people don’t make money trading, today I’ll highlight one of them… quite simply I consider it,

Not internalizing the basic rules

First off, let me tell you what the basic rules are:

1. Let your profits run.
2. Cut your losses short.

You may have heard of these rules before… you may even be tired of hearing them. But it’s one thing to intellectually know these rules, it’s another thing to understand them at a gut level.

For me, day trading really put these rules into focus because I found that by trading short-term every day I had at least a couple dozen trading opportunities and I quickly learned that if one wasn’t good I should get out of that trade immediately and start looking for a better one. This fast paced environment forced me to never fall in love with a trade.

When you are position trading, or possibly even swing trading, you may not have as many opportunities compressed into such a short time frame.

That’s why I usually advise new traders to really get their feet wet by paper trading on a very short-term basis. Because even though you may not intend to trade short term what you really are trying to do is internalize the importance of letting your profits run and cutting your losses, and nothing does that as well as actually experiencing it for yourself.

A lot of people are missing the point in paper trading. I think most people focus on the mechanics of trading, specifically how their entries are triggered, how their exits are triggered, and figure that paper trading is solely for the reason of insuring the strategy works, and insuring that they can trade the strategy.

While do I agree that is important I believe it’s even more important to use that avenue to develop a gut grasp of letting your profits run and cutting your losses short, because once you truly absorb that point, then your trading will follow from that principle and your strategy will be a secondary factor.

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