The Rules Of Trading - Read this each morning before you trade

Discussion in 'Professional Trading' started by retaildaytrader, Apr 6, 2010.

  1. * Successful traders adjust their trading style, trading system,
    holding Period, and exit strategies based on the current market
    conditions. This is a process I refer to as market adaptive
    trading. It is better to Learn how to adapt to the market rather
    than running from one trading idea to the next looking for the
    next super system. Being frustrated that the market is not doing
    not what you want often leads to losses. The market does what
    it wants, we just need to adapt to it. This will take time to learn,
    be patient. Read this paragraph again.

    * As a trader I do not care which way the market moves, I can
    make money either way. It is important to be able to quickly
    react to whatever the market does and not be emotionally
    attached to any particular choice.

    * I cannot control what the market does, so I have a plan for
    whichever path it picks and then trade the plan.

    * Successful trading is not about predicting what the market is
    going to do. It is about knowing how to react to whatever it
    actually does.

    * Always be thinking about taking and protecting profits.

    * If you are not sure what to do, exit the position. There will be
    other good setups.

    * You do not need to trade every day. Let the setups come to you
    and take the best ones. When the market is moving there lots
    of good setups to trade. If there are few setups, or most are
    failing, then listen to the message of the market.

    * Do not rush in, there is plenty of time to get into a
    tradable move when the market changes. If a trend
    is worth trading, then by definition you do not have
    to be in on the first day.

    * Never enter a position without a plan for exiting.

    * Do not count your chickens before they hatch. You do not
    have a profit until you are back in cash.

    * Never trade with money you cannot afford to lose.

    * Trading is not a team sport. Stay away from chat rooms and
    financial TV. Seek the truth, not support from others with
    your point of view.
  2. Nice rules. I have a set like yours in my trading plan. I call them my “Rules of Engagement.” I look at them every day.
  3. rabbitone,

    can you post some of your rules?
  4. I would not call those Rules, more like guiding principles. You can enforce a rule or at least know you've broken it.

    Rules would be more like:

    Only initiate a trade when all criteria are met.

    Set hard stops.

    Risk no more than 1% of capital on any one trade

    Have a written plan for each trade with stops, and when you move them, and targets noted.

    Let the trade unfold as planned.
  5. Rules of trading.

    Capital, leverage, margin, market, instrument, volume, daily volatility, open interest/DOM, pre-set trade parameters, order type market/limit, keep onside.

    All professional traders use the above everyday, no need for reading books or journals or little reminders.
  6. Thats more of a list of words than a set of rules.

    How do you know what all professional traders do? You can't possibly know all off us.
  7. F112358


  8. Sorry, i shouldn't have stated 'all', more like most. There is only one trading rule.

    1) Stay onside.

    The rest of the 'words' take care of themselves if used properly. If they are only 'words', as you suggested, then i suggest you learn how to use them correctly.
  9. I try to use them properly; Thats what my rules are for. :)
  10. Sure I will post some of my general ROT.
    1. Minimize Loses – This is the most important rule by far. Failing to keep losses under control and small is the quickest way to end trading. Make sure that all forms of losses in the Trading System Strategy optimization are thoroughly understood and noted in the exit plan before trading.
    2. Minimize Mistakes – This is the second most important rule. Mistakes that cause losses can add up to a sum larger than all the profits from a system. Ignoring mistake puts trading in danger.
    3. Be a Student of your own Psychology – Learn what motivates you to trade, understand how you handle wins and losses, manage your mistakes and always be aware of your emotions in any trading decision process.
    4. Become a Student of the Markets – Understand the markets that are being traded before trying to trade them. This is more important than trying to apply a trading system to a financial instrument.
    5. Never Trade without an Exit Plan – Prepare in advance for the conditions that will stop trading. Make no assumptions about future trading.
    6. Mange Trading Funds. Don't use the money the trader needs to live on to trade financial instruments. The trader needs to give trading profits from a financial instrument time to grow and not have to cash trades in a panic. Scared money is soon lost. Never trade with money that pay for the rent or buys food.
    7. Use Position Sizing. Don't over-commit your funds. When the trader has all their funds on the line, the trader will find it hard to make rational decisions. Make sure there is an acceptable amount of funds to handle drawdowns.
    8. Aim for Consistent Trading Results – Trading a financial instrument that produces gains of 3% for each of 5 months is preferable to gains and losses of 8%, -5%, 12%, -9% and 3% for the same 5 months.
    9. Concentrate on Selecting the best Markets to Trade in – The keystone of the trading method should be finding strong markets to buy in and weak markets to sell in. Once these are selected the Trading System will help the trader to outperform in these markets. A large part of the trader’s time should be spent on this activity.
    10. Make Trading Decisions using your own Faculties. Watch out for so called trading gurus, brokers, experts, and pundits who don't trade. If their advice was right all the time they would be out on their yacht right now.
    11. Don’t Trade Financial Instruments short-term when written up in Publications. Forget trading the stocks the trader sees touted in monthly magazines and the web. That article was written many weeks ago and more often than not the financial instrument is in a different maket state, such as congestion, than written up about. If the trader is trading for longer terms than there may be a case to trade the financial instrument.
    12. Review Trade Execution Reports on a Timely Basis. Be sure to read the traders performance and execution reports on a daily, weekly and monthly basis thoroughly. Then compare this with the traders goals and objectives using performance reviews. Compare the trades to the strategy optimization to make sure execution is going as planned.
    13. Review Mistakes after each round of trading. Learn from the traders own mistakes. It's okay to make a mistake once but try not to make the same mistake twice. If the trader makes a mistake, don't beat yourself up. Make a note of it and move on.
    14. Trade when your in good health and spirits. Don’t trade if the trader is sick or over-stressed. The trader should be in positive spirits when trading the Trading System.
    15. Keep a constant positive attitude in wins and losses. Believe in the “trader” self. Fear and self-doubt lead to hesitation or overtrading, which results in poor performance.
    16. Define set points for Performance reviews and Adjustments. Set semiweekly, weekly, monthly, quarterly or annual review sessions for the traders performance depending on the traders style. If the trader meets their trading performance goals, celebrate. Go out to dinner, take a weekend trip, or buy that jacket the trader’ve been looking at. The trader deserves it! Then get back to business.
    17. Keep a Trading Journal or Log and Review it Periodically. Write down the thought process that led you to trading the financial instrument with the Trading System. Include the market analysis, sector analysis, fundamental and technical evidence that led the trader to start trading. Specify why specific set ups or automated settings were chosen. Note periodic performance results from Trading Systems in the journal or log. Then periodically review the journal to aid in the trader’s self-improvement.

    most of the rest are strategy specific
    #10     Apr 8, 2010