Rules for Trade Management

BEFORE you even consider entering into the trade, you must have a game plan in place.

That game plan lays out how you'll handle this deal, whether it works out well for you or not.

It's easy to enter a trade; it's how you exit a transaction that determines whether you make or lose money.

Follow Tom's example

Tom and Jerry, two traders, could make the identical trade yet end up with completely different results.

Tom will profit from the transaction since he carefully handled it and prepared exit strategies for many circumstances.

Even if he loses, he'll know when to stop bleeding so he may go with a smaller loss.

Jerry, on the other hand, is without a strategy. He is unsure about what he will do if the price falls dramatically against him, wiping out his account.

BEFORE you enter the trade, you must decide how you will manage the trade.

In the midst of combat, you don't want to be making vital decisions.

You should have already chosen how you will react to every possible outcome before you enter a deal.

EVERY. POSSIBLE. OUTCOME.

Try to anticipate all of the possible outcomes and decide what you will do ahead of time.

Follow in the footsteps of Spock

In a trade, you want to be a cold-hearted, heartless execution robot.

You aspire to be like Spock, but without his human characteristics. You'd like to work as a Vulcan trader.

Before a trade, all decisions are taken. You are a proactive person. This indicates that you have not yet entered the trade!

You simply refer to what you wrote here when opting to enter a transaction. This eliminates any decision-making by the seat of one's pants.

If you do decide to accept the trade, you now know where your initial stop loss will be, as well as your profit target(s), if you will trail your stop, and how you might exit your trade early.

Follow in the footsteps of Keanu Reeves.

Assume the role of Keanu Reeves.

If you were given a pop quiz at any moment throughout the transaction and asked, “What if price does this or that？” what would you say？ What if the price shifts this way or that？

“How do you make a living？” “How do you make a living？”

Every single deal, every single time, you should be able to respond quickly and without thinking.

BEFORE the transaction is started, you must have all of your trade management rules thoroughly worked out.

When you're in a transaction, you never want to be thinking, “What the hell do I do now？”

The time to decide such things is always, always, always BEFORE you ever enter a trade.