They use good money management

They take consistent actions, they follow a trading plan

They keep good records so they can review their actions

They avoid overtrading

They have a winning attitude

You need to a strategy to put the odds in your favor for each trade you take. Your strategy should be as objective as possible and include the following elements:

For every action you take, the reason should be clearly described in your strategy.

The goal of money management is to ensure your survival by avoiding risks that could take you out of business. Your money management rules should include the following:

Maximum amount at risk for each trade. The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.

During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster.

Good record keeping

Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions. Good records will allow you to:

Review your actions at the end of each day to make sure you followed you strategy, not your emotions.

You should also keep a journal of your observations.

During trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules.

For every action you take during trading hours, the reason should not be greed or fear. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.

You have to follow the plan without exception. Any valid reason for an exception - for example, correcting an oversight - should become part of the plan.

Sometimes the best thing to do is to do nothing. Not trading on those bad days is key to becoming a consistent winner – in some situations it is very tempting to overtrade:

If you trade to fulfill a need for action, to relieve boredom

If you can’t find the proper setup but can’t wait

If you fear you are missing out on a great trade or on a great market

If you want to make up for losses (revenge)

If you trade to feel like you are working instead of sitting around. Trading involves a lot of work other than the actual buying and selling.

You should not trade under the following conditions  

You have reached your daily or weekly maximum loss

You are sick or very tired

You are very emotional (upset, pressured to make money, self-esteem destroyed)

You are using new tools you are not completely familiar with

You need time to work on your trading plan

Losing traders look for a “sure thing", hang on hope, and avoid accepting small losses. Their trading is based on emotions. You must treat trading as a probability game in which you don’t need to know what is going to happen next in order to make money. All you need to know is that the odds are in your favor before you put a trade.

If you believe in your edge, which is you believe that the odds in your favor for each trade you enter, then you should have no expectation other than something will happen.

Your attitude will have a direct influence on your trading results:

Take responsibility for all your actions – don’t blame the market or world events.

Don’t try to guess the future – trading is a game of probabilities.

Handle trading as a serious intellectual pursuit.