Your first trade is everything

Trading is all about performance. Many people can talk the talk, be very skilled technicians, know everything about the economy, the market, politics, charts, you name it, and still not be able to pull money out of the market. While academic knowledge is important and sets the foundation, it takes much more work to be a long-term consistently profitable trader.

One of the ways I try and evaluate and improve performance is by being aware how I start the day. If you are an active trader making several or more trades a day your first trade is important. It sets the tone for the day. If you come out of the gates taking a loss on your first trade chances are you will immediately feel a bit stressed, anxious, just an overall ding against your self-confidence, even if its only sub-conscious. Perhaps a single loss might not have much of an effect (or one you are aware of) but how about a second loser? A third?

When thinking about risk management rules I am sure many people only come up with very specific monetary rules for themselves. Things like, I will only risk 1% of my account per trade. Or, my standard stop loss will always be 2 points. How about creating rules that take into account the number of losing trades in a day? Or in a row? How implementing a 10-minute break from the screens after each losing trade, just to clear your head.

I bet if you were to do a quick scan through your daily performances you might be surprised at how net negative days can correlate with the first one or two trades of the day resulting in losers. As traders we need to get comfortable taking losses because lets face it, we will be wrong in our ideas about 50% of the time. That said, I am not advocating stopping trading if you start the day taking a loss. What I suggest is to just be aware of your performance and mitigate losses by taking a 5 minute stretch break after a losing trade, or cutting back in position size a bit while trying to regain a positive groove. Do not increase risk like most people instinctively want to do in order to make up for that loser.

All in all everyone handles themselves in different ways and it is up to you to decide for yourself what can help improve your trading performance. These are the nuances in successful trading that academics cannot teach you.