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The right mindset
- Your have to be able to manage your emotions.
- You have to have faith in your ability to trade your plan with discipline.
- You have to do enough homework that you will have faith in your system and your prospects of being profitable.
- You must manage your stress so you don’t make mistakes because of mental wear and tear.
The management of risk
- Capital Preservation has to be your #1 priority.
- Your expected win/loss ratio and risk/reward ratio must be in alignment for profitability.
- Never lose more than 1% of your total trading capital on any one trade.
- Your risk of ruin for your trading system must be reduced to zero.
A profitable methodology
- You must implement your backtested trading system with a great trading plan.
- Your position sizing must be based on how much you will lose if your stop loss is hit.
- Your entry signals must give you a high probability of profitability.
- Your exit strategy should allow you to end every trade with either a big win, a small win, or a small loss—never a big loss.