25 RULES
TO BECOMING A
DISCIPLINED TRADER
25 RULES
2
TO BECOMING A DISCIPLINED TRADER
How is it that some traders only last a few
months while others carve out a career in
markets over a lifetime?
One word… Discipline.
Discipline keeps us alive when a series
of bad trades threatens to extinguish our
account.
Discipline lets us change with the market.
Discipline helps us fight our worst enemy —
emotions.
While each trader forges their own
path, successful traders share common
elements.
We believe these are the top 25 most
essential rules necessary to become a
disciplined trader.
TABLE OF CONTENTS
PREPARATION
01 Journal your trades 5
02 Develop a trading plan 5
03 Create an economic data release schedule 6
04 Pick a trading style that works with your lifestyle 6
PERFORMANCE
05 Schedule a regular performance review 8
06 Use an accountability partner to maintain objectivity 8
07 Try and study ideas in a simulated account first 8
08 Avoid analysis paralysis 9
09 Simplify indicator usage 9
10 Make friends with expected value 10
MANAGING EMOTIONS
11 Be OK with losing 12
12 Take breaks from the markets 12
13 Take an emotional inventory regularly 13
14 Reset your account from time to time 13
TRADE MANAGEMENT
15 Start small 15
16 Trade often 15
17 Focus on decisions, not outcomes 15
18 Every trade should have an entry, target, stop, and size before it starts 16
19 Don’t touch your stops 16
20 Understand market correlations 16
RISK MANAGEMENT
21 Manage your position and portfolio size 18
22 Set daily and weekly loss limits 18
23 Never leave trades unattended 18
24 Your first loss is your best loss 18
25 Don’t trade what you can’t afford to lose 19
PREPARATION
Give me six hours to
chop down a tree and I
will spend the first four
sharpening the axe.
ABRAHAM LINCOLN
25 RULES
5
TO BECOMING A DISCIPLINED TRADER
01
JOURNAL YOUR TRADES
A journal is the single most valuable tool for any trader. Yet, most of us let it lapse or commit to one half-
heartedly.
Journals provide an unbiased view of your trades, cutting through emotions and noise to show you exactly
what happened. Used correctly, a trading journal helps currency traders identify risks and opportunities.
While there are thousands of templates out there, the best ones incorporate the following elements for each
transaction:
• Entry time and price
• Exit time and price
• Position size
• Target price or indicator
• Stop price or indicator
02
DEVELOP A TRADING PLAN
A well-crafted trading plan is a roadmap to success. Like any business plan, it defines key elements such as:
• Trading style
• Risk management
• Setups for your strategy
• Performance review milestones
• Markets you wish to trade
• Trading schedule
In this whitepaper, we discuss many of these in more detail. All of them need to align with your goals and
expectations. Otherwise, your strategy could deliver too much volatility or employ too little leverage.
25 RULES
6
TO BECOMING A DISCIPLINED TRADER
03
CREATE AN ECONOMIC DATA RELEASE
SCHEDULE
Economic data can and often do move currency markets as well as equities. Every currency trader should
know when these are scheduled and plan for them.
These points inject increased volatility, creating both opportunities and risks. Swing traders can use them as
catalysts, while high-frequency traders may be better off avoiding them altogether.
04
PICK A TRADING STYLE THAT WORKS
WITH YOUR LIFESTYLE
Imagine trying to day trade while holding down a full-time job. Other than checking your phone during
meetings, chances are you won’t be successful in the long run. Your trading style needs to match your
lifestyle. Take an honest assessment of how much time you can dedicate to trading daily, weekly, and
monthly. Then develop a trading plan and strategy that matches.
PERFORMANCE
Practice the philosophy
of continuous
improvement. Get a little
better every day.
AUTHOR UNKNOWN
25 RULES
8
TO BECOMING A DISCIPLINED TRADER
05
SCHEDULE A REGULAR
PERFORMANCE REVIEW
Collecting data is all fine and good. But it’s only useful when studied. Regular reviews serve several purposes:
• It keeps a trader focused on their trading plan
• Compare emotions and perceptions to reality
• Identify potential problems and opportunities
Performance reviews should be as structured as possible. These ensure each session provides optimal
value and covers all the necessary elements.
