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ENFORCING TRADING RULES

 Sometimes the most important thing a prop firm leader can do for a developing trader is to say, “No.”

No, you cannot leave early. 

No, I will not raise your loss limit since you are stopped out and your mother feels bad for you. 

No, you cannot trade with more size yet. 

No, you cannot blow off the AM meeting. 

Many traders trade independently with their own money from their house. They have their own rules but when they break them there are no consequences. For example, an independent trader will create the rule that if he exceeds his intraday loss limit, then he will shut down his trading for the day. Let’s say that that intraday loss limit is $1,500. The independent trader will be down $2k, recognize that he has exceeded his intraday loss limit, and continue trading. The independent trader will offer excuses to himself. That rule was not meant for a day like today. I just got screwed today, the rule does not apply. And then this trader will proceed to rip up another $1k. Does this sound familiar?

It is the job of a proprietary desk to ensure that you are following your own (and the collective) rules. If, for example, you must be prepared before the Open, but come in late, then you cannot trade the Open. We do not make exceptions. You must be prepared to trade on the Open, and if you arrive late, then you are not prepared. If you are not prepared, then it is not in your self-interest (or mine) to trade the Open. Instead, you trade on the demo until 11 AM. Traders will often ask for an exception to be made. My answer is, “No.”

When a trader is stopped out, they must sit and watch stocks trade all day and learn. He is not permitted to go home. 

Every successful prop trader knows his best setups. There are some traders who just know a great setup when they see it. But when you begin, it is important to measure your trading.

For example, do you trade momentum setups better than buying into a pullback? If so, then you should spend more time trading momentum plays.

The importance is not necessarily to learn this trade but it is to understand what works best for you.

If you want to be great at anything, you must practice.

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