It probably goes without saying but, don't trade when the odds are against you. Most successful traders know the kind of market conditions that favor their trading style. On some days, they can almost be certain in advance that their trading will be profitable, while on other days, they might have solid reasons to suspect that their trading will more than likely end the day in the red.
The best traders, IMO, have the discipline to simply not trade during those times when they know that the odds do not favor them. This may sound simply, but how many traders actually follow this simple rule?
Personally, my trading tends to benefit from increased volatility and heavy volume (as is likely true for many traders). As a result, I have substantially reduced my trading during the declining volatility of the last year, although my trading has increased somewhat in the past month.
Be creative to determine ways to predict whether your trading will be profitable, then use this as a guide to adjust your actual trading. One simple method, for example, is to look at your average profit per share (or better yet, average percentage profit per trade - so that stock price is does affect the results) over the past 5 trading days (or 10, or whatever).
=> If this number is above average (relative to your 'normal'), then you might consider increasing your trading size (possibly trade 150% of your normal size per trade). If your average profit per share is below normal, then cut your average trade size. If your average profit per share really sucks for the past x days, then consider trading the absolute minimum possible per trade, or even go into paper trade mode.
Personally, I am a huge fan of paper trading. When done properly, it is an excellent, and free, method to monitor the performance of a system.
Anyway, to summarize, a trader should "Make Hay While the Sun Shines" => and maximize his/her gains when trading is going well (within the constraints of good risk management) and most importantly, reduce trading during poor trading environments. Every trader should figure out how this should apply to them, but all of the successful traders I know use some form of this to manage their trading and reduce their inevitable losses.
The best traders, IMO, have the discipline to simply not trade during those times when they know that the odds do not favor them. This may sound simply, but how many traders actually follow this simple rule?
Personally, my trading tends to benefit from increased volatility and heavy volume (as is likely true for many traders). As a result, I have substantially reduced my trading during the declining volatility of the last year, although my trading has increased somewhat in the past month.
Be creative to determine ways to predict whether your trading will be profitable, then use this as a guide to adjust your actual trading. One simple method, for example, is to look at your average profit per share (or better yet, average percentage profit per trade - so that stock price is does affect the results) over the past 5 trading days (or 10, or whatever).
=> If this number is above average (relative to your 'normal'), then you might consider increasing your trading size (possibly trade 150% of your normal size per trade). If your average profit per share is below normal, then cut your average trade size. If your average profit per share really sucks for the past x days, then consider trading the absolute minimum possible per trade, or even go into paper trade mode.
Personally, I am a huge fan of paper trading. When done properly, it is an excellent, and free, method to monitor the performance of a system.
Anyway, to summarize, a trader should "Make Hay While the Sun Shines" => and maximize his/her gains when trading is going well (within the constraints of good risk management) and most importantly, reduce trading during poor trading environments. Every trader should figure out how this should apply to them, but all of the successful traders I know use some form of this to manage their trading and reduce their inevitable losses.
