Update: 3 ways to keep your shirt and your dignity as a Trader

Here is a list and an update on a trade I have been in since Jan 11th, felt like forever.

Let's start with the list, 3 ways to keep your shirt and dignity as a Trader.

1) Have a Legitimate reason to trade.
Don't trade out of boredom or a blog post or an article or because Max, sitting next to you, is a great trader and he is long TY_Future Fly, so I should be long too.  Put the time in, do the research and formulate plan, which is my next point.

2) Develop a Business Plan for each trade.
Entry, Risk Exit, Reward Exit, Time duration (if applicable).  Each trade is a new Business venture, treat it that way.  Very few of us have an endless supply of soldiers to deploy into the market, protect each soldier with a well defined plan.  You accomplish 2 things:
a) You define whether or not your approach is actually working in current market conditions, and
b) You have a well defined plan that preserves your most important resource, Capital.
Your business plan needs to define your approach.  It can be tweaked to account for nuances among asset classes, risk may be different in Treasury products when compared to risk in Equity products, for instance.  But, the overall theme of your business plan should be consistent so you have a benchmark for comparison.

3) Execute
Once you have well defined business plan, execute it.  You have to pull the trigger to put the risk on.  Executing is not just initiating the plan, it is also following the plan once your in the trade.  Don't override the plan once in a trade because you have a hunch.  A hunch has ruined many a man in this business, market makers and HFT programs will eat your "hunch" for lunch.  Execute the plan according to the rules and be disciplined.

By following these 3 points, you will ultimately improve your approach to the market.  A well defined plan will help you keep your shirt, preserve your capital and save your dignity as a trader.  You will be able to walk away from the market each day, with your head held high, knowing that you followed your plan.  Some of my best trades are losers, that I take early, according to my plan, and save me a lot of mental and financial capital.

Update on SP vs Eurostoxx 50
This trade has worked according to plan and I have exited all units as the S&P and the EuroStoxx 50 have traded back to par for the year.  As you can see in my previous post, dated Feb 24th, I have been in this trade since Jan 11th.  I took some of this trade off when the market traded into the -100 bps diff on Feb 22nd, reinitiated some at the -200 bps diff level and am totally out of the trade now.

Have a great weekend and Be Blessed.

Hemi