A Few Rules To Follow
Follow Them
A Few Rules We Follow - Part VI
Learning how to position invest or trade is a marathon, not a sprint. Nonetheless, we follow rules, and you should too. Here’s a few of perhaps some of the best “hints'' that universally will improve your trading regardless of your level of expertise.
Everybody has a list of rules; problem is most investors or traders disregard their very own rules. Choose your trading style, learn how to use the tools you’ve acquired, then practice, practice and practice some more. If you think learning about futures then trading futures is going to be easy then you’re probably going to be very disappointed. Again, it’s a marathon not a sprint and the sooner you realize that the better off you will be.
To get you started here are a couple of the “rules” we follow. Take the time to think up your own but again, if you do follow them.
1. Don’t trade when “hope”, “pray”, “wish” or even “think” are associated. There will be plenty more opportunities. As a position trader I don’t trade unless all signals used align and the probability of success approaches certainty.
2. Follow the trend. Post identifying the trend it’s best to follow it realizing that in today’s world it can change on a dime. We take more time on this and related subjects in our webinars and one-on-one interactions.
3. Make a plan and learn the basics of investing and trading before you start. Unless you want to fall into the category of just being “lucky”, trust me it doesn’t last, or just blowing yourself out of the market quicker than you’ve ever lost before, you are best to start with a “paper” account. If you need help setting one up let us know; we have our favorite brokers, clearinghouses and data providers to recommend that we’ve worked with for years. They’re not the cheapest but they’re the best and that matters.
4. Follow your plan. Think about it; you are making your first plan. We hope you are not just doing that for fun. You are creating your plan for you; please use it. If you are putting it together as just an exercise do yourself a favor; do something else. Learning anything is a major decision so in short, don’t screw it up. That doesn’t mean you will not change your plan over time but give it a chance first to show you what needs to be changed.
5. Choose a trading style. I’m a biased position trader. I’ve considered other trading styles like day, swing and scalp trading. In today’s world, most everybody wants to be a day trader. While I’m a position trader I still might jump on a solid day, swing or scalp trade that hits my radar screen. Choosing a style helps you build a solid plan; it doesn’t preclude you from investing or trading other styles.
6. Understand your personal risk and reward status. If you take anything away from this course the most important qualities necessary to having the chance to make a living investing and trading is understanding yourself; what’s “between your ears”. Understand what you can afford to lose. Have a goal and depending upon your goal decide the amount of capital you can afford to lose.
7. Do not overtrade. As reiterated many times throughout this course, I do not trade much. In a prior lifetime I traded a lot more. As I have aged the reflexes are just not there; neither is the interest. It’s best to operate within your preset boundaries and wait for your opportunities to arise; the ones in your plan that emerge and find you versus what amounts to just shooting buckshot.
8. Cut your losses short. There will be plenty more opportunities. Just how many times have we brought this issue to light in this course? We’re not doing it for our health; we instinctively abide by this rule.
9. Let your profits run but remember greed kills: bulls make money, bears make money and pigs get slaughtered. This rule remains a problem for most, not because they aren’t decent investors or traders, they’re just human. Gamblers look for the big one; not me. I’m happy to take a piece out of several transactions knowing I have the ability to find the next one.
10. You’ll never go broke taking a profit. Not much more to add here as it’s very similar to what’s written above. When coupled with cutting your losses short there’s even more value.
11. Do not stay too long in a good trade. This is for all of you day traders. You are short term in nature by design. Your plan and set-up dictate your desire like the hamburger chain, “In & Out”. Follow your plan; if it’s not working reevaluate it and reassess who you are. If you’re not profitable, that's the best place to look.
12. Recognize fear, greed, ignorance, stupidity and impatience in the markets; take advantage of them. Quite frankly I look for “wicks” or “candles” most often. I first assess the overall direction of the markets then watch for aberrations, you know the ones that are significantly contrary to the direction the markets should be heading. I suggest you take advantage of the opportunities that arise when they do. Having a solid plan and abiding by it works.
13. Not owning a position is a position. The best way to teach this adds a third moniker to the often used list of positions used, “long”, “short” and now “flat”. Being out of the market is a position. As a matter of fact it’s the position used most often. After reviewing indicators, unless there is a 90% congruence rate I don’t take action.
14. Gamblers and thrill seekers often lose. Let me start you off with a good story; I play Roulette. On my “Stats I” final a question about gambling in Monte Carlo was asked. The answer was covering 22 of 37 numbers on the Roulette table. Like a casino, if you do not have a game plan, in this case an investing or trading plan you are essentially gambling. Clearinghouses, like casinos, make money every time you enter an order. If you are trading without a plan you’re essentially making the “house” a winner. Don’t do that.
15. Don’t trade on rumors. If you are the recipient of insider information how many people before you have already heard the news? You were not the first intended beneficiary of that news. More than likely you’re a victim of a “pump & dump” scheme where the true beneficiaries have already cashed in.
16. Learn from losing. Regardless of what you do, learn from your mistakes. If not, you've defined the word “idiot” in its primary form, “doing the same thing over and over again expecting a different result”. Without a doubt most people learn more from losses and mistakes than winners. Review your losers early and often.
17. Always use stop losses. Let me repeat that; always use stop losses. Let me emphasize; ALWAYS USE STOP LOSSES. The world is always changing, information flows at the speed of the Internet. If you are wrong there’s no guarantee you’ll be able to get out. ALWAYS USE STOP LOSSES.
Again, before you start investing or trading understand more than just your investing or trading objectives. Understand what makes you “tick”, what’s “between your ears” before watching the market’s ticks. Learning how to trade isn’t a sprint . . . it’s a marathon. Everyone learns at their own pace; you’re off to a great start.
Big family weekend and week in this part of Texas. A couple “new” babies are getting christened and a great grandmother is turning 90-years young. Hell, there’s little new in the macroeconomic, geopolitical genre except for the way the information gets spun and how it’s interpreted. There’s no reason to do much of anything next week as the first holiday, Memorial Day, the official start to summer follows. Please take the time to honor those brave individuals who have given more towards preserving the freedoms we still have than most.
Hope you enjoyed this post. I’m just a young 68 years old; my Dad became a broker when I was 13. It’s time for me to ‘give back’ to all of you what’s in my head. It’s not always pretty but it’s based on history . . . and history, unchecked, repeats itself as you are witnessing..
Everyone learns at their own pace. If you pick everything up the first time through, great but if not email me at david@thetickeredu.com so we can further help. Thanks again go out to Danny www.mrtopstep.com . . . check him out; he’s worth your “click” and thanks to all of you who have adopted what is being created and presented; we’re humbled by the response and referrals. Again, let me know what you want to learn, I’m all ears.
Carole King is better known for many songs but “Where You Lead” just fits what i’m trying to do . . . get you started and lead you down the path of success. It takes time to become a better investor or trader; it takes dedication but first, get to know what’s “between your ears”.