How Does a Trader Make their Personal Trading Rules

A trader makes a list of their personal trading rules based upon their own unique trading experience. Over time as a trader tests the market by taking small positions they make observations about the outcome of their trades.

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When they see a repetitive result either positive or negative they write down what happened and why and formulate this observation into a rule that governs future trading decisions.

They gradually build up a list of rules which are simple and straightforward and provide a framework of action they adhere to. As needed they tweak the rules and use this as a strict set of guidelines. The rules spell out what to do and when and it removes the emotional and discretionary part of trading. This prevents repetitive errors which crop up due to emotional trading.

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It Comes with Trading Experience

I mean, initially you can take a few principles as a basis, and then the list of rules will gradually grow. It is important to make up the rules and observe them. This requires fixing each violation, and summing up every trading period, say a week.

In general, self-discipline is the establishment of certain confines in trading. Sometimes these confines refer to the number of trades, sometimes – to the number of points, and sometimes – to the amount of money. Self-control, calmness, clarity, lack of emotion, determination – this is how it’s necessary to approach your computer with the switched-on terminal.

The rules themselves can be subdivided into different categories according to the level of priority.

For example, into unconditional compulsory requirements, and the rules which it is possible to deviate in some situations.

For a start it would be a good thing to make a plan of actions, and then to shape the rules based on it.