Trading Rules

The trading rules are different from the life rules. In the life rules the primary rule is nobody knows nothing - or, to say it another way, trust - but verify, or, to say it another way, if you are in a poker game and you don't know who the dumbass is - it's you. But that's life.

The trading rules on the other hand are far less philosophical. Rule 1 - nobody knows nothing especially you. Rule 2 - every day is a new day with a new start complete with a new opportunity to succeed or otherwise comport yourself. Rule 3 - patience is not only a virtue it is the best money saving method ever devised.

If you understand rule 1 you might even have a chance of suceeding in this game. The reason for that is if you adhere to rule 1 you won't become an arrogant jerk and lose all of your trading funds on a few plays. It took me two tries to discover rule 1 - but I'm slow. I'm still an arrogant jerk which is why rule 2 is necessary but rule 1 reminds me that I don't know anything and I need to learn again with each and every trade.

Rule 2 suggests that there is an opposite to success and that is the most important part of rule 2. That is why rule 2 is written in a way guaranteed to challenge even the most erudite scholar. Rule 2 makes your head hurt - bad trades make your head hurt - rule 2 is a winner. The opportunity that every day presents is to succeed or to fail. Measure your successes one day at a time and measure your failures in the same way.

In the game of golf which is very close to the game of life there is one cardinal rule - never follow a bad shot with a bad shot. Even if it means taking a slam dunk, can't miss baby chip - do it because it will put you back on the road to success and that's where you want to be. In trading you should attempt to never follow a bad trade with a bad trade. But there are no slam dunk trades or are there? In an upward going market there are a lot of stocks that will go up a dime or twenty cents in a very little while. In this day and age of small commissions you should be able to take a successful, break-even trade fairly quickly. Take it, savor the win, and press on. Repeat after me - a profit is better than a loss - any profit - any loss.

Rule 3 was written to supplement rule 2 - rule 3 says that sometimes the best thing to do is to wait. If you don't know how to wait then the first thing you should practice is waiting. If you are impatient you will rush into trades that may prove disasterous. I trade from home. The market opens at 9:30. If I have an overnight trade I wait until the market opens and then make my trade within the first five minutes or so. Then I close my trading station and do something else for the next 30 minutes or so. Most days I shower and shave. I have learned (the painful way) that I have no business trading in the first half hour of the day. Some people make money trading the 2-minute boundaries. Most people trade better on the 15-minute charts and even more people trade best on the 30-minute charts. Patience is not just a virtue it is the key to winning.

There are no other rules that will serve you as well as these. You're welcome.