One trade is meaningless outside a trading system. A trading system can not be implemented without a trading plan. Entries are just the beginning; the exit is what determines if a trade is profitable or not.

Here is the structure all traders need for long term success:

  1. We have to create a trading system that back tests show would have been profitable.
  2. We then create a trading plan that shows how to execute our trading system with real money.
  3. You need quantified entry signals to tell you when the risk/reward is in your favor.
  4. Position sizing has to be determined based on volatility.
  5. The risk of ruin has to be eliminated or you will eventually blow up your trading capital.
  6. A trader needs to trade primarily in the direction of the trend in their time frame.
  7. We must have a price level that will tell us when were wrong about a trade and need to exit with a small loss.
  8. We need exit signals to tell us when to exit and lock in profits when we are right.
  9. We must have trading rules that override our fear, greed, and ego.
  10. We must have the discipline to follow our trading rules no matter how we feel.

By Steve Burns

After a lifelong fascination with financial markets, Steve began investing in 1993 and trading his accounts in 1995. It was love at first trade. After more than 30 successful years in the markets, Steve now dedicates his time to helping traders improve their psychology and profitability. New Trader U offers an extensive blog resource with more than 4,000 original articles, online courses, and best-selling books covering various topics.