I have discussed the importance of having a game plan to day trade in various articles recently (A Tale Of Two Traders, Trading For A Living and Mind Over Market). Yesterday afternoon, while I was doing my Daily Wrap Up of market commentary, trades of the day, and trading tidbits, I typed something to the effect that a certain trade did not fit my trade "guidelines". I got to thinking after I typed that word. Why did I use the word guideline instead of rule? To me, the word guideline is a looser interpretation of the word rule or rules. If you read my article "A Tale Of Two Traders", I explain how integrity plays an important part of MY trading strategy. I think that it is important to be true to your trading strategy and follow your rules to the letter. Therefore, my use of the term guideline was probably not appropriate as that may lead many of the traders reading this article to believe that you can change your rules at a whim, move stops or not adhere to the limit orders you have in place. Now some of you my think that this whole article is a matter of semantics. I don't agree. If I use the terms interchangeable, my sub conscience mind might think that it is OK to move stops, or make changes in the way I trade. I work daily on my trading mind set and how I place trades and most importantly, how I manage the trade once I am in that trade. ANY influence that could affect that mind set and cause me to stray from my tried and proven strategies is not acceptable. So, I hope you study your own lexicon and make sure that you are not doing something that will submarine your results.
One other thing that I would like to touch on is very near and dear to my heart. If you have a trading buddy or partner, having a true conviction about your trading rules is extremely important. I have several friends that trade for a living. The lesson that I am about to share with you has come a great cost and frustration. If you are not totally convinced that your trading strategies have the ability to make you money, then you can be easily swayed. Here is the story that happened to me. When I was first learning how to day trade, I studied many courses and manuals regarding the subject (some free and some costing thousands of dollars). Going through this process with me was a good friend of mine. We would cuss and discuss various trading strategies that we had studied and how we interpreted the various results we were receiving. Then finally it occured to me that I was responsible for MY trading results and MY trading results only. Although my friend and I are very close, when it comes to trading, it is important not to focus on what anyone else is saying to you. I can't tell you the number of times that I was influenced by what my friend said. The markets going up, down, sideways, etc. It always made me feel that he was right and I was not. Finally, I became confident enough in my own strategies that I started to take his advice and comments with a grain of salt and trade MY trading criteria. My advice to you is once you have a set of rules and have tested those rules, become so focused on how you trade those rules that no one else can sway your thinking. You will be surprised how much better your trading results become.
One final thought. As I have discussed many times in my articles, I have gone from one strategy to another, usually paying lots of dollars to learn the secrets from so called gurus. What I have found out is that many of the so called gurus out there are just selling you something. Some of the best strategies that I have learned have been FREE. Keep that in the back of your mind next time your are asked to cough of thousands of dollars to learn a new concept.