Habit 3

Trade only with proven methods. Test before you trade. When applied consistently, most trading methods don't work. The conventional wisdom that you read in books is mostly ineffective.

Notice that authors never demonstrate the effectiveness of their methods. The best you can hope for is a few, well-chosen examples. The reasons for this is that they are lazy and their methods mostly do not work when tested rigorously.

You must be skeptical of everything you read. You must somehow acquire the ability to test any trading method you intend to use. The reliability of non-computerized testing is highly suspect. You must, therefore, use software that tests a particular approach or a variety of approaches.
You must learn the correct way to test and evaluate trading approaches.

Have a good approach. Follow the four cardinal rules of trading.
1) Trade with the trend.
2) Cut losses short.
3) Let profits run.
4) Manage risk.

These are well known cliches. Yet virtually all losing traders violate these rules consistently. Trading with the trend means buying strength and selling weakness. Most traders are more comfortable buying weakness and selling strength, the essence of top and bottom picking.

Trade good markets. Trend is your only edge. You must emphasize those markets which trend the best.
This will maximize your statistical edge over time.