My recent post emphasized the importance of understanding one's own trading and the value of distinguishing between trading strategies and tactics. Hats off to Crosshairs Trader, who responded to the post by breaking down his trading into Grand Strategy, Strategies, and Tactics.
What I'd like to highlight in response to Crosshairs Trader is the value of expressing one's strategies and tactics in terms of rules. His rules will differ from mine, and both of ours no doubt are different from yours. The value of rules, however, is that they cement sound trading practices and guide our behavior when we're "under fire".
Once we formulate rules for entering, exiting, and managing trades, we can mentally rehearse those rules prior to trading and ground ourselves in best trading practices. We can also draw upon those rules in difficult market conditions to help us make difficult decisions. Once we have sound rules, moreover, we can assess our performance relative to those rules and gauge how well we're trading.
One question I have posed to traders is: "How can you be disciplined when you haven't even formulated the rules for proper trading?" To be disciplined is to be rule-governed, and to be rule-governed is to be mindful of one's strategies and tactics.