Saturday, April 02, 2016

What Are Your Trading Principles?

Here is an exercise:

Quickly jot down your five most important trading principles:  the rules you will not violate--and cannot violate--in order to be successful.  Write these down before you proceed with this blog post.


Now take a look at how long it took you to think of and write down those five cardinal trading principles.  If it took effort to think of them and took you a while to write them down, then you've learned one thing:  Your trading principles are not front and center in your mind.  If someone asked you to write down principles of healthy eating or principles of how to be successful in a romantic relationship, you would have little problem coming up with your answer.  If you have trouble identifying your principles, you're probably trading in an unprincipled manner.

The most powerful trading principles come from an exhaustive review of our performance and a clear identification of what makes us successful.  As I stress in the recent book, those best practices can then anchor our trading processes.  Success comes from consistency in enacting our strengths; failure comes from inconsistency.  All the work on discipline cannot help us if we haven't clearly identified our trading principles and turned those into robust habit patterns.

Further Reading:  Turning Success Into A Habit