The Dos and Don’ts of great trading

  1. Trading is not gambling.
  2. Trading is years of hard work, learning, and discipline. If you are looking for a place to make money easily, look elsewhere.
  3. Trading is purely a game of psychology and discipline. Numbers data etc are secondary
  4. Never trade with a profit target in mind. Trade because the trade is the right thing to do at that point of time
  5. Capital preservation is the only job you have as a trader. You need to preserve your capital for great trades with a high probability of high profit. If you lose money on poor trades, you will not have any money to take the great ones
  6. There is a life outside of trading. It is easy to lose sight of that and get addicted to gambling.
  1. A trade is not just up or down. It is a complete plan
  2. Most of the trading happens outside the market hours. The actual trade is just 5% of the work. Do your homework and plan your trades at least the previous day. If something seemed like a good idea to you this morning, it is often a bad idea
  3. Keep your trading plan simple. Just look at 3–4 indicators. More numbers equals more complications
  1. Remember, there is always the next trade. Don’t take stupid risks in the current one
  2. It is okay to miss an opportunity. It is not okay to lose money because of impatience
  3. Not having a position is a position. Some of the best trades in life are the ones you do not take.
  4. Most of the times the best strategy is to sit and watch on the sidelines
  5. This trade is one trade of the many trades of a month of the many months of a year of the many years of your trading life. Treat it that way. Do not be attached to a trade. Learn to let go
  6. If you are stuck in the wrong trade, you will miss the right trade
  1. Reversal in a trend happens only once. If you bet on a reversal you will be right only once. If you bet on continuations, you will be right most of the times
  2. Never buy a stock because its price has come down. Never sell a stock because it has gone up.
  3. Never catch falling knives. Corollary — never short shooting rockets.
  4. Buy a technically strong stock, ideally on dips, and sell a technically weak stock ideally on upticks.

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