[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.
- 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.
- 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.