How to keep stability in a longer-term in achieved trading results? The answer is simple: stick to defined principles. Principles, which I worked out over the years in trading! Do you want to find out which are the most important for me? Below you will find 3 most important day trading rules for me.
I really invite you to reading this articles. It could save you a lot of money!
RULE #1 – I carry out profits based on what happens on the market
I don’t wish and wait for this one golden shot. I treat trading as a business, and hence “trading for me is a marathon, not a sprint”. Therefore, the stability of profits is on the first place. It gives me peace of mind, mental and financial comfort.
When I began my adventure on capital markets in 2004, for quite a long time I lost on not-processing profits. I had some of my assumptions; however a problem with closing profitable positions always appeared. I planned 10% of the profit, and when I already obtained it, I changed on 20%, next 25%, etc. When the price changed on 20% I felt it was too little, next completely it didn’t want to close 10% because in I had in mind a prior 25% of unrealized gain. After all very often I closed positions with a negligible profit, but usually with stop loss. Unfortunately, it lasted 3 years.
In daytrading I know that my profit is a sum of many profitable and losses transactions. A final result is important. If you will look at presented by me “Trading Reports”, you will notice a large number of transactions in month. Taking this into account, with appropriate keeping adequacy of profits to losses, effectiveness on a level of 50-55 % fully enables to achieve decent, but stable profits from 2007.
In order to achieve it stick to the principle – effective take profits. Remember that a sold profit is a posted profit. Even a very profitable position, which still is an open position – can quickly change into a loss. You decide when to take profit. The question is what if this doesn’t take includes my trading plan?
Below I present one example
It is based on trading under breaking through. To ranges and take profits I look very statistically. I determine the level of profit defined in cent changes, which is on the company. In case of increase it is usually range of 30-50 cents or faster realization followed by a sudden decline. I don’t dream, I don’t invent!
BX Company – two sessions in a row, on which every time I traded on declines. Look at the graph no 1. There was break-through in a decline below 41.60$ – the position was opened at 41.56$ and 41.46$. Profit was on a level of 41.28$. 20-30 cents of changes carried out. I fulfilled assumptions of my strategy. The price dropped in this moment to 41.20$. By which increased to 41.38$. The price after nearly 45 minutes again decreased. Then once again I opened a short position. Notice: I didn’t lose those 45 minutes on observation, which may happen. I took my profit, and I waited for another chance.
After 45 minutes – there was another break-through in a decline and opening short at 41.18$. For breaking through below 41.00$ I counted on a possibility of even greater drop. However, all the time I was prepared up to potential increase. When 41$ changed by decline, but it reached to increase I immediately closed the position above 41$, taking this time 15 cent of profit. The price declined under 41.08$ – again fell to 40.94$, after which there was a strong turn up to 41.39$.
ONLY REALIZED PROFITS ARE IMPORTANT!
RULE #2 – I trade what the market gives, not what I would like to happen
Returning to above example. Why I didn’t hold the position longer? And what if the price dropped farther? I would earn more. Of course – it’s right, but the fact that I understand my trading strategy causes that I carry out scenarios established by me. I try not to regret, not to speculate. Trading what the market gives, what I can see and results from my strategies –causes that I know what I trade, I know my plan.
Let us look at graph of the same company – day later. New test of a level 41.00$ and again traded short position. Opening at 41.00$, profit at 40.66-70$. Within 45 consecutive minutes the price dropped to 40.53$. So I could earn more. The price could break-through with 40.50$ and continue to fall. Everything is only a speculation.
Taking profits, I already knew that if a volume will reappear, and the price will start test 40.50$, it will be a next potential entry in short. Compare changes under which I traded to what happened later. Decrease from 41.00$ to 40.6$5 was more dynamically, on a strong volume, in principle without corrections. When the first appeared I took profits. Next the price of 40.70$ fell to 40.53$, but how. Changes were already chaotic. I don’t trade this way, so I didn’t have a position then.
RULE #3 – I trade in accordance with my trading plan. And whether you have your own?
As you may have noticed based on these two examples. I trade specifically, I’m interested in order. Before I open the position I know where I plan to close it with loss. I also know my take profit, which statistically at the given stpricegy is established. But I always back my decisions to close the position with tape reading analysis – that is quotes. In some cases, this allows to take larger profit than established in trading plan, and in other causes that I close the position more quickly, because towards it premises appeared.
In trading you have an impact on several factors:
-
Price at which you will open the position.
-
Price at which you will close the position with profit.
-
Price at which you will close the position with loss.
You don’t have the most important impact: where the price will head.
Thanks to trading plan – you have an impact on how you trade after opening the position. You won’t be surprised. Depending on how the rate will head – you will use your strategy.
Of course, I’m simplifying this issue – because I assume that your trading plan is based on already developed trading strategy. If it isn’t – you will be surprised, because actually you won’t know what you trade and why 🙂
Of course, these are not all my trading principles. There are more of them. To those I would like to draw special attention. After nearly 8 years, where daytrading is with me every day – I clearly determined these principles, which are the most important for me.
And what trading principles are the most important for you? I will be grateful if you share it with me in a comment below 🙂
