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10 One Liner Rules for Traders

  
  Education
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Risk management- Plan your loss before planning your profit.
Diversification- Be bullish, be bearish, be involved in various groups/markets.
Proper Position Sizing- Trade small, trade safe.
Effective Trading Plan- Make sure your plan works, and/or makes money.
Cutting Losses Short- Enter a trade that offers a small loss.
Letting Winners Run- Don’t kill your winners.
Curbing Your Emotion- This is a bi product of trading small.

Recommendation: Give your account the same foundation so you can participate in the activity above.
Long: My rules
Short: My emotion

Trading Wisdom – Trend Following

  
  Education
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For most people, trend following is extremely counter-intuitive. Why? Because it’s human nature to look for bargains before buying. People tend to buy when it’s low and sell when it’s high. But, how many are bold enough to do the opposite by buying high and selling even higher? My guess is; not many. And what about risk management? Yeah, what about it? Remember the dot com bubble era? Out of all the people that got caught up in that frenzy, how many do you think even had a risk management plan in place? Hmmm…
Back in those days, I’ve never even heard of a stop loss. We all just jumped in blindly with dreams of making it big. And a lot of us got burned. Really bad. All the warning signs where there and yet we chose to ignore it. We foolishly rode our stocks all the way down and in the process, destroying every little glimmer of hope that we had for a turn-around. A lot of us lost 80-90% of our so-called “long term investment.” It’s tragic. But we can all learn from this valuable lesson.
Trend following is a life philosophy. It works in trading and it also works in daily life. It’s simply a matter of sticking with what works and getting rid of what’s not. That’s it! It’s a deceptively simple little system that can be applied into all aspects of your life. And if you follow this line of thought, I guarantee that you will see dramatic improvements. You just can’t help but to get better because ultimately, what are you left with in the end? That’s right, WINNERS!

3 Types of Traders & 4 Questions

  
  Education
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An egotistical trader is more likely to argue with the markets, potentially leading to huge losing days or possible account blow-outs. You don’t need to win on every trade, or even every trading day, or every trading week.

A humble trader is able to admit that his trading is creating nothing but losses that day, and stop trading until the markets are better suited to his/her style. A humble trader is less likely to double-up into excessively risky trades, in order to ‘get back even’ on the trade or on the day. A humble trader has nothing to prove, to anyone, and can freely admit mistakes to themself and others, enabling them to quickly and easily react to what the market is telling them, with little regard for it’s contradiction to what he/she may have expected only minutes earlier.

Conversely, and egotistical trader might confidently tell his friends ‘what is going to happen’ and is unwilling or unable to subsequently change his mind when the market tells him otherwise. Once he’s made a public proclamation, he can’t go back on his ‘call’ or he might appear to be wrong.

The successful trader can’t tie up their self image or self worth on a single trade, or a single trading day. Keeping your attitude humble enables you to simply treat each and every trade as individually irrelevant, and allows you to focus on doing what’s right, and not being right.”

I’ll close with the questions I ask myself about each trade at the end of the day:

1. Was it a valid setup?

2. Did I wait for confirmation of the setup and follow my rules for entry?

3. Did I implement my risk management plan?

4. Did I manage the trade according to my rules, taking profits at or beyond the initial target, never earlier unless a valid stop-and-reverse signal appeared?“A successful trader is humble, not egotistical. The trader that knows it all, will typically quickly be proven wrong by the market. The humble attitude leads a trader to be willing to admit mistakes quickly, close out losing trades, and move on without loss of confidence.

Basic principles for Traders

  
  Education
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Many of you spend too much time worrying about things like other peoples trading signals, what price pattern it is you are looking at, which strike price to select, how to read implied volatility, etc when you haven’t constructed the basic tenets of portfolio management or asset allocation.

Shame on you.

To your defense, I can’t make any assumptions when I have no idea what your time frame is, what your financial standing is, your risk tolerance, your investing objectives, or anything else looks like about you. What I do know is this… I don’t care who you are or what you are trying to accomplish, you will not last long in the pursuit of becoming a decent trader without creating a firm foundation of these basic principles, which are…

Risk management- Plan your loss before planning your profit.

Diversification- Be bullish, be bearish, be involved in various groups/markets.

Proper Position Sizing- Trade small, trade safe.

Effective Trading Plan- Make sure your plan works, and/or makes money.

Cutting Losses Short- Enter a trade that offers a small loss.

Letting Winners Run- Don’t kill your winners.

Curbing Your Emotion- This is a bi product of trading small.

Basic principles

  
  Education
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Risk management- Plan your loss before planning your profit.

Diversification- Be bullish, be bearish, be involved in various groups/markets.

Proper Position Sizing- Trade small, trade safe.

Effective Trading Plan- Make sure your plan works, and/or makes money.

Cutting Losses Short- Enter a trade that offers a small loss.

Letting Winners Run- Don’t kill your winners.

Curbing Your Emotion- This is a bi product of trading small.

Long: My rules

Short: My emotion

Update: If you took any part of this post personal, don’t. You know I am not in the business of attacking, just trying to get a message across. If I were mad, I wouldn’t have addressed it at all.. When all else fails, “Fresh Tactics.”

Focus

  
  Education
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The goal of a successful professional in any field is to reach his personal best. You need to concentrate on trading right. Each trade has to be handled like a surgical procedure – seriously, soberly, without sloppiness or shortcuts. This is a stock trading risk management plan. A loser cannot cut his losses quickly. When a trade starts going sour, he hopes and hangs on, and his loses pile up. And as soon as he gets out of a trade, the market comes roaring back.

  • Trends reverse when they do because most losers are alike. They act on their gut feeling instead of using their heads. The emotions of people are similar, regardless of their cultural background or educational levels.
     
  • Emotional traders go into risky gambles to avoid taking certain losses. It is human nature to take profits quickly and postpone taking losses. Emotional trading destroys those who lose. Good money management and timing techniques will keep you out of the hole. Losing traders look for a “sure thing”, hang on to hope, and irrationally avoid accepting small losses.
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