Exit: Cut loss area, Trail stops, Take profit levels, Trend breaks, Time limits etc etc
(I would argue that Exit rules are more important than Entry rules; Selling is an art.)
Draw up your charts and trading plan beforehand.
Do not try to improvise on the fly.
During trading hours, there will be a lot more variables and emotions in play.
Your judgement will be clouded by market noise and your own biases.
Sure, if you don’t have a plan, you mightget lucky a few times; but you will never be a consistent trader.
Eventually, you are going to surrender all your gains and more back to Ms. Market.
Consistency is king; It is better to be consistent than lucky.
Without a trading plan, you are only gambling and it is only a matter of time before you get wiped out.
RULE # 3
“It is the rule in war, if ten times the enemy’s strength, surround them; if five times, attack them; if double, be able to divide them; if equal, engage them; if fewer, defend against them; if weaker, be able to avoid them.”
Pick your battles carefully, boars and girls; we do not need to trade everything that moves.
We only have so much resources so we put them into play only when the odds are with us:
If it is overwhelmingly in my favor, I would go all in.
If it is greatly in my favor, I won’t hesitate to make the trade.
If it is considerably in my favor, I would enter perhaps in tranches.
If it is slightly in my favor, I would look for another opportunity.
If it is not going in my favor, I would cut to fight another day.
“He who knows when to fight and when not to fight, will be victorious.”
(All quotes from the Art of War, Sun Tzu)
If you read the book, just replace the words below: