Trading Rules

This is a discussion on Trading Rules within the General Trading Chat forums, part of the Reception category; I'm looking for a publication from a few years ago. It was a list of about 20-25 rules traders should ...

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Old Jul 13, 2006, 2:15pm   #1
 
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Joined Jun 2006
Trading Rules

I'm looking for a publication from a few years ago. It was a list of about 20-25 rules traders should live by. I remember that one of the rules was "Love to lose mone" and what was ment by this was if you're losing take the lose and be done with the trade because it's closed out and the trade is over. Don't let it run because it will become a disaster. I found this set of rules interesting and helpful. So if anyone has seen this set of rules or has a set they want to post please feel free. Note: I'm not trying to take anyone's rules, I just want to continue to grow. It's a discipline thing. Thanks.
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Old Jul 13, 2006, 2:33pm   #2
 
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Joined Aug 2003
You may find these helpful:

Richard Rhodes' Trading Rules

I must admit, I am not smart enough to have devised these ridiculously simple
trading rules. A great trader gave them to me some 15 years ago. However, I
will tell you, they work. If you follow these rules, breaking them as infrequently
as possible, you will make money year in and year out, some years better than
others, some years worse - but you will make money. The rules are simple.
Adherence to the rules is difficult.

"Old Rules...but Very Good Rules"

If I've learned anything in my 17 years of trading, I've learned that the simple
methods work best. Those who need to rely upon complex stochastics, linear
weighted moving averages, smoothing techniques, fibonacci numbers etc.,
usually find that they have so many things rolling around in their heads that
they cannot make a rational decision. One technique says buy; another says
sell. Another says sit tight while another says add to the trade. It sounds like a
cliché, but simple methods work best.

1. The first and most important rule is - in bull markets, one is supposed to
be long. This may sound obvious, but how many of us have sold the first
rally in every bull market, saying that the market has moved too far, too
fast. I have before, and I suspect I'll do it again at some point in the
future. Thus, we've not enjoyed the profits that should have accrued to
us for our initial bullish outlook, but have actually lost money while being
short. In a bull market, one can only be long or on the sidelines.
Remember, not having a position is a position.

2. Buy that which is showing strength - sell that which is showing
weakness. The public continues to buy when prices have fallen. The
professional buys because prices have rallied. This difference may not
sound logical, but buying strength works. The rule of survival is not to
"buy low, sell high", but to "buy higher and sell higher". Furthermore,
when comparing various stocks within a group, buy only the strongest
and sell the weakest.

3.When putting on a trade, enter it as if it has the potential to be the
biggest trade of the year. Don't enter a trade until it has been well
thought out, a campaign has been devised for adding to the trade, and
contingency plans set for exiting the trade.

4.On minor corrections against the major trend, add to trades. In bull
markets, add to the trade on minor corrections back into support levels.
In bear markets, add on corrections into resistance. Use the 33-50%
corrections level of the previous movement or the proper moving average
as a first point in which to add.

5.Be patient. If a trade is missed, wait for a correction to occur before
putting the trade on.

6.Be patient. Once a trade is put on, allow it time to develop and give it
time to create the profits you expected.

7.Be patient. The old adage that "you never go broke taking a profit" is
maybe the most worthless piece of advice ever given. Taking small profits
is the surest way to ultimate loss I can think of, for small profits are
never allowed to develop into enormous profits. The real money in
trading is made from the one, two or three large trades that develop
each year. You must develop the ability to patiently stay with winning
trades to allow them to develop into that sort of trade.

8.Be patient. Once a trade is put on, give it time to work; give it time to
insulate itself from random noise; give it time for others to see the merit
of what you saw earlier than they.

9.Be impatient. As always, small losses and quick losses are the best losses.
It is not the loss of money that is important. Rather, it is the mental
capital that is used up when you sit with a losing trade that is important.

10.Never, ever under any condition, add to a losing trade, or "average" into
a position. If you are buying, then each new buy price must be higher
than the previous buy price. If you are selling, then each new selling
price must be lower. This rule is to be adhered to without question.

11.Do more of what is working for you, and less of what's not. Each day,
look at the various positions you are holding, and try to add to the trade
that has the most profit while subtracting from that trade that is either
unprofitable or is showing the smallest profit. This is the basis of the old
adage, "let your profits run."

12.Don't trade until the technicals and the fundamentals both agree. This
rule makes pure technicians cringe. I don't care! I will not trade until I am
sure that the simple technical rules I follow, and my fundamental
analyses, are running in tandem. Then I can act with authority, and with
certainty, and patiently sit tight.

13.When sharp losses in equity are experienced, take time off. Close all
trades and stop trading for several days. The mind can play games with
itself following sharp, quick losses. The urge "to get the money back" is
extreme, and should not be given in to.

14.When trading well, trade somewhat larger. We all experience those
incredible periods of time when all of our trades are profitable. When that
happens, trade aggressively and trade larger. We must make our
proverbial "hay" when the sun does shine.

15.When adding to a trade, add only 1/4 to 1/2 as much as currently held.
That is, if you are holding 400 shares of a stock, at the next point at
which to add, add no more than 100 or 200 shares. That moves the
average price of your holdings less than half of the distance moved, thus
allowing you to sit through 50% corrections without touching your
average price.

16.Think like a guerrilla warrior. We wish to fight on the side of the market
that is winning, not wasting our time and capital on futile efforts to gain
fame by buying the lows or selling the highs of some market movement.
Our duty is to earn profits by fighting alongside the winning forces. If
neither side is winning, then we don't need to fight at all.

17.Markets form their tops in violence; markets form their lows in quiet
conditions.

18.The final 10% of the time of a bull run will usually encompass 50% or
more of the price movement. Thus, the first 50% of the price movement
will take 90% of the time and will require the most backing and filling and
will be far more difficult to trade than the last 50%.

There is no "genius" in these rules. They are common sense and nothing else,
but as Voltaire said, "Common sense is uncommon." Trading is a common-sense
business. When we trade contrary to common sense, we will lose. Perhaps not
always, but enormously and eventually. Trade simply. Avoid complex
methodologies concerning obscure technical systems and trade according to
the major trends only.
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dbphoenix is offline Training literature vendor (e.g courses / spreadbetting guides / eBooks)   Reply With Quote
Old Jul 13, 2006, 4:32pm   #3
Joined Jul 2003
Quote:
Originally Posted by rzepe93
I'm looking for a publication from a few years ago. It was a list of about 20-25 rules traders should live by..
I attach a couple of pdfs I got from John Piper ("The Way To Trade"). They were originally produced by netfutures which is now part of the Zaner group. I like to take the opportunity to mention John Piper when appropriate as I found his work inspiring.

Having given the appropriate attributions I don't know if I have accidentally fallen foul of the new t2w guidelines on advertising. If so, apologies, not intended and please delete this post. We all know how to do that by now, don't we...

rzepe - don't know if these were the rules you were thinking of, but even if not, they will still serve your overall purpose of further education.

hth
Attached Files
File Type: pdf million.pdf (1.83 MB, 627 views)
File Type: pdf million2.pdf (1.90 MB, 686 views)
TheBramble is offline   Reply With Quote
Thanks! The following members like this post: Trader333
Old Jul 13, 2006, 11:42pm   #4
Joined Oct 2005
excellent points.
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