Order Of Magnitude

1. Manage Risk

Mistakes are easy to make. Determine risk levels and how much can be lost on each and every trade. Set hard stops at these loss levels and stick to them. This defensive strategy will keep you in the game.

2. Be Objective

The market doesn't care what you think or how you feel. Price is all that matters. Do not get fooled into entering or holding a position on a feeling. When something hits a price objective, don't get greedy or fearful, follow the plan. Have a systematic approach, and be aware that emotion will influence your decisions.

3. Be Patient

Don't try to anticipate a pattern, wait for it to develop. Trying to capture a few cents before the confirmation may result in a lot less money in the future. The market is a harsh mistress and will punish impatience.

4. Know Your Outs

Have a plan in place before you even get started. Determine what price results in maximum acceptable loss. Just as important is knowing price targets for profits, so winners don't turn into losers. Solidify maximum losses and desired profit before each and every trade.

5. Stick to the Plan

Money is emotional. These rules came from learning opportunities that were made, and it is very easy to fall back to old habits when things start going really good, or really bad.

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