Thread on risk and trading psychology in day trading:
Some traders stress too much on RM and TP to cover their many incurably inept trading methods. Some simple rules which is all you need are:
(1/n)
1. Have a proven system in place.
2. Do not risk more than 1% of cap per trade.
3. Fix a number of trades per day. I don't go beyond 4-5 trades at any cost. Many days, I am done in 3 trades only.
4. Focus on R:R but also make sure you focus on POP.
(2/n)
1. Be a trend follower. Higher rate of success.
2. Do not always book in full at target in the direction of trend. Book partial, move SL to cost and let it trail. More often than not, trends continue than reversing and will give extra gains.
(3/n)
4. Do not think when in trade. Thinking is to be done before entering. After entering, your only job is to wait for SL to hit or book and trail your positions at profit.
LET MARKET DO ITS JOB.
(4/n)
6. Don't look at MTMs. Will impact you psychologically.
(5/n)
1. Maintain a journal with trade details.
2. Check how many rules you followed and how many you broke.
3. Assess the mistakes made. Make a plan to try and not make them again.
(6/n)
1. I risk 1-1.2% on a trade in the direction of trend.
2. I risk 0.5 - 0.7% on contra trades since contra trades offer better R:R but have less POP than trend direction trades.
(7/n)
1. Don't enter markets with a mind bias. Let market show you the way.
2. Learn to buy high and sell higher; sell low and cover even lower.
3. Do not try to catch bottoms and tops. 9 out of 10 times you won't.
(8/n)
5. Do not enter futures and options without experience and less cap. High chance you will be left without an option to continue.
(9/n)
1. Get min 7 hrs sleep and breakfast before trading.
2. Your mind can play funny tricks with lack of sleep and food.
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