What’s up Tackle Traders! I hope your week is going great thus far despite the continued madness happening around the world. We are, however, in a business and our business is to trade so trading we must. I do not know about you but I enjoy trading very much. I love the excitement of placing a trade and seeing the results of those trades play out in my favor. I have also come to the point in my trading journey where I have learned to let my profits run and cut my losers short and keep it moving. This was not the case as a beginner though, my emotions were all over the place when I got started. I was forever staring at my computer looking at the indices, charts and the ever-changing red and green numbers on my profit and loss. I had not quite established a plan of how this new venture was going to pan out but I knew this was going to be the thing I did forever and ever. From day one, coaches and mentors emphasized on having a rules-based trading business, but I didn’t always apply to those rules and even when I did, halfway through I was making up my own rules because I had all of a sudden become an expert after having a couple of good runs. It took a while to realize the collation between following rules and the effect they have on our emotions. It is quite simple when you think about it, yet so hard to apply until you get smacked in the face a couple of times.
So what are the rules of trading anyway and why are they so important? Well, if you have ever posted that question to the Justice Brothers as a newbie you probably heard Trust the process TTP or because I said so as the answer. That answer is sometimes hard for us who are analytical to grasp but frankly, it is what we need as new traders. That response is what we give our kids when they keep asking the infamous question WHY? I have probably told my kids “because I said so” over a hundred times because as their mom I know they are too young to understand certain things. Of course, as they get older I can explain in deeper lengths certain things when it is appropriate. As a new trader, I did not have the time or the know how to dissect the ins and outs of options trading. What a new beginner needs is DIRECTION! We need to have the same approach with our coaches and mentors too. They have put in hours upon hours of backtesting and trading to prove that they know a thing or two about why the rules and why they are what are. When it comes to Delta, days to expiration, ROI target, position sizing and of course stop losses these rules exist for a reason. There is a reason why the rule for a covered call has a 40 delta rule vs a 10 delta for the iron condor. If you disagree, go ahead and trade a 40 delta on an Iron Condor especially when it has been on a run like it has been the last month. By ignoring the rules, you run the risk of having a major drawdown and even worse blowing up your entire account.
When I look back at my trading journey, it is amazing the number of times I ignored or overlooked the rules provided. I have always followed the Delta rules when getting into a trade yet when it came to other trade management rules it was a battle. For the most part, I was over positioned in my trades and I didn’t even realize it. After analyzing and going through the technical analysis, I would then enter my trades. I had multiple accounts and I would enter the same trades in all the accounts. So for instance, if the minimum I was willing to risk in a trade was $100, I would enter the orders across 3 accounts which meant that my risk was $300, not $100. See, small mistakes like these can really make or break your account. Obviously, if the trade was profitable then it would be a good mistake but when it went the opposite direction then I was at risk to lose an additional $200. The other thing I would do quite often was to ignore the stop loss or exit rules. I would start doing all sorts of things to justify keeping the trade in place. Before I knew it, I thought I was hedging not realizing that I was getting into riskier trades. In comes the emotions. Often times it is said to trade with no emotion but even when you follow the rules its hard to trade with no emotion. So can you imagine the amount of emotion that comes with trading without rules? It is the most nerve-wracking thing in the world. I already have things in my life that cause my blood pressure to go up and down. I am a Washington Redskins fan, enough said. Trading did not need to become another. So eventually after a few highs and lows, I have learned to follow the rules and have less emotion but that doesn’t come easy. We have a tendency to go against the what we’ve trained to do but hopefully after trying it your way and you realized it is not working, that you will pick up the phone and call your mentor and coach and ask for help when you need.
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Emily Muiruri, an Entrepreneur, Real Estate Agent and Business owner. Born and raised in Nairobi, Kenya before her family moved and settled in Maryland. She began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Emily uses different strategies to trades stocks, options and forex. Although still a student learning and enhancing her trading skills, she has strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders
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