trading plan before you start to trade, that has to be your anchor in decision making.
4.    You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut a loser short the   moment it is confirmed that you are wrong.
5.    Never trade position sizes so big that your emotions take over from your trading plan.
6.    “If it feels good, don’t do it.” – Richard Weissman
7.    Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.
8.    Do not worry about losing money that can be made back worry about losing your trading discipline.
9.    A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake of your nerves as much as for the sake of capital preservation.
10.    A trader can only go on to success after they have faith in themselves as a trader, their trading system  as a winner, and know that they will stay disciplined in their trading journey.

Bring your risk of ruin down to almost zero.

RISK MANAGEMENT

1.    Never enter a trade before you know where you will exit if proven wrong.
2.    First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3.    Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4.    Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5.    Never expose your trading account to more than 5% total risk at any one time.
6.    Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7.    Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8.    All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9.    Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10.    Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.

Develop a winning trading system that fits your personality.

YOUR ROBUST METHOD

1.    “Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2.    Go long strength; sell weakness short in your time frame.
3.    Find your edge over other traders.
4.    Your trading system must be built on quantifiable facts not opinions.
5.    Trade the chart not the news.
6.    A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7.    Only take trades that have a skewed risk reward in your favor.
8.    The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9.    Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10.    Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.

My 7 Trading Habits

1. I trade in the direction of least resistance until the risk/reward ratio becomes skewed against a trend going much further in my favor based on an extension away from a short term moving average or overbought conditions.
2. I risk a small amount of money for the potential to make a lot of money. I manage my position sizing and stop loss level so if I am wrong I only have a small loss.
3. I only trade in markets I have backtested for historical price patterns around moving averages, MACD, and RSI.
4. I like to trade stable instruments like stock indexes and big cap stocks with leverage by using leveraged ETFs and stock options.
5. I only trade in liquid markets so the bid/ask spreads are tight. I do not want built in losses trading is hard enough than to suffer from losses when getting in and getting out of a trade.
6. My time in a trade corresponds to if I am making money or losing money. My losing trades last a about a day while my winning trades can last for weeks and even over a month during a trend.
7. I trade based on the current reality of my position and whether it is right to continue to continue to hold it, I am not biased by my P&L or my entry just the current potential to make or lose money.