Welcome to the Psychology Index (PI), our proprietary tool designed to help you develop a rock-solid trading mindset. Think of it as the soul of your trading journey. Even the most technically skilled traders can't succeed without a disciplined mindset, and that's where the PI comes in.
Why is the Psychology Index a crucial pillar of our Trading System?
The PI is a tool that helps you build and maintain the best trading habits. It provides an objective score that you can use to track your progress and ensure you're developing the discipline and character needed for long-term success.
Look at the table below that provides the rules.
Serial No. | Rule | Max Score | Date - X | X+1 | X+2 | X+3 | X+4 |
1 | Trade only on the basis of a completed candle, never before the candle is complete. | 1 | 1 | 1 | 1 | 1 | 1 |
2 | Do not chase the price if it runs away without giving you a chance to enter. Always place limit order at entry price. | 1 | 1 | 1 | 1 | 1 | 1 |
3 | Never take a trade without proper planning including the trade selection drill. If you could not get time to plan, DO NOT TRADE! | 2 | 1 | 2 | 1 | 2 | 2 |
4 | While planning, always apply the 3 cardinal rules of Money and Risk Management Rules: 1) Max Loss for each trade <2% of Trading Capital (TC) 2) Total Max Loss for all trades in a day <3% of TC 3) Total Max Exposure for each trade <50% of TC | 2 | 1 | 1 | 1 | 1 | 2 |
5 | Never have more than 1 open trade at any one time. If you take a trade in the morning that is still outstanding, do not take a fresh trade at 1 or 2 PM. If the morning trade is exited before 1 PM, then only 1 trade in the afternoon should be taken, if tradable. | 1 | 1 | 1 | 1 | 1 | 1 |
6 | Place SL and Target for all lots on the system, not in your mind. Never move your SL. It will bring ruin. | 1 | 0 | 1 | 0.5 | 1 | 1 |
7 | Never average when the trade goes against you. Let the trade hit SL and take you out. | 1 | 0 | 0 | 0.5 | 1 | 1 |
8 | Avoid looking at the screen frequently after putting on a trade as it might force you to take wrong decisions. Come back to the screen only when you have to check and take action as per the System. | 1 | 0 | 0 | 0.5 | 0.5 | 1 |
9 | Always be humble. If you make a loss, accept and retreat. Do not put on the next trade or increase volume with the feeling of revenge or getting back the loss from the market. | 1 | 1 | 1 | 1 | 1 | 1 |
10 | Always respect your Trading System and Strategy. Never get complacent after having a good run and take trades outside your system or disregard risk management. | 1 | 0.5 | 0.5 | 0.5 | 1 | 1 |
Scoring Rules : a) If rule followed in letter and spirit, score = Max b) If rule partially followed, score = half of Max b) If rule not followed, score = 0 | 6.5 | 8.5 | 8 | 10.5 | 12 | ||
Score Ranking : a) 12 (Maximum) = Excellent b) 10 to 11 = Good c) 8 to 9 = Average d) Below 8 = Bad | Bad | Average | Average | Good | Excellent |
How to Use the PI
At the end of each trading day (or the start of the next), take five minutes to score yourself honestly. Here's what your scores mean:
12: Excellent - You're on top of your game.
10-11: Very Good - Keep up the great work.
8-9: Average - Room for improvement.
Below 8: Needs Work - Time for serious introspection.
These rules are tailored to our Nifty Futures Trading System and Strategy. Some rules, like Trade Selection, Max Loss, and Max Exposure, are non-negotiable. They have higher weights because sticking to them is essential for keeping your trading career alive.
Scoring yourself honestly and truthfully is crucial to make this exercise fruitful. Once you score against all the rules, the total score ranks your trading behaviour for the day. Your honesty and truthfulness in scoring against each rule is crucial to make this exercise fruitful.
The Path to Improvement
Even if you start with a low score, identifying your weaknesses is the first step to getting better. If you're not preparing properly or ignoring money management rules, this tool will highlight those areas.
The biggest advantage of the PI? It shows you where you need to improve. Track your daily scores and plot them on a graph to visualize your progress. As your scores improve, so will your trading results. The PI helps you become disciplined and develop the character essential for trading success—and for life.
In the next post, we would talk about nuggets of Trading Wisdom, that have been collected over time from our experience and the teachings of other great trading minds. They are the icing on the cake and will help you build a great trading mindset.
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