A Few Trading Rules

[dc]I[/dc]n doing the preparation and background work for the book, I found a set of rules for a swing trading system I traded for many years.  I thought I would share a few snippets from those rules, especially the parts dealing with trade management and behavior management.  I cleaned them up, and removed specific system references… and I think this list is now relevant for traders regardless of timeframe or instrument.  To me, it’s useful to re-read things like this sometimes, just to remind myself of the obvious, and, though these.  I hope you find them useful, but you should adapt them to the specifics of your own situation and personality.

Trade Management

  • Let winners run. While momentum is in phase, the market can run much further than might be expected.
  • Corollary to that rule: Do not exit winners without reason!
  • Be quick to admit when wrong and get flat.
  • Sometimes a time stop is the right solution. If a position is entered, but the anticipated scenario does not develop then get out.
  • Remember: if one thing isn’t happening the other thing probably is. Historically, this has never been good for me…
  • Be careful of correlations. Several positions can often equal one large position bearing unacceptable risk. Please think.

Other thoughts

  • I am responsible for risk management, money management, trade management, doing the analytical work and putting on every trade that comes.
  • I am not responsible for the outcome of any one trade. Markets are highly random. I do not have a crystal ball. I am not as smart as I think I am.
  • Risk management is the first and last responsibility. I can make almost any mistake and be ok as long as I do not violate my risk management parameters.
  • Opportunity comes every day. Do not neglect the work. Must do analysis every day.
  • Opportunity comes every day. Get out of poor positions. Move on.
  • I am a better countertrend trader than a trend trader. Sometimes the crowd is right, and they will run me over at those times if I’m not quick to admit I’m wrong.
  • If you’re going to do something stupid, at least do it on smaller size.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 8 Comments

  1. txchick57

    I also seem to do better at countertrend trading. Interesting.

  2. Robert Baker

    Your rule “Do not exit winners without reason” is excellent. I am often guilty of money based exits and watching the market continue without being on board. My work recently has been all on exit strategies … realizing that entries are easy – it’s the exit that makes the trade.

    Thanks for your post.

  3. Pingback: Wednesday links: market selection

  4. Jsl

    but counter trend trading requires being right twice a) the market will change direction and b then it will trend in that direction.( another words it is tough to call bottoms) Trend traders only have to be right in one area, that the trend continues. That said, I am more comfortable at counter trend, because its my ego that gets massaged

  5. Rodolfo

    Thank you for sharing your bits of wisdom through these important rules.

  6. marc

    counter trend trading has wiped out more traders than trend followers. I tried the strategy on March 09 Through March 2014 lost most of my accounts

    1. Adam Grimes

      I don’t know that it’s true that countertrend trading has wiped out more traders than trend following. The risks are a different kind of risk, but so many more traders try (and fail) as trend followers… I wonder if more traders have failed as trend followers overall.

      Definitely pros and cons to each style.

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