The 3 Strike Rule

Markets can be chaotic.

Market makers don’t always agree where price will go next which means price can whipsaw as it consolidates before a big move....

Stop losses are important.

Setting a stoploss on your trading behavior is as well. If you notice you just can’t seem to get it right one day and feel like you’re out of sync with your trades.

Take that day to clear your mind. Spend the rest of the day focusing on all the things you intend to do right the next day.

Make those intentions clear in your mind that day and then sleep on it. The next morning remind yourself!

Spend 20min focusing on all those things you are going to do right and when it’s time, execute.

Healthy trading behaviors are key to your success.

So consider a 3 strike rule as a self stop loss to keep your self from making unnecessary mistakes on those days you just can’t seem to get it right.

The 3 strike rule doesn’t just apply to yourself but setups that just don’t seem to be working. If you’ve stopped out of the same trade 3x already maybe it’s time to move your attention onto something that isn’t so choppy.

The goal isn’t to trade everything you see. The goal is to trade the setups that are the most obvious and that have the greatest probability of making you money!

It’s your job as a trader to manage your risk.

This means before every trade you need to ask yourself, “is the juice worth the squeeze?”. Will my return on this investment outweigh the possible downside risk? Is there anything I need to be aware of before making this investment? If you’re investing in semi-conductors and the market is starting to look weak maybe you hold off..

Successful traders cultivate successful habits.

In trading this means only entering when your potential reward outweighs possible downside risk (in my trading by at least 5:1) and the odds are on your side (entering at strong support/resistance and purchasing options that put the odds on our side).

If on any given day you can’t seem to get in the flow or a ticker you are trading keeps chopping you up try adhering to the 3 strike rule to get yourself out of a bad mindset so you can come back fresh and kick the markets a$$!

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