Classic Rules of Trading by Linda Bradford Rascke Time Tested Classic Trading Rules for the Modern Trader to Live By. A senior trader collected these rules from classic trading literature throughout the twentieth century. They obviously withstand the age-old test of time. I'm sure most everybody knows these truisms in their hearts, but this list is nicely edited and makes a good read. 1.Plan your trades. Trade your plan. 2.Keep records of your trading results. 3.Keep a positive attitude, no matter how much you lose. 4.Don't take the market home. 5.Continually set higher trading goals. 6.Successful traders buy into bad news and sell into good news. 7.Successful traders are not afraid to buy high and sell low. 8.Successful traders have a well-scheduled planned time for studying the markets. 9.Successful traders isolate themselves from the opinions of others. 10.Continually strive for patience, perseverance, determination, and rational action. 11.Limit your losses - use stops! 12.Never cancel a stop loss order after you have placed it! 13.Place the stop at the time you make your trade. 14.Never get into the market because you are anxious because of waiting. 15.Avoid getting in or out of the market too often. 16.Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action. 17.The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success. 18.Always discipline yourself by following a pre-determined set of rules. 19.Remember that a bear market will give back in one month what a bull market has taken three months to build. 20.Don't ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point. 21.You must have a program, you must know your program, and you must follow your program. 22.Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable. 23.Split your profits right down the middle and never risk more than 50% of them again in the market. 24.The key to successful trading is knowing yourself and your stress point. 25.The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes. 26.In trading as in fencing there are the quick and the dead. 27.Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success. 28.Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long. 29.Accept failure as a step towards victory. 30.Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don't let ego and greed inhibit clear thinking and hard work. 31.One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door. 32.The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed. 33.It's much easier to put on a trade than to take it off. 34.If a market doesn't do what you think it should do, get out. 35.Beware of large positions that can control your emotions. Don't be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts. 36.Never add to a losing position. 37.Beware of trying to pick tops or bottoms. 38.You must believe in yourself and your judgment if you expect to make a living at this game. 39.In a narrow market there is no sense in trying to anticipate what the next big movement is going to be - up or down. 40.A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss - that is what does the damage to the pocket book and to the soul. 41.Never volunteer advice and never brag of your winnings. 42.Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss. 43.Standing aside is a position. 44.It is better to be more interested in the market's reaction to new information than in the piece of news itself. 45.If you don't know who you are, the markets are an expensive place to find out. 46.In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word - Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen. 47.Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost. 48.When the ship starts to sink, don't pray - jump! 49.Lose your opinion - not your money. 50.Assimilate into your very bones a set of trading rules that works for you.
*** [1]Price is more important than indicators.[As important as'' Big Trends'' book is ,authored by Price Headly; actually referring to bid/ask price. ] [2]In all labor there is profit-Solomon.trader king [3]I use many of Alan Farleys rules also. [3b]Trend = friend & in a winning streak,preserve & guard my reading time. [3c]In a temporary losing streak,preserve & guard my reading time.
Yes! My #1 Rule: Appreciate the value of discount. Never chase the market. That means: If price is already going, never pay retail! They see you coming, sucker. You must either get a discount (via limit order) or let it go. There's no other way. Basically, you can never (or rarely) make money by selling when price is already down or buying when price is already moving up. Your only low-risk chance to get a piece of the fun is to get a discount. If you don't obey this rule, you're putting on a very high-risk trade. Just like jumping onto a running train isn't exactly sane. Why do it in trading? Basically, by buying "discount", you not only have a much greater chance of price continuing and hitting your target gain earlier, but also you have considerably offset the risk of price moving against you so easily / retracing hard. In larger timeframes than scalping, these discounts are referred to as retracements, but they're exactly the same thing. Never enter on a running trend or move, in any timeframe. Enter on the retracements. Many people don't understand or obey this rule, but certainly in futures it's extremely important. And since you're a scalper, even more so. I think this is the most important rule in trading altogether. Appreciate the value of discount. ~Scientist
This is a subtle but very important point. It's more of a tactic than a rule, but getting a "discount" as you term it, really avoids a lot of trouble.
You are putting a great value on the profit per cycle. At some point you will get to optimising making money. I would guess (poorly, probably) that you have capital and you place it as you describe. If the capital sits through this thing you recommend, then it is not efficient in it's application. Optimising making money deals primarily with time and secondarily with profit per cycle. I like to look at when the money should be applied just as you do. Just in time is almost best. A little later is better though. There are many people who trade on retracements and/or pullbacks; it would be interesting to see what they do after they get past that stage.
You're right. It's more of a tactic. However, to me this tactic has sort of become a rule. Doing this, you can halve or quarter the size of your stops, and it's the bottom line that counts. I.e. if you're scalping the ES and want to get into a running move, in order to take off 4T at first target, you should have a limit order 2T from current price. Often, price will retrace 2T because somebody is covering (some 250-car CME scalper who pays $0.25 per trade and is happy with having made 2T) and the next second it's already back where it was before, and you're in the green by 2T, with 2T left to go to for first target fill. Your chances of making 2T are about 3X greater than making 4T, generally price will go another 2-3 T in a fast move and you're squeakin'. Plus, you have seriously offset your risk. If you don't get the fill - So what. Let it go. Who cares. In larger timeframes, all this isn't so extremely critical, but it's still quite critical, at least to me... ~Scientist
Scientist, I actually use this rule/tactic as well but have noticed I miss out on some good trades due to this. Your thoughts? -FastTrader
quantify what you are missing by testing. unless you know what Good Things you are giving up you have no way of knowing if it is a good strategy.
Yeah, definitely. LOL now you're really sounding like Jack Not entirely correct. The point is that capital does not sit through a thing, particularly not a large drawdown. In order to do that, I want to enter the peak of a retracement or discount, which in fact maximizes both profit cycle and time-in-trade. Bingo. Entirely right. Initially, you want to have minimal exposure, and as you get more advanced you want to have more and more exposure until it's continuous, as well as on different time-fractals. Yeah. As Jack says: Always try to enter late and exit early. Again, this reinforces the retracement theory. However, as you get to advanced SCT, you shouldn't have to time entries / exits anymore, but rather stay in continuously until multiple flaws indicate that change of sentiment will occur, upon which you shift the weighting of your multi-matrix positions. I.e. as the smaller timeframe trends change, they become larger timeframe retracements. This way, you just ride every trend until exhaustion, which is the ultimate form of money application. BE DO HAVE. This is very powerful stuff As detailed above, i.e. SCT. As for retracements - Do you know any other effective form of entering a trade, other than if it's a reversal? I don't. Please teach me. And by the way : A pullback and a retracement are the same thing. Also a discount, while we're here. Discount, pullback, retracement, whatever you wanna call it is up to you and your timeframe. It's still the same principle - getting a discount to offset risk. I don't think you can trade effectively without doing this. ~Scientist