Trading is a process of learning and relearning key lessons in psychology, risk management, and using a proper method. Trading is like building a wall with the right bricks and when you leave a brick out, the whole wall eventually collapses. Or if you use the wrong quality of bricks even though the wall may stand for a while it also eventually collapses as that weakness is exposed in the wrong environment.

Below is a trader’s 7 steps to building a wall that can withstand the strong winds and storms of the markets.

  1. LET THE MARKET BE YOUR BOSS. Hold your opinions loosely and your discipline tightly. Trade in the direction of the trend for your time frame. Be quick to admit when you are wrong but hold your winners for as long as they keep going in your favor.
  2. TRADE ONLY IF IT IS WORTH IT. Do not take any trade where your expected possible profits are not at least three times as much as your risk of loss. Risk $1 to Make $3, risking $3 to make $1 is a formula for losing.
  3. STAY DISCIPLINED AND ONLY TRADE YOUR METHOD. If you do not have a robust system, method, or strategy do not trade again until you have one.
  4. ONLY TAKE TRADES WITH IN THE PARAMETERS OF YOUR TRADING PLAN. Trade your plan not your emotions. If you do not have a plan that defines entries, exits, and position sizing do not trade again until you have one.
  5. YOUR FIRST LOSS IS YOUR BEST LOSS. When your planned stop is first hit just get out. In trading hoping is a very expensive emotion
  6. UNDERSTAND THE MARKET ENVIRONMENT. There are times to be short, times to be long, and times to be out. Volatility is many traders kryptonite.  If the market itself is not conducive to your strategy wait until it is.
  7. CHOOSE YOUR SPOTS CAREFULLY. Do not rush trades, wait until you get the right set up, trend, or break out you are waiting for, the market isn’t going anywhere, wait for the fat pitch.
  8. MAKE YOUR NEXT TRADE ONLY ONE OF THE NEXT 100. How do you take most of the emotions out of your next trade? Risking only 1% of your trading capital on each trade with the use of stops and position sizing will make no one trade that big of a deal. Ten losing trades in a row will leave you down just 10%. What would your account look like if you had 10 losing trades in row with your current risk management? Would ten losses in a row knock your wall down?

These tips are meant to help you move eight steps closer to your ultimate goals in trading.