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**Source:** [https://www.investopedia.com/articles/trading/04/042104.asp](https://www.investopedia.com/articles/trading/04/042104.asp)
**Type:** #litnote   [[Other/Obsidian Starter Vault(Second Brain)/003 RESOURCES/Trading]]

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> A plan helps you follow your strategy, keep your emotions on check and be a consistently profitable trader. 

The market is always right. Don't get attached to your opinion or view of why one thing should happen. The market is always irrational at times because it is made by humans who most of the time don't have to make sense. 

Trading is a mind game. Mastering your own psychology is a must if you want to succeed as a trader. 

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# General Rules
- Never enter a trade without a plan(Take Profit, Stop Loss)
- Once in a trade, stick to the plan
- Its okay to be wrong. You are here to make money not to be right
- Be patient. Don't act on Fear & FOMO
- Don't chase the market
- Let winners run and cut losers

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# 5 Fundamental Truths
- Anything can happen
- You don't need to know what's going to happen next in order to make money
- There is random distribution between wins and losses for any given set of variables that define and edge.
- Edge is nothing more than an indication of higher probability of one thing over another
- Every moment in the market is unique

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# Rules of consistency
- Objectively identifying edges
- Predefined risk of every trade
- Accepting the risk or willing to let go of the trade
- Acting on edge without any hesitation or fear
- Paying yourself when the market makes money available to you.
- Continually monitoring the susceptibility for making errors
- Never violating these rules

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# Risk & Money Management
- Don't increase the standard trade size until you doubled your account
- The maximum amount I'm allowed to lose in a day is $XXX
- The maximum amount I'm allowed to lose in a single trade is $XXX
- The maximum number of losing trades in a row you are allowed to have in a day before you stop trading is 3
- The maximum number of losing trades you are allowed to have in a day before you stop trading is 5
- The maximum number of losing trades in the same direction you are allowed to take in a day before you stop trading is 2
- If you are up $XXX on a single trade, you will put a profit floor of $XXX underneath the current price to protect a portion of those profits
- If you are up $XXX on a single trade, you will take the money and close out the trade.
- If you are up $XXX for the day, you will take the rest of the day off, stay away from the trading screens, and do something you enjoy doing—other than trading.
-  If you are up $XXX for the month, you will put a profit floor of $XXX underneath the month's profits to protect a portion of those profits. 
- If you are up $XXX for the month, you will take the rest of the month off, stay away from the trading screens, and do something you enjoy doing—other than trading! Take a vacation, sleep late and read books, or do something else fun.

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> Look for price action to either jump or fade a move.
- You can be profitable with less than 50% win rate if your money management is up to the par
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For day trading, you want to look for hight probabitliy setups. The trade needs to go into your intended direction more or less immediately.

Put stop loss to break even as soon as the trade starts making profit. This keeps enough room for the trade to run while protecting your captial. 

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Study, study, study. Instead of doing social media, do courses. Read books. Revise your plans. Learn from others. 

Focus on RR, profit factor, and expectancy instead of just win rate. Win rate doesn't tell whether you are profitable or not.