06
USE AN ACCOUNTABILITY PARTNER
TO MAINTAIN OBJECTIVITY
We all get tunnel vision from time to time. Keeping a friend or trading partner on the side can help you
maintain objectivity. If you don’t know anyone that trades, consider joining an online community or group of
like-minded traders.
Another great way to keep yourself balanced is with a trading mentor. Mentors provide invaluable insights
based on experience. They can help you avoid pitfalls that plagued them early on.
07
TRY AND STUDY IDEAS IN A
SIMULATED ACCOUNT FIRST
Never implement a new idea in your real money account without first testing it in a paper (demo) version. In
fact, you shouldn’t begin trading a new idea until you’ve completed one of your scheduled reviews and then
rewritten your trading plan. It’s easy to get caught up in a new idea and miss something small and important
that could wreck your account.
Think of an algo trader who fat fingers a decimal point and ends up with a position size 100x larger than they
intended. Wouldn’t you rather find out about that without risking real money?
25 RULES
9
TO BECOMING A DISCIPLINED TRADER
08
AVOID ANALYSIS
PARALYSIS
Traders can often overthink situations or trades, leading to analysis paralysis. Indecision is especially
prevalent when emotions are high, or a trade is failing. If you start to second guess yourself in the middle of
the action, do the following:
• Read your current trading plan and strategy.
• Commit to finishing this trade exactly as prescribed.
• Write down any ideas or questions you have and leave them for your scheduled review.
Later on, when you review your trading journal looking for patterns and opportunities, remember that nothing
will ever be perfect or foolproof. At some point, you will need to decide whether to put an idea into action.
It’s ok to trade a strategy you aren’t 100% comfortable with as long as you have and trust a review process.
09
SIMPLIFY INDICATOR
USAGE
How many times have you seen a trader’s chart with so many indicators you can’t see the candlesticks
beneath it?
Indicators come in two flavors: reactive and proactive. Reactive indicators look at past price action to
tell you what has happened. These include moving averages, Bollinger Bands, and the like. Proactive
indicators attempt to identify turning points before and as they occur. These include oscillators, divergences,
stochastics, and the like. Some traders will break these down further into volatility and support and
resistance indicators.
Whether you use two or four groups, if you use multiple indicators from one group, ask yourself whether
they individually provide value or need to be used together for a strategy to work. Quite often, traders find
they have overlapping indicators that function similarly. Excess indicators not only clog up your screen, but
they can also slow down a platform’s performance and gunk up your analysis. Look for them during your
scheduled reviews and consider removing ones you find unnecessary.
25 RULES
10
TO BECOMING A DISCIPLINED TRADER
10
MAKE FRIENDS WITH
EXPECTED VALUE
Expected value is the amount you forecast to make on average over many trades. You only need three pieces
of information to calculate this metric: win rate, potential profit, and potential loss. All of this can be derived
from your trading journal, substituting average for potential profit and loss.
The calculation is as follows:
Expected value = (% chance of winning x potential profit) - (% chance of losing x potential loss)
Note:
Your percent chance of losing is 100% minus your percent chance of winning. An expected value greater
than one means you should turn a profit over time. Less than zero indicates you would lose money. And zero,
you would break even.
Here’s an easy example
Say I give you $1 every time you flip heads on a coin, and you lose $1 every time you flip tails.
Your expected value is $0 since you have a 50/50 shot of either occurrence and your risk and
reward are equal.
Now assume that I pay you $1.25 for every time you flip heads, but you lose $1.10 for every loss.
Your expected value is as follows:
EV = (50% x 1.25) - (50% x 1.10) = $0.075
Trading works the same way. Say your win rate is 65%. Your trading journal says you average
$150 profit for your winners and $200 for your losers.
Your expected value calculates as follows:
EV = (65% x $150) - (35% x $200) = $97.50 -$70 = $27.50.
So, on average, you should make $27.50 per trade.
MANAGING EMOTIONS
No work is stressful. It is
your inability to manage
your body, mind and
emotions that makes it
stressful.
SADHGURU
25 RULES
12
TO BECOMING A DISCIPLINED TRADER
11
BE OK WITH
LOSING
No matter how good you are, trade long enough, and you will lose. It could be one loss. It could be a string of
losses. That’s part of trading. Every trader needs to understand and plan for this.
