Trading Commandments!
So what are the things that a successful trader does and the amateurs miss? Here’s a representative list of advice from Dr. Elder -
o Keep accurate records - maintain a minimum of four records—a trader’s spreadsheet, an equity curve, a trader’s diary, and an action plan. Scrupulously keep records up to date and study them to learn from experiences.
o Make your own trading plans - Even when you get a terrific-sounding tip from a friend, don’t get swept up in the excitement. Either ignore it or put it through your own decision-making screens.
o Please don’t chat about trading - A trader may discuss a technical point or a closed trade with a trusted friend, but never ask for advice on an open trade. Does not disclose positions so as not to expose himself to unwanted advice or tie up ego in the process.
o Learn all you can about the market being traded - Develop a good grasp of the main technical, fundamental, inter-market, and political factors that may impact stock or a future.
o Grade yourself only on the adherence to written plan and not on individual losses/profits - Imagine yourself to be an employee, and the boss has left on an extended vacation, leaving to manage his money by following his plan. When he returns, he will reward or punish based on how faithfully you followed his plan and not on how the system did.
o Allot a certain amount of time to the markets each day. Download data each day, put it through battery of tests and screens, and write down the results and plans for tomorrow. Allocate time in daily schedule to make trading a regular activity.
o Monitor selected markets daily, regardless of their activity - Avoid the typical beginners’ error of monitoring markets only when they are active and “interesting.” A smart trader knows that strong moves spring from periods of relative inactivity.
o Learn and be open to new ideas, but please be skeptical of claims - Read market books and magazines, attend conferences, participate in online forums, but do not accept any ideas without testing them on your own data.
o Follow money management rules as if everything depended on them - If you have good money management, almost all trading systems with a positive expectancy will make money in the long run. And if your system does not have a positive expectancy in back-tests – you should not be trading them anyway.