The three Pillars of trading consist of :
1. money management
2.methodology
3.psychology
Money management is the secret behind survival and prosperity. Survival will keep you from ruin while prosperity will keep a smile on your face.
Methodology is your day-to-day combat instructions. It articulates how you'll trade for expectancy. The methodology will consist of two parts:
a setup
a trade plan
A setup will identify an area of possible future support or resistance--that is, when you should be looking to enter the market and whether you should be looking to buy or sell.
Your trade plan should tell you how to take advantage of your setup. It should have clear and unambiguous instructions on how enter, place stops and exit.
The methodology should be simple and logical. If it is, you'll have a good chance of trading a robust methodology, where the real-time results will match the validated TEST results.
Psychology
Even with the best money management strategy and methodology, you still need a plan to deal with your emotions. Psychology is the glue that keeps the Three Pillars together. From time to time hope, greed, fear and pain will distract you from your path to success. The constant emotional pain the market's maximum adversity inflicts will challenge your resolve to stay the course.
Once you have a plan in place for each component of the Three Pillars, you'll be in a position to consider trading, but not before!
