Trading is as much about mental strength as it is about strategy. In this post, we’ll explore the essential rules that keep you disciplined, focused, and in control of your trades. Follow these principles to improve your consistency and safeguard your profits.

Following trading plan

After establishing reasons to take a trade and deciding your entry and exit, respect those points. Extending your SL may help reduce loss 8 out of 10 times but those 2 times, it will wipe your capital 100%.

Keep your position sizing and max loss in control and nothing will affect you.

Patience

Never chase trades, if your entry point is triggered, enter and if you missed it, let it go. There are unlimited opportunities.

Never be in a hurry to take a trade just for the thrill, wait for your setup before entering. It is better not to trade than taking a loss.

Journal

Having a journal to note down your mistakes at the end of the day is of utmost importance and reading the same before starting the next day.

You will eventually realize you are stopping yourself from repeating the same mistakes.

Markets are irrational

Assuming your analysis is correct, still it doesn’t guarantee a trade working in your favor. A very famous quote regarding the same is “The market can stay irrational longer than you can stay solvent”

Markets can stay over extended for a long period of time, so one must avoid going against trend. Additionally, one must exist at once when SL is hit. Waiting for pullback to exit can and will lead to bigger losses eventually.

Revenge Trading

This is the situation when you get emotional and try to recover your losses and start fighting markets. This mostly happens when you are about to reach your target but the market reverses and hits Stoploss. 

Treat trading as a business and your stop losses as expenses to do the business. This makes it easy to accept losses and help avoid being emotional. Losses are an integral part of trading.

Revenge trading can be avoided if you know your entry and exit before entering the trade.
Also, keep a cap on the maximum number of trades to be executed per day.

Plan B

Always have a plan B while in a trade when things are not going for you. Plan B could be anything – booking losses, booking partial loss, increasing/decreasing position size. 

This is nothing but preparing yourself for the worst.Never get complacent or overconfident in the market.

Borrowed Money

Never ever trade with borrowed money/loan. Risk only which will hurt you and not make you broke, if you lose it.

Try to have multiple sources of income. The more relaxed you are in the market, the more it will reward you.

Checking Profit/Loss continuously

If you have a habit of checking on P/L continuously, either you will book small profit fearing of losing it or holding on to losses in hope of a reversal which in turn results in bigger losses. 

Mistakes of booking small profits may not hurt big but holding on to losses will surely blow the account.

It is advisable to fix your profit/loss before entering the trade and let your profits run while booking predefined losses gracefully.

Detach yourself from profits

Do not get over hyped if you are making continuous profits and do not sacrifice your health and family for losses. Always remember there is life beyond money. It is a proven fact, if you are running after something, you will never get it.

If your profits are not making you overjoyed and losses are not keep you awake at night, you are doing it right.After big profits, slow down; after big losses, slow down.

Trading is a game of mentality and not about knowledge. Spend time meditating, knowing yourself.

Profit and Losses

Fix number of trades to be taken per day and max loss per trade. If things are not working, reduce your position size, go on holiday, stop trading.

Your approach should be to lose as little as possible, even if your trades turn into profitable after you have exited.

Trail your profits to maximize winners. You will never be able to catch the tops or bottoms, money is made in between.