JOHANNESBURG (Business Day) -- All the rest - analysis, charts, trade execution, etc. - is the other 10%. "You can't trade without a plan," he says.
"But you can't execute that plan consistently if your mental game is off."
The following is a pr'ecis of Borsellino's 10 commandments of trading, published in The Global-Investor Book of Investing Rules:
Trade for success, not for money
If money alone is your motivation you severely limit your chance of success because focusing on money will raise all kinds of emotional issues.
It will make you afraid of losses to the point that you will abandon your discipline. It will tempt you to trade too often, too large and with too much risk.
Discipline is essential
The disciplined trader - regardless of profit or loss - comes back to trade another day. A great intellect, the ability to take on risk, even a sense that you're somehow "lucky", mean nothing without discipline.
Know yourself
Do you break out in a cold sweat at the mere thought of risking your capital? Do you think of trading as a "gamble"?
Or can you handle risk in a disciplined fashion, knowing how much is "too much" for both your capital and your constitution?
Lose your ego
No matter how much success you enjoy as a trader, you'll never outsmart the market.
The market rules, always, and for everyone. To trade effectively, you need to put yourself aside.
Don't rely on hoping, wishing or praying
If you end up hoping, wishing and praying for things to turn around it's because you've lost your discipline and allowed a small loss to turn into a much bigger one.
When the market hits your stop-loss level, get out.
Let your profits run, and cut your losses quickly
Exit when the loss is a small one. Then re-evaluate your strategy and execute a new trade. Profits take care of themselves as long as you execute according to your plan. When you place a trade, know in advance where you'll exit for a profit.
Know when to trade and when to wait
Trade when your system says you have a buy or sell. If the market doesn't have a clear direction, wait on the sidelines until it does.
Love your losers like you love your winners
Losing trades will be your best teachers. Examine what went wrong, objectively, then adjust your thinking, if necessary, and enter the trade again.
After three losing trades in a row, take a break. Sit on the sidelines for a while. Watch the market. Clear your head.
Re-evaluate your strategy, and then put on another trade. Avoid becoming overemotional and angry at yourself and the market.
The unbreakable rule
You can break a rule and get away with it once in a while. But try it too often and the rules will break you.