Losing is only a problem when it happens more often than you’d expect over many trades, or you take losses
that are much larger than expected.
When you accept losing as part of the game, it becomes easier to take those small losses rather than
holding on and hoping for more.
12
TAKE BREAKS FROM
THE MARKETS
Trading is work as much as it’s fun. It’s stressful and rewarding.
Like any good business, we sometimes need a vacation. It’s easy to get caught up in the markets. That’s why
every trader needs to take regularly scheduled breaks where they unplug.
We’re not talking about going home at the end of the day but stepping away from the screens. Breaks help
us recenter and reset ourselves, especially when bad behavior creeps in.
Here are some signs you need to take a break from trading:
• You find yourself overtrading, taking marginal and sometimes sloppy setups.
• You’ve taken a handful of really large losses lately.
• When you’re not trading, you’re going over trades, particularly losing ones, in your mind.
• You become more irritable or have started to lose sleep.
25 RULES
13
TO BECOMING A DISCIPLINED TRADER
13
TAKE AN EMOTIONAL
INVENTORY REGULARLY
We noted that journals are the single most valuable tool for currency traders. Why? Because emotions are
the biggest obstacles they face.
Emotions cause traders to ignore their plans, over trade, take excess risk, or unproven strategies, ultimately
leading to disastrous results. We can’t get rid of our emotions. But we can diminish their influence. That
starts with an emotional inventory.
While you ideally want to do it before every trade, you should at least identify your emotional state before
every session.
Ask yourself questions such as the following:
• How do you feel?
• What are your current worries and hopes?
• Have any significant events occurred that could destabilize your work?
If you think that emotions could impact your trading, take a step back. You don’t need to trade every day.
There’s always another opportunity around the corner. Instead, work on the causes of your emotional
distress. If you cannot solve them, develop a plan that regularly checks your emotions throughout the day,
before each trade, or limits as much in-the-moment decision-making as possible.
14
RESET YOUR ACCOUNT
FROM TIME TO TIME
Many traders have mental blocks against certain dollar amounts. Maybe you struggle to break $50,000 or
$100,000. Other times they start taking larger or too many losses when the account grows beyond a certain
point. When this happens, consider resetting your account.
Find a set amount you’re comfortable trading with and limit how much you will let that account grow. Then,
simply take profits out and reset the account.
TRADE MANAGEMENT
In trading, it's not about
how much you make, but
rather about how much
you don't lose.
BERNARD BARUCH
25 RULES
15
TO BECOMING A DISCIPLINED TRADER
15
START
SMALL
With few exceptions, there is no successful strategy that works on a $500,000 account that can’t work on a
$5,000 one. Newer traders are especially prone to blowing up. It’s almost a rite of passage.
That’s why you want to start small. Don’t focus on total profits. Instead, look at percentage changes. Building
consistency will build your confidence.
16
TRADE
OFTEN
George Soros famously made $1 billion betting against the British Pound in the early 90s. One shot wealth is
more the exception than the rule.
Few traders earn their living off only a handful of profitable trades. Instead, they make money through
hundreds, if not thousands, of small trades.
Trading often allows the law of averages to work in your favor. It ensures that no one trade or string of them
will obliterate your account.
17
FOCUS ON DECISIONS,
NOT OUTCOMES
If you make good decisions, profits will follow. Humans are hardwired for recursive learning, using feedback
to adjust.
Trading is a lot like poker. Even with the best hand, you can lose. The best poker players and traders don’t
worry about whether they win or lose on any given day or hand.
Instead, they make sure they make the best decisions possible, knowing that the outcomes will turn in their
favor over time. Keep in mind, even proven strategies can and do break down over time.
Focusing on making the right decisions helps us separate luck from strategy.
25 RULES
16
TO BECOMING A DISCIPLINED TRADER
18
EVERY TRADE SHOULD HAVE AN ENTRY,
TARGET, STOP, AND SIZE BEFORE IT STARTS
This is one of the hardest concepts for newer traders to grasp. Knowing your entry, target, stop, and position
size is essential to risk management.
Without knowing these ahead of time, you open yourself up to potentially devastating losses. What many
people don’t realize is these don’t have to be exact numbers.
Actually, traders often use zones, targets, candle closes, and the like to structure their trades. Even if a trader
uses the time of day to exit a trade, they still keep fail-safe risk parameters in place just in case.
