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11 Trading Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

Trading, Gambling, Praying

  
Analysis, Education
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Intuition is not free

If you are thinking about exiting, it is too late. You are praying at that point. If it is in your plan for your targets to get hit, up or down, continue what you are doing. If you are just hoping your stop does not get hit, on behalf of the market, thank you. I am making the assumption that those who post or say that their stop is going to get hit have discretion in their system. The problem is not this trade it is the hundreds or thousands you will take after that. There is a reason you wanted to get it, that is intuition. If you cannot afford to not make money on a trade, you are fucked anyways.

You lost the lesson too

The market is constantly giving feedback. What happens after the “my stop is going to get hit” statement? What if the market goes in your direction? Are you going to get out at breakeven? Let it run? Take a small lost/gain? What are you going to do next time? The time after that? The outcome will affect your decision. The outcome you remember best will be the one that gives you the best psychological reward not financial rewards. Trading is about answers, not questions. Unanswered question impedes reactions and forces decisions. Decisions are bad over the long term.

Get out already (more…)

Three types of traders

  
  Education
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There are broadly three types of traders:
  1.  -the first type can look at a idea or concept and understand and make it work
  2.  -the second types are in search of perfection so the first thing they do is they find faults in any method, they back test to death and can never find things that will satisfy them. 
  3. -the third kind are clueless. They do not understand good from bad. Everything to them is  Greek or Latin.


There are no perfect methods. You have to make things work. Add some discretion, add some judgement and you can make  it work.
If you take that attitude you will find hundreds of workable methods

My 11 Trading Rules

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. Here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle
room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings.
But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1. (more…)

TRADING COMMANDMENTS

  
  Education
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Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?

Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?

Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?

Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this?

Some people don’t like rules. They don’t want to be told what to do even if it’s themselves telling themselves what to do. They even more don’t like following rules that came with a system for which they paid good (any or excessive) money. They have a polarity response to direction even after it becomes apparent that they’d be more profitable simply following the rules.

Others like to be told what to do, but somehow their rules are conflicting, obscure, or so bound up with discretion as to be meaningless. These traders may not even be aware that in essence they have no rules.

Whatever your situation turns out to be, it may be helpful to think in terms of commandments or suggestions. You may think in terms of absolute rules or simple guidelines.

Do you like clear directions as to what to do? In this case you can think in terms of commandments. For example, when The Ten Commandments says, “Thou shalt not kill,” it doesn’t leave much discretion. Reword your rules as commandments that are precise and clear and easy to follow.

Do you resist being dictated to and bossed around by outside forces? In this case, reformulate your rules as guidelines or suggestions. Give yourself some leeway in certain situations. Reword it so that when you read it, it sounds like a good idea and not a demand.

However, be certain in advance that whether you choose a suggestion or command, the results will be profitable if followed consistently or even most of the time. There’s nothing worse than a bad idea or a rule that doesn’t work. Remember the basics: Find out what works. Verify that it works. And do it.

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