Trading Discipline
Trading is a probabilistic event. A mature trading system should follow the order below to open positions:
1: Capital Management - Ensure that small mistakes do not lead to large losses, and never exit the market; this should always be the top priority.
2: Direction - The target for opening positions; this must align with the current overall trend.
3: Stop Loss Position: Ensure that, when the direction is correct, the probability of needing a stop loss is low.
4: Entry Position: When the direction is clear, ensure you are in the trade with a reasonable risk-reward ratio.
Most people lack the first point and only focus on the fourth, fixated on entering the market, which is a grave mistake.