19
DON’T TOUCH
YOUR STOPS
It’s far too easy and all too common for traders to move their stops. Once you’ve clicked your mouse, you’ve
sealed your fate. With rare exception, adjusting your stops during a trade is a recipe for disaster. We set
opened ourselves up to the potentially devastating consequences.
20
UNDERSTAND MARKET
CORRELATIONS
This is for our forex traders, especially. When investors want safety, which currencies do they typically pick?
The Japanese Yen or the U.S. Dollar.
What about more risk? Try the Turkish Lira if you can stomach it.
While each forex market is unique, many correlate to one another. Correlation is a measure between -1 and
+1 of how two markets relate:
• +1 means the two markets move exactly in the same direction.
• -1 means the two markets move in exactly opposite directions.
• 0 means the two markets move entirely independently of one another.
Forex traders need to keep this in mind when they take positions across multiple currencies. Otherwise, they
may find themselves with concentrated risk in similar forex markets.
RISK MANAGEMENT
All of life is the
management of risk —
not its elimination.
WALTER WRISTON
25 RULES
18
TO BECOMING A DISCIPLINED TRADER
21
MANAGE YOUR POSITION
AND PORTFOLIO SIZE
Never take an arbitrary position size. Every trade that you take should be measured. You should be able to
determine how each position would impact your portfolio before executing a trade.
22
SET DAILY AND WEEKLY
LOSS LIMITS
Everyone hits a rough patch in their trading lives. Sometimes it’s us. Sometimes it’s the markets. The key is
not to let any string of losses ruin you or your account. Daily and weekly loss limits prevent any streak from
ending a trading career, whether driven by the market, a broken strategy, or our emotions.
23
NEVER LEAVE TRADES
UNATTENDED
This might sound obvious, and no, we’re not talking about using the restroom. Our world is full of
distractions. It’s easy to take a phone call and lose focus on what’s going on. Heck, some traders completely
forget to close out trades before leaving the office. Don’t let that be you. If you don’t plan to exit a trade
manually, always have a stop loss and target order in place just in case.
24
YOUR FIRST LOSS IS YOUR
BEST LOSS
This adage has been used by countless traders and never loses its value. In layman’s terms — take small
losses before they become big ones. Traders stay in positions for two reasons: they don’t want to be wrong,
or they don’t want to lose money. Once your trade has gone outside the parameters of your strategy, you’ve
turned it into a gamble.
25 RULES
19
TO BECOMING A DISCIPLINED TRADER
25
DON’T TRADE WHAT YOU
CAN’T AFFORD TO LOSE
We’ve saved the most important for last…
We all want to make money trading. That’s why we start. But the last thing you want to do is trade money
that you can’t afford to lose. What does that mean?
Here are three simple rules:
• Don’t borrow money to trade that puts you in debt (this is different from leverage).
• Don’t take money you’ve set aside for another savings purpose.
• Don’t trade money that you need to pay your bills.
ABOUT SURGETRADER
Here at SurgeTrader, we fund traders up to $1 million. Our traders keep up to 90% of the profits.
The program is built on three pillars:
1. Simple, straightforward trading rules
2. No time restrictions
3. Fast, responsive service
SurgeTrader offers a one-step funding model, where traders take an Audition with simple rules and no
time restrictions. SurgeTrader exists to accelerate trader funding and help profitable traders with their
biggest challenge: undercapitalization. We are not built to profit off of failed challenges like other firms.
Our approach is long-term. We profit when you profit. When you win, we all win.
If you want to partner with a firm that has simple trading rules, incredible trader support and has your
best interests at heart, SurgeTrader is the partner for you.
Get started today at www.surgetrader.com
CONTACT INFO
866-998-0883 (Toll-free)
239-829-8438 (Direct)
[email protected]
www.surgetrader.com
405 5th Ave South
Naples, Florida 34102
All information provided here is intended solely for study purposes related to trading financial markets and does not serve in any way as a specific
investment recommendation, business recommendation, investment opportunity, analysis, or similar general recommendation regarding the trading
of investment instruments. The content, in its entirety or parts, is the sole opinion of SurgeTrader and is intended for educational purposes only. The
historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading
records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose.
