TRADING PYSCHOLOGY Rules followed by master traders

WHEN TO TRADE Do not trade when you cannot afford to lose. There are few ways of guarantying that you will lose than by trading money you cannot afford to loose. Trading with scared money will lead to lot of negative emotions. You don’t always have to be in the market as to win in market you need confidence as well as desire to trade

SIZE OF THE TRADE Do not concentrate too much of your money on one big trade or highly co-related trades. Always know where you stand of risk control. Divide your capital into X parts and never risk more than 1/X of your in one trade. Magnitude of losses and profits is purely a matter of position size. Controlling position size is indispensable to success. Never over trade

STOP-LOSS Always use stop loss points, preferably mental top loss points. Never let a profit run to loss by use trailing stop- loss to avoid loss of capital. Never cancel a stop loss you have made at the point of trade. Never average a loss. This is one of the worst mistakes a trader can make.

TREND Do not back the trend if unclear of the trend. When in doubt get out and when in doubt do not get in. Never change position in a market without a reason. If you make a trade, then do not get out without a definite indication of a change in trend Stay with the trend.

No. of Trades The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. Avoid the temptation to be completely right.

ORDERS & TRADES Trade only in active shares. Give market orders. Never purchase a share to obtain a dividend. Never buy a share just because its price is too low. Never sell a share just because its price is high.

PYRAMIDS & HEDGEING Do not get in or out of position all at once. Be careful about pyramiding at wrong time, Buy after it has crossed a resistance. Never hedge. If you are long in A and goes down do not sell B. Get out market and take loss and wait for opportunity. Hold a core group of stocks long and core group of stocks short.

PATIENCE Never get out of the market just because you have lost patience, or get into the market because you are tired of waiting. Don’t close a trade without a good reason.

What if…. All progress in knowledge results from efforts to falsify, not confirm theories. Try to think everything that can be wrong with your trading system. Challenge the system by trying to disapprove of it. Spend no time at all thinking about those roseate sceneries in which the market goes your way since in those situations, there is nothing more for you to do. Focus instead on those things you want least to happen and what your response should be.

What if….. Go through a mental process. Decide what to do if when situations X,Y,Z arise. If X,Y,Z is a surprise you are part of the crowd. Successful traders have commitment to markets. They develop scenarios, re- evaluate scenarios.

Profits & Losses Do not take your profits, but take your losses. Accumulate a surplus. Some money of the Surplus to be used only in emergency. Losses should be pre-determined so that risk can be measured.

Individual Style Have a trading strategy that suits your personality. Admitting mistakes is must in trading as taking losses quickly Psychology (right mental attitude) is critical to success in trading Never fear the market or fear making a mistake.

Trading - three hired hierarchy Preservation of capital for which ask the question “ what is the potential loss that can be suffered “ and not “ what is the profit I can realize. Strive for “consistent profitability” by balancing risk to accumulated profits or losses. Consistency is far more important than making lots of money. Only if 1 and 2 are achieved try for superior returns by increasing bet size after periods of high profitability.

Last but not the Least There should be zero back office errors. One can be right on the market but still end up losing because of excessive leverage.

It is not important how many times you are right or wrong but how much you make when you are right and lose when you are wrong. Confront the process of losing, wherever I take a position I like to imagine, what it would be in a worse case scenario.

THANK YOU