In our career or profession, in initial phase we all go through some form of struggle till we achieve success. Trading as a profession is no different. This struggle actually makes us more strong and capable and helps us to be successful if we learn the lesson out of it. When I first started day trading with DPs I was struggling a lot. Most of my trades were hitting the initial stop loss. It forced me to stop trading. Then I tried to analyze what was going wrong. I found out that my one of the problem areas was related to discipline, self-discipline. I was lacking discipline. I was keeping the SLs and adhering to it but not following good money management, not following other rules of trading. Sometimes I was overtrading, sometimes I was hesitating to initiate trade. So I decided to work on that. I made some rules and decided that I would strictly follow those rules.
Rules that made a difference in my trading:
Maximum number of trades in a loss (where initial SL gets hit) allowed per day is 2. Maximum number of loss days allowed per week is also 2. If there are losses for two consecutive weeks, stop trading for that month.
This helped me to limit my losses to around 5K for the Nifty 50 lot per month. I never lost more than that once I started following it.
Restrict to only one losing trade per DP or cluster of DPs. If the trade was in a loss, do not trade again at the same DP.
This kept me away from overtrading and kept my emotions under check while trading.
Avoid taking the trade when the price is in a channel or DP is barb wired between the range.
This also helped a lot in controlling the losses whenever I was able to suspect it early.
Avoid taking the trade in same direction when it has run up a lot, e.g. 40 to 50+ or more.
This helped me to avoid trading overextended, over-stretched, big gaps kind of moves where we can suspect range-bound movement after such moves.
No BO trade of any type, PP, cigarette, range BO etc.
Most BOs fail and this rule saved me a lot from those failures, though I missed sometimes very good BO moves.
Take a break for 20-30 minutes after every trade.
Break means focus off the trading screen and not thinking about it for some time. Doing something else, like chatting with others, listening music, anything.
This too helped me a lot. A small break after the trade, no matter what, winning or losing, helps in many ways to keep me calm and focused and think from the scratch.
Plus, I avoided trading in the following situations where I felt it was hampering my thought process and making me take wrong decisions.
- When I was mentally upset. Because I feel your surrounding/environment, at home or at work, should be conducive to trading. You should not be worried or anxious or angry or upset over something.
- Crying over spilled milk. You missed a good trade and that feeling of being left out makes you not to think straight.
- Itch to trade. You are not getting good opportunity to trade and the itch is so strong that you end up taking wrong trade.
I simply avoided trading for the rest of day once such emotions started affecting me very strongly and I was not able to get out it.
These self-made rules initially were very difficult for me to follow, but I decided strongly to stick to it. There were many days where I had lot of reasons not to trade and I did not trade actually. I was getting upset easily, was crying over lost opportunity, was watching the trade to move in my anticipated direction without me. I did not escape from those emotions or tried to control them. I just avoided trading in those situations till I was more mature enough to handle them.
This approach to address the self-discipline and cut the losses by being a disciplined helped me a lot and gradually over a period of time I started making the right decisions. Later I modified those rules as I gained experience and confidence. I even started taking the BO trades more confidently.
If you feel you are in the same struggling phase where self-discipline is the culprit, make your own set of rules, be honest to yourself and be disciplined in following them. The rules that you make and follow, make sure address your problem areas, your personality, your lifestyle and your goals. What works for me, may not work for you.
Wish you all the best.