The ninth commandment of profitable trading is to eliminate mistakes. The trouble is most people don't know they're making mistakes. I wrote a document and it's got 97 common trading mistakes people have called the Trading Mistakes Cheat Sheet. As you are doing your trading, your journal says, "Okay, what did I do wrong today? What went wrong? What could have done better?" And identify what...

The eighth commandment of profitable trading is diversifying in multiple ways. Most people think they're diversified just because they have five bucks, but no, they're not at all. Nowhere near it. You'd want to have different strategies, markets, and time frames. In my program the Trader Success System, I talk about three different ways of diversification: designs, markets, and time frames....

The seventh commandment of profitable trading is to write your plan. You wouldn't go headlong into a business without any plan at all. You would have to have a business plan about what you would do, how you would make money, what your processes would be, and what your backup plans were. Most people go into the markets with no plan: no rules, risk management, and...

The sixth commandment of profitable trading is to reduce your risk. If you think you should be risking this much, you probably should be risking that much. The ideal amount to risk on a trade is usually far less than you think because unforeseen events happen. Crazy things happen in the stock market. Markets crash and stocks have bad announcements and earnings, and sometimes there are...

The biggest mistake people make is they think about making money. That sounds counterintuitive, but if you think about how much money you will make as opposed to how much you could lose if you are wrong, you get two very different outcomes. If you start by thinking about how much money you can make, you're all optimistic and thinking, "Wow, this could go to the moon." And, "how much can I...

The fourth commandment of profitable trading is you've got to have a positive edge or a positive expectancy in trading. If you apply your strategy repeatedly, do you get a positive expectation of making a profit? And I want to know if I test my strategy over the last 20 years, do I get like a thousand trades? Are those trades profitable overall on average? There will be many losses and...

The third commandment of profitable trading is to use an approach that suits you. If you're a very patient, long-term considered person, you want a long-term strategy. A long-term strategy is a trading strategy where you buy and you wait through the big major trend, and the stock keeps going up. And then when it's stopped going up and starts going down, you sell and make a profit out of the big...

The second commandment of profitable trading is to use a system. Most people approach the markets the way they approach everything else. They think “I'm pretty smart. I've got some experience. I'll bring that experience to bear, and I'll make some sensible decisions, and then I'll make some money, and then I'll be rich.” But unfortunately, when it comes to trading in the market, what you learn...

The first commandment of profitable trading is you've got to learn the language. If you want to go into a foreign country and function effectively, you need to know the language or translate. In trading, most people come into the markets and think “I'm a smart person. I'll figure it out.” But then they realize that the stock trading is confusing, and so they start to do some research and...