20 Trading Rules For Making Money in the Markets

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#1
Not sure where I originally saw these but good advice:

1. Never, under any circumstance add to a losing position....ever!
Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla - changes sides when necessary.
We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account.
Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher (or sell low and buy lower).
We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cents/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral.
That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling.
Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength.
Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action.
We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly.
In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician.
It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs.
Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.

12. Keep your technical systems simple.
Complicated systems breed confusion; simplicity breeds clarity and elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends.
If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is more important than an understanding of economics.
Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets.
The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades.
Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom, and the ignorance, of all of those who deal in it
Never argue with the market's "wisdom." If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not
If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold. Not the other way around!

20. The hard trade is the right trade to execute.
If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. If your execution was easy, it was probably the wrong trade to take.
 

montmorencyt2w

Well-known member
May 17, 2008
2,620
294
93
#3
Not sure where I originally saw these but good advice:

1. Never, under any circumstance add to a losing position....ever!
Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
Define "losing".

You can be right about ultimate direction, but volatility can mean you get your initial exit less than perfect.

Re-enter with another position, et voila.

2. Trade like a mercenary guerrilla - changes sides when necessary.
We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
That's like saying you blow with the wind. If you know why you are fighting, you don't change sides. (Hint: fundamentals].

3. Capital comes in two varieties: Mental and that which is in your pocket or account.
Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
repeat: define "losing".

4. The objective is not to buy low and sell high, but to buy high and to sell higher (or sell low and buy lower).
We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cents/lb and seemed "cheap" many times along the way.
Good advice in trending markets. Dubious in ranging.
Can you tell the difference?
Really?
Always?

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral.
That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
The type of market, bull or bear, always seems self-evident...a long time in hindsight.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling.
Illogic often reigns and markets are enormously inefficient despite what the academics believe.
True. Translate that into practical trading.
I suppose you mean cut "losing" trades early.
*yawn*



7. Sell markets that show the greatest weakness, and buy those that show the greatest strength.
Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.
Works great in trending markets....what's that...about 30% of the time?

8. Try to trade the first day of a gap, for gaps usually indicate violent new action.
We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
If you say so.


9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly.
In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.
And *** happens, and motherhood and apple-pie are good.


10. To trade successfully, think like a fundamentalist; trade like a technician.
It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.
Technically speaking, I fundamentally agree with this.

11. Respect "outside reversals" after extended bull or bear runs.
Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.
And I respect the entrails of a slaughtered lamb, although not half as much as the lamb probably did.


12. Keep your technical systems simple.
Complicated systems breed confusion; simplicity breeds clarity and elegance.
So simple that it's hardly noticeable.


13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends.
If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not.
Yes, but I don't care if it's 50% or 150%.



14. An understanding of mass psychology is more important than an understanding of economics.
Markets are driven by human beings making human errors and also making super-human insights.
Yes, although not necessarily easy to predict the reaction of the masses.


15. Establish initial positions on strength in bull markets and on weakness in bear markets.
The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
hm...maybe, yes,-ish.


16. Bear markets are more violent than are bull markets and so also are their retracements.
hm...in FX, the opposite side of a bull is a bear, and vice-versa. How does that work?



17. Be patient with winning trades; be enormously impatient with losing trades.
Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.
Been here before.

18. The market is the sum total of the wisdom, and the ignorance, of all of those who deal in it
Never argue with the market's "wisdom." If we learn nothing more than this we've learned much indeed.
Would never argue with it. Doesn't mean that it is wise.

19. Do more of that which is working and less of that which is not
If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold. Not the other way around!
Except in a ranging market.


20. The hard trade is the right trade to execute.
If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. If your execution was easy, it was probably the wrong trade to take.
What's this? The Calvinistic Trader's guide?


Carve your trading rules in stone and cling on to them as you swim in the market pool.
 
#4
point 20 is just plain wrong...
For you, perhaps. For me, I always notice that the easier it is to get into a trade, the more nervous it makes me because it usually means there were plenty of sellers wanting to give me the price I want - not always a good sign.
 
Likes: elitejets

LittleKnown

Active member
Oct 29, 2009
160
12
28
#5
Traderinterviews, this all seems quite familiar, I feel I have read this somewhere before I just can't put my finger on it, maybe some agora publication, from when I used to waste immeasurable time on &^%$, and I still think I do waste a lot of time reading &^$£, you have anything of any use:rolleyes:
 

Black Swan

Well-known member
Nov 24, 2008
5,613
833
173
#6
For you, perhaps. For me, I always notice that the easier it is to get into a trade, the more nervous it makes me because it usually means there were plenty of sellers wanting to give me the price I want - not always a good sign.
Nonsense, you obviously don't pull the trigger much...
 

songcon

Active member
Oct 28, 2009
165
4
28
New York
#9
HTML:
TraderInterviews;1065622]Not sure where I originally saw these but good advice:

[B]1. Never, under any circumstance add to a losing position....ever![/B]
.  .  .  .  .  .
Gann stated it differently: * Never average a loss.

WD Gann's 28 Trading Rules
random image

* Never risk more than 10% of your trading capital in a single trade.
* Always use stop-loss orders.
* Never overtrade.
* Never let a profit run into a loss.
* Don 't enter a trade if you are unsure of the trend. Never buck the trend.
* When in doubt, get out, and don't get in when in doubt.
* Only trade active markets.
* Distribute your risk equally among different markets.
* Never limit your orders. Trade at the market.
* Don't close trades without a good reason.
* Extra monies from successful trades should be placed in a separate account.
* Never trade to scalp a profit.
* Never average a loss.
* Never get out of the market because you have lost patience or get in because you are anxious from waiting.
* Avoid taking small profits and large losses.
* Never cancel a stop loss after you have placed the trade.
* Avoid getting in and out of the market too often.
* Be willing to make money from both sides of the market.
* Never buy or sell just because the price is low or high.
* Pyramiding should be accomplished once it has crossed resistance levels and broken zones of distribution.
* Pyramid issues that have a strong trend.
* Never hedge a losing position.
* Never change your position without a good reason.
* Avoid trading after long periods of success or failure.
* Don't try to guess tops or bottoms.
* Don't follow a blind man's advice.
* Reduce trading after the first loss; never increase.
* Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

http://technical-analysis-addins.com/trading-38-steps.php
 
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trader_dante

Well-known member
Aug 18, 2005
4,535
1,457
173
www.trader-dante.com
#12
I might be wrong but your answers sound suspiciously like petty sniping from a disgruntled trader who has found that arguing the fundamental case justifies holding positions way offside and market "volatility" is a good excuse for poor timing.

Perhaps I am completely wrong.

I hope so because I'm somewhat disappointed in you.
 
Last edited:

rawrschach

Well-known member
Nov 14, 2007
1,223
277
93
#16
meh, Aslan was the disappointment. Gayest lion ever.
 
#20
Define "losing".
You can be right about ultimate direction, but volatility can mean you get your initial exit less than perfect. Re-enter with another position, et voila.That's like saying you blow with the wind. If you know why you are fighting, you don't change sides. (Hint: fundamentals].
repeat: define "losing".
Losing is very easy to define - the security is worth less than you paid. Doesn't matter that you aren't out of the position or have some sort of wiz-bang strategy to come back to break even or profitable.

Defining it any other way is just denying the obvious, in my opinion.