Category: Trading Rules

In my previous post , I quoted this :

” The first rule of trading is to survive ; the second rule is that all rules can be broken if that supports the first rule. ”

The Stock Market is a complex environment. Market condition changes every second , sometimes you know the reason , sometimes you don’t. Trading systems and trading rules are meant to guide us during our execution of trades.

Trading Rules are not carved on solid rock. At times we need to review and edit some of the rules that do not work anymore.

I would like to quote a driving example here …

Imagine if you are driving along the road and an oncoming truck is heading towards you in your lane , do you stay in that lane or swerve across to the empty lane ( assuming no vehicles there ) where you are not supposed to be ? The rules are clear , you are not supposed to be over there in the wrong lane. The system says not to do it , but reality …

Not many people define their trading rules. Worst still , many beginners traders have a beautiful set of trading rules written on paper , which they do not follow.

” The first rule of trading is to survive ; the second rule is that all rules can be broken if that supports the first rule ”

Life is a judgment call , but that call is based on having data and systems to make life work better ; so is with trading. We need a systematic approach to enter and exit trades. There is no holy grail in trading. A perfect system or perfect strategy does not exist. Never has , never will . Stop searching and work hard on other trading topics …

We need some form of judgment when we use our trading system , supported by your own set of trading rules and your own trading behavior or psychology.

Successful trading is an Art of using knowledge and systems at the right time. We do need systems and rules …

Did you watch this movie - home alone ? I love it !

Many traders enter the trading business and work from home because we want freedom and independence. However freedom requires a trader to be very highly disciplined. There is nobody to set rules for you at home , and this new-found freedom often results in an actual lack of control and self discipline. Working at home has its own set of rules that must be followed strictly in order for a stay-at-home trader to be successful.

The trader must be able and willing to assert control over his work time in such a way that the interruptions in time and concentration are kept to an absolute minimum and that they relate exclusively to work. In order to take control of your working time at home , you must establish a set of simple , effective rules that you are willing to follow. Some guidelines and rules are : ( these are my lists , you may add or delete to match your personality …

In the older days when information technology was not as advanced as it is today , many traders depended on tips to make trade decisions. It is still happening today , of course. Tips are pieces of information that come from questionable sources , and usually with no known way of tracing them. Today there are many paid trade signals subscriptions and even tough analysis are done by professionals I treat them as tips too. Do you ? Perhaps you have some better experiences to share ?

However I must also say that there are people who made money trading using tips. To them they got a better way to get more reliable tips. I made some money before based on some reliable tips on companies merger news , but also lost some money on tips that turned out sour.

In reality there is no right or wrong using tips to trade. That is my view , but I make it my Trading Rule not to trade using tips. The argument for using tips …

Abiding to general public rules needs discipline and social responsibility as an individual. As a citizen we have the duty to follow rules created by the authority. Many countries impose fines or other form of punishment if anyone breaks any of the rules. ( provided if you are caught … ) Naturally , the feeling of getting away from breaking a rule might be a good feeling of some form , but in trading this is not going to work. I obviously have broken many trading rules during my course of trading. Though at times I managed to get away free for some of the mistakes made , some other mistakes are really costly. From there on I am self motivated to abide by all my trading rules. In trading there is no room for mistakes , especially silly ones. Some written rules might appear simple and silly that makes one think that it is not necessary to be written down , but I learnt that these are some of the most …

I just started to blog about trading now. But I always like to explore other traders’ blogs. Nestled somewhere in their writings is often a nugget that helps me to improve my own trading skills. I love to read other traders’ trading rules and their mindset or trading habits that makes them successful. 

To be frank , my first impression is that trading does not really need rules. You buy or sell a stock at your wish. You decide to get in and out of a trading position anytime you wish. You decide when to trade and when not to trade. If you are trading online at home you could even decide to trade half naked , have a bottle of beer by your side and all the freedom you want. Who cares ? The only rule probably is that you need to have sufficient money in your trading account to take a trade.  Why make things more difficult then by having the need for rules ?

All I can say now is that if anyone were to trade without a set of …