1. Adopt a definite trading plan
   With the emotional stress that is inherent in any speculative situation, a trader must have a predetermined method of operation. This can include a set of rules by which a trader operates and adheres to. Quite often, emotions will cause a trader to do something totally foreign or negative to what their market trading plan should be. It is only by adhering to a preconceived formula that a trader can resist the emotional temptations and stresses that are constantly present in a speculative situation.


2. If you’re not sure, don’t trade
   If you’re in a trade and feel unsure of yourself, take the loss or protest your position with a stop order. If you are unsure of a position, you will be influenced by a multitude of extraneous and unimportant details and will probably end up taking a loss.


3. Traders should be able to be right 40% of the time and still show handsome profits In speculating, it would be folly to expect to be right every time. An individual trader with the proper trading techniques should be able to cut their losses short and let their profits run so that even being right less than half the time will show excellent profits.


4. Cut losses and let profits ride
   The basic failing of most traders are that they put a limit on their profits and no limit on their losses. Traders hate to admit their wrong. Therefore, an individual will often let their loss ride, becoming larger and larger in hope that eventually the market will turn around and prove they’re correct. Then after a while, they begin hoping for a small loss and gives up hoping for a profit. Human nature also dictates that an individual wants to take their profit right away and thus prove they are correct. Taking a small loss does not necessarily mean a trader was wrong in their thinking. It simply means that their timing was perhaps incorrect and that they should wait for the correct timing and situation to allow them to re-enter the market.


5. If you cannot afford to lose, you cannot afford to win
   Losing is a natural part of trading. If you are not in a position to accept losses, either psychologically or financially, you have no business trading. In addition, trading should be done only with surplus funds that are not vital to daily expenses.


6. Don’t trade too many markets
   It is difficult to successfully trade and understand a specific market; it is next to impossible for an individual, especially a beginner, to successfully trade several markets at the same time. The fundamental, technical, and psychological information necessary to trade successfully in more than a few markets is more than the individual has either the time or ability to accumulate.


7. Don’t trade in markets that are too thin
   A lack of public participation in a market will make it difficult, if not impossible, to liquidate a position at anywhere near the price you want.


8. Be aware of the trend
   It is vitally important that a trader be aware of a strong force in the market, either bullish or bearish. When this force is at its high, it would be folly to attempt to buck it. However, one must learn to recognize when a trend is about to run its course or is near a period of exhaustion. By an ability to recognize the early signs of exhaustion, the trader will protect themselves from staying in the market too long and will be able to change direction when the trend changes.


9. A trader can usually sell the first rally or buy the first break
   Generally, a market which has just established a trend either up or down will have a reaction and good interim profits can be made by recognizing this reaction and taking advantage of it. For example, in a bull market, the first reaction will generally be met by investors waiting to buy the break. This support generally causes market to rally. The reverse is true of a bear market.


10. You must retain control of the situation and yourself
    Do not allow your position to control you. It is a mistake to find yourself in a position larger than you can reasonably handle. When this occurs, you will find that the sheer size of the position, rather than the fact of the situation itself will affect your judgment.


11. The commodity does not know that you own it
    You must remain impersonal in trading. When you take a position and you are wrong, remember it is better to get our immediately. The market will not feel badly about it if you do, buy you will if you don’t.


12. The market always looks its worst at its bottom, and best at the top
    It is important to remember that before the markets turn around, it is at its very worst. Therefore, be prepared to treat each day objectively by not allowing the emotional fever to carry over and cloud your judgment.

To learn more from Pratik and the guys at The Futures Room, visit their site at TheFuturesRoom.com