Thursday, May 29, 2014

Build Rules For Better Trading

Trading is a game of probability, where we win sometime and sometime we lose. The only work we can do to be profitable is, improve the probability of winning and cut losses quickly.

        There must be a proper method or setup for trading, if we want to improve our odds of success. And that setup should be clearly defined to us, and guides us on point to point in every situation of market. The few key points which should be considered while making rules or preparing your setup:-

(1) In what kind of market you will trade, that is trending, choppy and range bound.

(2) What kind of trade will you take in that market, that is, long or short. For example, if market is up trending than I like to take only long positions.

(3) What kind of pattern or breakout of support/resistance or reversal points you trade and how you confirm their move, enter and exit.

(4) How much risk you can afford from a particular trade and how you will manage the loss of that trade.

(5) How you are going to manage your overall account, for bad days, which come to visit everyone at some point in life.

       These are few points and there could be few more, which should be taken into consideration while entering in a trade. The best way to do is write them somewhere on paper and always keep it on table while trading. This could help a trader to improve his trading.

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