Trading rules, do they have to be broken sometimes?

Nov 14, 2010
79
2
18
#1
Ok this is in reference to a post I made earlier....

http://www.trade2win.com/boards/first-steps/123474-where-set-stop-losses.html

In which I had set rules for setting my stop losses and today they had to be broken, I'm kinda new to this and learning the ropes so to speak and constantly need to slightly adjust things to get it right.

However I have always learnt that a successful trader is someone who has a set of rules and a method and sticks to them with strong discipline. However are there times when these rules have to be broken in order to succeed? I'm somewhat confused now.
 

shadowninja

Well-known member
Jul 22, 2007
5,524
641
173
www.helpforheroes.org.uk
#2
I suppose I could ask you to define "broken". You could argue that as the market conditions change, then you have to adjust the rules to suit - is this breaking the rules or merely an evolution of the rules? Or if you are convinced you're right and you're in a big loss, do you average down and hope the market comes back?
 

shadowninja

Well-known member
Jul 22, 2007
5,524
641
173
www.helpforheroes.org.uk
#3
An example: I enter a position. It takes me a moment to set a stop loss. Imagine there's a power cut and I haven't set the stop. An hour later, I manage to log in and see I'm down three times my stop size. I have three options:
1) Close the position
2) Average down and hope I'm right even though I'm now in a loss three times my intended size
3) Sit tight and hope it comes back

As I've never been in this situation before, I have not been able to test likely outcomes. Any analysis will be biased in favour of the direction of my trade. So, I would close the position and take a bigger than normal loss. It could fall further, leaving me in a much bigger hole. A 3x stop loss isn't difficult to recoup.
 
Nov 14, 2010
79
2
18
#4
You never average down, and you never sit there hoping that things we turn your way this is how you make big losses in your account. If you were to change these rules you will have big problems, I have this ingrained in my head after having it pounded in numerous times. There are few rules like that which I feel you should not change under any circumstances else you will fail.

When a good trader sets himself rules does he go and set himself the basic rules which he stick to like the one of have just to avoid losing large amounts and to keep himself alive, and then creates a trading plan which is flexible to suit the markets and evolve? Does there have to flexibility in some rules and some rules that have to be stuck to regardless?
 

new_trader

Well-known member
Jan 1, 2006
6,163
1,252
223
#5
As shadowninja said, there are rules that change as you evolve, learn and make new discoveries which will alter previous methods. But there are some rules which never change regardless of where you are in your development and that is the rule about stop-losses.

1) Always trade with a stop
2) Never move a stop in the direction that increases risk.

Never, ever break the rules in regard to stops.
 
Likes: wackypete2
Apr 20, 2010
25
1
13
#6
Ok this is in reference to a post I made earlier....

http://www.trade2win.com/boards/first-steps/123474-where-set-stop-losses.html

In which I had set rules for setting my stop losses and today they had to be broken, I'm kinda new to this and learning the ropes so to speak and constantly need to slightly adjust things to get it right.

However I have always learnt that a successful trader is someone who has a set of rules and a method and sticks to them with strong discipline. However are there times when these rules have to be broken in order to succeed? I'm somewhat confused now.
You can't have a completely rigid set of rules. If that were the case you could pay someone to program it and watch the money roll in. Doesn't work that way though. There are basic things that you should adhere to always, such as proper money management. But in your trading lots of things will be discretionary. Which things? Well, that's part of what you need to find out for yourself. Come up with your set of rules. Trade by them and be STRICT. Continue to trade this way. Eventually you'll get to a point where you recognize spots that your rules should be amended or changed. Do so, then trade by that very strict. And repeat the process until you've completely refined your method. At that point, you'll no longer have any questions.
 

anley

Well-known member
Dec 16, 2003
2,730
229
73
#7
The problem is with breaking a rule and that decision being a good one (in hindsight) is you'll do it again and probably again and again so the rule then becomes worthless.

Personally I wouldn't mess around with taking a loss, who cares anyway because one trade is never going to make you anyway so just dump it and go on to the next trade.
 

trader-john

Active member
Mar 12, 2011
104
5
28
www.mt4i.com
#8
Forex exchange market is not trader friendly environment. There are many temptations: high profit potential, easy money, a lot of emotions. But there are so many threats in trading such as : dishonest broker, unpredictable disasters, re-quotes . . . To handle all this you need a shield. Shield made of your own rules, that will save your account.

Trade well.
John
 

coopster

Active member
Jan 17, 2005
247
21
28
Norwich
#9
Ok this is in reference to a post I made earlier....

http://www.trade2win.com/boards/first-steps/123474-where-set-stop-losses.html

In which I had set rules for setting my stop losses and today they had to be broken, I'm kinda new to this and learning the ropes so to speak and constantly need to slightly adjust things to get it right.

However I have always learnt that a successful trader is someone who has a set of rules and a method and sticks to them with strong discipline. However are there times when these rules have to be broken in order to succeed? I'm somewhat confused now.
It should be a logical IF... - THEN... approach. If it was obvious that the existing rule needed to be broken then there is obviously one rule in place where there should maybe be a couple of rules to cover all eventualities.

As already mentioned, the rules get more and more bulletproof, the more you experience eventualities that up until now haven't occured.
 

enragedcow

Active member
Apr 24, 2011
211
15
28
#10
i think it depends on your rule set

for example a trader might use a 30 period EMA to signal trades when price crosses it and exits them once an oscillator hits a certain level now we assume price crosses from the underside so the trader goes long, then something happens and the market crashes downwards, the trader looks at his oscillator and decides the level hasn't been reached the loss continues until bankruptcy.

theoretical example of when rules should be broken

i'm very new to trading but from my experience so far and books i've read i'm more inclined to believe concrete rules are unprofitable, you have to be responsive to the market and not just believe that an oscillator or EMA level will be profitable