The consistent winners follow a winning approach:

They have a strategy to enter and exit trades

They use good money management

They take consistent actions, they follow a trading plan

They keep good records so they can review their actions

They avoid overtrading

They have a winning attitude

A strategy to enter and exit trades

You need to a strategy to put the odds in your favor for each trade you take. Your strategy should be as objective as possible and include the following elements:

Entry: conditions required before you can enter a trade - may include technical analysis, fundamental analysis, or both.

Initial stop loss: price at which you will close the entire position if it does not go in your favor. The risk per share is the difference between the entry price and the initial stop.

Initial price objective: price at which you will take some or all profits if the trade goes in your favor.

Trade management: set of rules that dictates your actions while a trade is opened. It may include trailing stops, closing position, etc…

For every action you take, the reason should be clearly described in your strategy.

Money management rules to keep losses small

The goal of money management is to ensure your survival by avoiding risks that could take you out of business. Your money management rules should include the following:

Maximum amount at risk for each trade. The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.

Maximum amount at risk for all your opened positions.

Maximum daily and weekly amount lost before you stop trading – avoid trying to trade your way out of a hole after a loosing streaks.

During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster.

Good record keeping

Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions. Good records will allow you to:

Review your actions at the end of each day to make sure you followed you strategy, not your emotions.

Learn from your losses – they cost you money, make sure you get the education in return.

You should also keep a journal of your observations.

A trading plan to keep emotions out of your decisions

During trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules.

For every action you take during trading hours, the reason should not be greed or fear. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.

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