TRADING RULES
Before we get started, it is absolutely imperative to set up personal trading rules based of off your own trading style. Whether your time period is intra-day, short-term, intermediate or long-term, create a trading game-plan. The importance of this aspect of trading cannot be stressed enough, and I PROMISE that you will be donating funds until this is mastered. The hardest part of the trading game is sticking to your game plan; any deviation and you will accumulate losses, guaranteed. That being said, review, master, memorize, and personalize EACH and EVERY rule below before you trade a single share.
THE 10 TRADING COMMANDMENTS:
1.) BOOK PROFITS, ALWAYS
- The simplest, yet most important rule. Greed will end your career faster than you think. If you are correct, praise yourself by booking profits. The market cannot take away what you have already earned.
2.) Trade PRICE, not OPINIONS
- Every stock has a million opinions, price targets, etc. All that matters is how the price is acting, nothing else. No security is invincible, have your own assumptions, but let the price confirm those ideas. Stocks are nothing but letters and numbers, they don't know who you are and at what price you own them.
3.) Exit trades that you do not want to be in.
- Each trade we make has a certain risk/reward that we are willing to accept. If we get into a trade a realize our setups were miscalculated or timing was poor, get out ASAP. Bad trades lead to horrendous losses, and pile up if you don't exit quickly. You can always buy the stock back at a later date!
4.) Leave emotions at the door
- Do NOT fall in a love with a stock. Trade the tape and nothing but the tape. Each stock will have 100 reasons to be bullish, and twice as many reasons to be bearish. Equities aren't invincible, and they are subject to the Dow Theory just as every other security is.
5.) Learn from your mistakes
- Create a journal and review each trade, your execution, and what you could have done better. Making the same mistake over and over will make you insolvent, and quickly.
6.) "Babe Ruth" mindset WILL lead to failure
- Home run trades are few and far between. Stick to your game-plan and have a set risk/reward before every trade.
7.) You DO NOT know more than the market
- An arrogant and stubborn attitude will lead to a short trading career. As soon as the market has access to information, the market had adjusted before you have time to react. You WILL NOT out-smart the market, but you can time it.
8.) There is no such thing as over-preparation.
- Research, research, and research some more. And when you are done, research more. There are always indicators to a market movement; find the leaders and laggards and memorize everything about them.
9.) It's not about being right, it's about making money.
- Have a trading plan, perfect it, and make money. End of story.
10.) Just because you own the stock, doesn't mean it's a good trade.
- In short, keep an open mind at all times. Don't let personal opinions or outside rumors cloud your judgment. Trust your skills, and master them.
THE 10 TRADING COMMANDMENTS:
1.) BOOK PROFITS, ALWAYS
- The simplest, yet most important rule. Greed will end your career faster than you think. If you are correct, praise yourself by booking profits. The market cannot take away what you have already earned.
2.) Trade PRICE, not OPINIONS
- Every stock has a million opinions, price targets, etc. All that matters is how the price is acting, nothing else. No security is invincible, have your own assumptions, but let the price confirm those ideas. Stocks are nothing but letters and numbers, they don't know who you are and at what price you own them.
3.) Exit trades that you do not want to be in.
- Each trade we make has a certain risk/reward that we are willing to accept. If we get into a trade a realize our setups were miscalculated or timing was poor, get out ASAP. Bad trades lead to horrendous losses, and pile up if you don't exit quickly. You can always buy the stock back at a later date!
4.) Leave emotions at the door
- Do NOT fall in a love with a stock. Trade the tape and nothing but the tape. Each stock will have 100 reasons to be bullish, and twice as many reasons to be bearish. Equities aren't invincible, and they are subject to the Dow Theory just as every other security is.
5.) Learn from your mistakes
- Create a journal and review each trade, your execution, and what you could have done better. Making the same mistake over and over will make you insolvent, and quickly.
6.) "Babe Ruth" mindset WILL lead to failure
- Home run trades are few and far between. Stick to your game-plan and have a set risk/reward before every trade.
7.) You DO NOT know more than the market
- An arrogant and stubborn attitude will lead to a short trading career. As soon as the market has access to information, the market had adjusted before you have time to react. You WILL NOT out-smart the market, but you can time it.
8.) There is no such thing as over-preparation.
- Research, research, and research some more. And when you are done, research more. There are always indicators to a market movement; find the leaders and laggards and memorize everything about them.
9.) It's not about being right, it's about making money.
- Have a trading plan, perfect it, and make money. End of story.
10.) Just because you own the stock, doesn't mean it's a good trade.
- In short, keep an open mind at all times. Don't let personal opinions or outside rumors cloud your judgment. Trust your skills, and master them.