The All-American Traderuntil there is a reversal in the trend. Plainly put, if he is short, he
will only get out of the trade if the prior candle’s high is broken. If
he is long, he will only exit if the prior candle’s low is broken. Note
that Paul follows the classic definition of trend with an uptrend
defined by higherlowswhile a downtrend is defined by lower
highs. This is a very simple, disciplined approach that keeps Paul
in position for those few long-trending trades that can account for
the disproportionate amount of profits. Although Paul’s approach
is exceedingly simple, by executing every detail of his trading plan
with discipline and precision, he has become very successful.
Don’t OvertradeOne of the most common mistakes traders make, especially when
they are trading on a shorter-term basis, is to transact too much.
Almost every trader is guilty of overtrading, and the consequences
of this practice can be quite costly, especially in commission-based
markets such as electronic futures. Take, for example, a typical
$10,000 account that trades electronic e-mini futures. Trading just
one contract 20 times per day at very low$5 per round trip com-
mission rates would debit the account$100/day even if the trader
managed to break even on all of his trades. After only 20 days the
account would lose 20 percent of its value just through the bleed
of commissions. One of Paul strongest attributes as a trader is that
he remains disciplined and very selective in his setups. As he says,
there are only two to three good moves in the market on any given
day. By not overtrading, Paul puts himself only into the highest-
probability setups and at the same time keeps his transaction costs
to a minimum.