Trading
Rules
to Live By:
Copyright 2004 TradingProFiles.com
Following these simple 15 trading
rules will help make you a more profitable trader and help you keep
your trading profits...
1.
Never put up trading money you can't afford to lose.
Never trade with your house payment, rent, car payment, etc. Never
mortgage your property for trading capital. You are playing with
fire if you violate the first rule of trading. The fact will always
remain that you can or may lose a good portion or even all of your
trading capital. This is why rule #1 is so important.
2.
Keep your trading costs down.
There are many great brokers that offer low cost commissions, with
great service and excellent trade executions. If you are a high
volume trader or a frequent trader, you can save a good sum of many
just by trading with a different broker. Sometimes the difference
between being profitable and trading with a loss can be the cost
of commissions. Explore your options, check out several brokers.
3.
Be a student of the markets. Learn and use both Technical Analysis
and Fundamental Analysis.
The top pros in every profession are constantly trying to improve
their game. Trading is no different. It is one of the most competitive
industries in the world with some of the brighest people involved
in it. You should constantly be a "student" of the market(s)
you are involved in. Constantly learning and improving your edge.
Don't rely only on Technical Analysis or just Fundamental Analysis.
Although you may focus on one, understand how both pictures can
influence the market.
4.
Do your own homework.
Never trade solely on someone else's suggestion or tips. Study methods
are markets that you are unfamiliar with completely for YOURSELF
before you put trust in it. Understand the idiosyncracies of the
signals of each before you trade with it. Be responsible for your
own decisions.
5.
Pick your spots to enter the market. Do not enter the market blindly
just because it's moving.
Find your entry points based on careful evaluation and analysis.
Don't rush into a market just because it is moving up or down right
now. Markets have a tendency to move back to retracement levels.
Find an entry point based on careful analysis and stick with it.
Then make small adjustments if you do not get the fill you want...
but, NEVER chase a market just to get in...just find another entry
point. Chasing markets usually end up being very costly.
6.
Have your gameplan in advance. Don't make it up along the way.
This goes along with rule #5. Have an overall trading game plan,
and a plan for each particular trade, and stick with it. Realize
trading plans involve time of entry, price of entry,
contingency plans, price and time of profit and total
time anticipated for the trade, along with stop loss
plans. And those are just the basics. Without at least, these basics
involved in each trade, you are trading haphazardly, and possibly
blind.
7.
Always use protective stops.
A Chicago floor trader once told me..."Always keep your powder
dry...You need your ammo for the next fight." In other words,
if you blow all of your capital or most of it on one trade, you
won't be around to trade another day. Trading opportunities come
and go, but they will always appear again in the future. Always
use protective stops so that you will have capital for that next
trade.
8.
Always use price profit targets to close part or all of your position.
A good rule of thumb is to take half of your position off the table
if you are fortunate enough to be on a trade that doubles in value.
This way you get your initial capital back, and still have money
on the table for the trade to mature even more. A better rule of
thumb is to take all of your money if you realize a double in a
very quick amount of time, and then reconsider and re-evaluate the
market and your options.
9.
Never let a winning postion turn into a money losing trade.
If you use stops and move them along with profitable winning positions
you can protect your profits. For example, if you are long only
move your stops UP, if you are short, only move your stops DOWN.
Move your stops only in the direction of the PROFIT. Not the other
way around. Also...
10.
Never let a "pre-stopped loss" turn into a bigger loss.
The brother of rule #9...Never let a small loss turn into a bigger
loss. Never let a pre-determined stop loss turn into a larger losing
trade. Get out when your stop is hit. Never widen your stops on
a losing trade, just to stay in the trade. By changing your stop
you are potentially opening the door for a much larger loss and
you are deviating from your trading plan. Don't do it. Never let
a potentially small loss turn into a potentially big loss.
>
Continued Read
Part 2 of Trading
Rules to Live By
>
Go Back to Trading
Methods and Trading Tactics
*DISCLOSURE:
This is not a solicitation to buy or sell securities. These are
NOT recommendations to buy or sell stocks or to invest or trade
in any stock, or any other financial instruments. The information
above is not intended to offer any professional investing or trading
advice. This website is not compensated by any of the companies
to promote their stocks. These are just personal opinions. Trading
Pro Files is NOT responsible for any investment or trading decisions
that anyone may make based on any information received from this
website, or any affiliated site, or from any links on the Trading
Pro Files website(s). When investing or trading in any financial
instrument, always excercise extensive due diligence, and investigate
any investment or trade completely prior to commiting any money.
Consult with a financial professional. Know your risk and understand
that any financial trading and investing inherently involves RISK,
and with this risk there is a potential to lose a substantial amount
of money.
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