Have a system!

So many times I have seen customers putting on trades without having a system. Trading without a system is like trying to be an air traffic controller without knowing how to read the radar screen.

Trade with discipline!

I'm sure you have heard this over and over again, but it truly is the main key to being a successful trader. It is present in all aspects of the trade from the setup to the exit point. Having the discipline to find a system and stick to it is a tall task for any trader, but it is absolutely necessary if you want to be successful.

Trade markets not money!

So often I'm talking to customers and they place an order to buy an S&P 500 at the market with a $500.00 stop. From the way this customer placed this order, I can tell he is trading money not the market. Taking the monetary consequence out of your decision process is essential and probably the hardest part of the discipline process. If you've ever seen the popular quiz show "Who Wants To Be A Millionaire?," then you've seen that the people who have won the million dollars were not thinking of the money, their only concern and thought was the question at hand. At the same time, how many times have you seen someone stop even though they would have been right because they were thinking about the money?

Have a favorable risk to reward ratio!

When preparing to place a trade, make sure the risk to reward ratio is in your favor. Before placing a trade, know where your stop is going to be placed and where you intend to take a profit. Never place a trade where you're risking more than you're trying to make. This doesn't mean put a trade on and always risk 200 points to make a 300 point profit. Sometimes, for example, you may risk 500 points to make 1000 points. Or, you may risk 100 points to make 200 points. The point is, all trades are different. Don't enter into one if the parameters aren't in your favor.

Always trade with a stop loss!

Trading without a stop is like walking a tightrope without a net. You may not use the net every time you walk the rope, but when you do, it will save you to trade again another day. Using a stop helps take the emotional element out of the trade. This one factor alone helps to maintain a strong discipline in your trading technique.

Don't add to a loser!

There is a saying around the trading pits that goes like this, "If you liked them at 75 you'll love them at 50." Sometimes the worst thing that can happen to you as a trader is averaging down your position and eventually making money on the trade. This is because you may end up trying to do this every time you get into trouble. Eventually you're destined for catastrophe. I've seen this strategy put traders out of business for good, never to return.

Trading not to lose!

If you're trading from a defensive perspective, you're destined to fail. You must train yourself to trade from an offensive position. Taking the money aspect out of the trade is the first step. Being under-capitalized can also lead you into a defensive mode. I always say the first $20,000 is the hardest. Not that $20,000 is some magic number, but experience tells me that my first climb to $20,000 took more than twice as long as the climb from $20,000 to $40,000.

Strive for consistency!

The key to longevity in your trading career is consistency. If you can make money every day, no matter how much or how little, the end of the year will look better than you've ever seen before. Some of the best traders I've ever seen made money every day on a consistent basis. I'm not saying that they never lost, but those days were few and far between. Those are the traders that have been there for twenty and thirty years.

Don't be afraid to take a profit!

So often I see customers enter into a trade, put in their stop and watch the market go their way without taking a profit. They watch their profit turn into a loser. Always remember: never turn a winner into a loser. Many traders avoid this by raising their stop over and over again. Although this can work, I prefer knowing where I want to take my profit before I put on the trade. When I see the market approach my level, I either have had an order in at my level or I simply get out at the market. In doing this, not only am I taking a profit, but I'm also getting out while the market is going in my direction instead of, in the case of the moving stop, when it is going against me.

Trade within your comfort level!

I've had customers open an account for say, $50,000, and ask me, "How many contracts can I trade?" Just because margin requirements say you can trade four contracts, doesn't mean that's how many you should trade. Over the years I've found that finding the right comfort level has been instrumental in making me a more successful trader. There have been countless times where having one contract on has netted me more than having two contracts on. This is because it helps keep the money aspect from entering my thought process. I find myself taking larger profits and smaller losses. I also tend to trade more often, therefore not missing many opportunities. When you over trade, you tend to freeze up if a trade goes against you. Not only do you usually end up losing on that trade, but you also miss many opportunities while you're sitting there hoping and praying.

Avoid reversing your position!

Being able to reverse your position while day trading inside the trading pit is essential to being a good scalper. Reversing your position on the fly while you're trading from outside the pit is usually a poor choice. By doing this, you enter into a trade brought about by pure emotion instead of your usual proven thought process. Once in a while it works, but don't let that fool you; the whipsaw is right around the corner.

Three trades rule!

I'm sure you've heard this before, but I think it bears repeating. If you have three losing trades in a row, take a break and reassess your system to see if you're doing anything wrong. Remember, markets change and systems have to change with them. Learn from your mistakes and remember the situation. You're sure to see a similar situation or the same market conditions again; only this time you'll know how to tackle them. Just because your system isn't working today doesn't mean it won't work the next day or the next week. I've been able to survive by adapting my systems to different types of markets. This wasn't an easy task, but years of experience in the markets has shown me many types of markets and many different situations.