Trading Rule # 9 & 10

Trading Rule # 9:  Avoid Over Dependency on Market Gurus

I am spitting in my own rice bowl here, but you should not be letting some self-appointed market guru dictate or dominate your trading decisions. The most you should expect, or accept, from experts are a few trading patterns, and a bit of advice on how to make a trading plan. No one knows or cares as much about your personal circumstances as you yourself do: how much money you can invest, your tolerance for pain, your goals, your most suitable and comfortable time frame, etc. and note, your guru will not bother to part with a single penny if all his great picks you fall for come a cropper.

Most of the traders, especially new traders rely completely on media news or advices from their friends or other traders. While to some extent it is ok to consider these resources as they give you some idea about the market movement or current trades. However, don’t completely depend on them as the best methodology to establish yourself is through “Trial and Error”.

As I have mentioned in most of my posts earlier, when I began trading, I used to go with the media trend and though it helped me a lot in determining the trend but not completely. It’s when I started learning from my mistakes and kept preparing new trading plan every day.

Relying completely on market gurus or media is like seating on the river side with a book in hand “How to Swim”, that will but not completely help you. It’s when you go down in the water and learn to spread your hands with the flow that you actually start learning swimming.

At first it might sound like a risk and you might feel hesitant about it, but, believe me with practice and time you will realize that, you are in much better position to analyze the market trend with the news available with you, and once you will start putting these analysis into practice, you will start to reap the fruits with initial trial and errors though.

Trading Rule # 10:  Make a Habit of Preparing Daily Trading Log

One thing I personally follow is preparing a trading log daily, you can prepare your own trading log with simple formula in excel as per your requirements.
A trading diary or log is a great way to check and confirm your trading entries and exits. Consider what this can do for you as a trader. If it is followed properly, it can, and most likely will, help improve your level of self-discipline and ultimately lead to an increase in your self-confidence. How? If you execute when the signals call for action, you can validate whether you responded when called upon to do so. You can check your work. You will find out whether you hesitated when your methods called for you to exit and if you timed it as per the system or not.

This is where my excel checklist will help you a lot as it has been designed in such a way that as you put previous day’s High/Low and current day’s High/Low (At 9:30) a.m., it will give you exact entry/exit point and approximate high for that particular day and with stop loss at 5% or 10% as per specified by you (I have given an option for you to decide what % stop loss you wish to follow).

The trading log will reinforce the validity of your trading strategy. By cataloguing your trades, you will gain more experience in identifying the patterns that drive your trading signals. It also keeps track of what went right or what went wrong with a trading plan. It will allow you to study and examine the results in black and white. On successful trading days, it will be good to capitalize on your success so that it can be repeated. Of course, on bad days, provided you are not tempted to average down or tempted to hide from your spouse about your bad day, it can help you focus on what went wrong so that you can understand and improve on it and stop repeating the same mistakes over and over again.

Remember, your ultimate goal is to come out as a winner!