10 Golden Rules of Trading Discipline
Discipline management is one of the hardest things to master. At the same time, it is the most important element of successful trading.
It is up to every trader to establish a pre-market routine and build strong trading habits.
You should strive to attain discipline if you ever hope to achieve any level of trading success. Trading discipline is practised 100 percent of the time, in every trade, each and every day.
So, to give you a hand, this blog post aims at revealing the 10 golden rules of trading discipline. You must continually condition yourself to be disciplined. If you want to be a serious trader, than read through the rules every day before the trading session begins. It shouldn't take more than three minutes to read through them. Think of the exercise as reminding you how to conduct yourself throughout the trading session.
1. Follow Your Trading Routine
Your trading routine should consist of:
- pre-market analysis
- major market hours trading
- end of day (EOD) hours.
Never try to break your trading routine. Follow major markets and trade only during the major markets.
These include: London, New York and Tokyo markets.
The price moves more noticeably during major market sessions, so you can ignore minor markets. Major markets provide you with a great number of setups too.
In fact, you can already:
- check the day's economic calendar for any strong economic reports that may influence your setups; then
- move to price action analysis, to see if the prices have broken through important support or resistance levels.
My advice is to trade trending markets.
2. Actively Trade the First Three Hours of Each Major Session
It is common knowledge that the Forex market trades 24 hours a day. But not all of those hours are viable for day trading. If you are a day trader, you want to pay attention to the following trading aspects:
- volatility
- momentum
- direction
- trend
- divergence.
And, you need to decide between positional trading and scalping. Take positions that seem to be the most obvious, because these are the best way to maximise your profits. You can learn how to spot no-brainer setups using our analysis and webinars. Also, pay attention to your trading schedule. The first three hours of each major session are usually the best in terms of momentum, trend, and retracement. It is then that we traders tend to find the best trading possibilities.
3. Don't Forget EOD – End of Day Trading
When the London session is about to end, you still have approximately two or three additional hours to exploit market movements. If you fail to use this time, your trading might stop in its tracks until the Tokyo session opens. EOD trading is different, as you usually need to trade against the trend. Why?
Because when most day trading market movers take profits, the price retraces. Every close of a buy position is an automatic sell back into the market. The huge advantage of EOD trading is that it does not require constant monitoring which, in turn, makes it ideal for traders with a day job.
4. The Market Rewards You for Your Discipline
Trading with discipline should (all being well) reward you with a positive money flow. The point of trading with discipline is to have more pips in your account and fewer pips out. The one constant truth concerning the markets is that trading with discipline should provide you with bigger profit potential.
5. Don't Let a Winner Become a Loser
We have all violated this rule from time to time. However, it should be our goal to try harder not to violate it in the future. What I am talking about here is the greed factor.The market has rewarded you by moving in the direction of your position. However, you are not satisfied with a small winner. Thus, you hold onto the trade in the hope of a larger gain, only to watch the market turn and move against you. Of course, inevitably you now hesitate and the trade further deteriorates into a loss, sometimes substantially.
The golden rule I use is – profit taking. When we trade on an intraday basis we need to use profit stops. Once we are in profit, we need to move our Stop-Loss into a profit thus, securing profits. That way we should protect our profits. To see how this is done practically, I suggest you pay a visit to my live trading webinars.
6. Stick to a Proven Trading Method
...and don't change it! If you have a proven methodology but it doesn't seem to be working in a given trading session, don't go home that night and try to devise another one. If your methodology works for more than one-half of the trading sessions, then stick with it.
Remember, the Holy Grail of trading is money management.
7. Don't Chase the Markets
Literally. You should avoid jumping on a freight train. This might suck you into a spiral of doom as you realise the markets might turn against you. Patiently wait for the setup. The markets are like a shadow. If you run after it, you'll never catch it. If you stand still, it will embrace you.
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8. You Are a Long Distance Runner
Have you ever had the desire to trade while not being able to do so because the equity in your account is way too low and your broker might not allow you to trade unless you submit more funds? That happens if you take too much risk. Big losses hurt, and they hurt too much. Use leverage smartly. Don't risk more than 2% per trade. Remember, you want to be able to trade another day.
9. It's a Step-by-Step Process
Try to use compounding. Compounding is a great way to add profits to your profits. It is very suitable for smaller-sized accounts. Ultimately, you might even be able to build a six-figure sum out of two-figure account. How? Check out the following video:
10. Consistency is Confidence
How good does it feel be able to turn on your trading platform in the morning knowing that, if you play by the rules, the probability of successful trading day is relatively high? The answer? Really good! Remember: If you make a little bit every day, then you have earned the right to trade bigger.
By following these 10 golden rules of trading discipline those profitable days might soon become more frequent.
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