Among all other things I was reading tonight I just want to post some very helpful rules from the Time Tested Classic Trading Rules for the Modern Trader to Live By.... by Linda Bradford Raschke,
1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don’t take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating.
You are the most important element in the equation for success.
You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point.
25. The difference between winners and losers isn’t so much native ability as it is discipline exercised in avoiding mistakes.
26. In trading as in fencing there are the quick and the dead.
27. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
29. Accept failure as a step towards victory.
28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
29. Accept failure as a step towards victory.
30. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don’t let ego and greed
inhibit clear thinking and hard work.
inhibit clear thinking and hard work.
31. One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door.
32. The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed.
33. It’s much easier to put on a trade than to take it off.
34. If a market doesn’t do what you think it should do, get out.
35. Beware of large positions that can control your emotions. Don’t be overly aggressive with the market. Treat it
gently by allowing your equity to grow steadily rather than in bursts.
gently by allowing your equity to grow steadily rather than in bursts.
36. Never add to a losing position.
37. Beware of trying to pick tops or bottoms.
38. You must believe in yourself and your judgement if you expect to make a living at this game.
39. In a narrow market there is no sense in trying to anticipate what the next big movement is going to be – up or down.
40. A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss – that is what does the damage to the pocket book and to the soul.
41. Never volunteer advice and never brag of your winnings.
42. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss.
43. Standing aside is a position.
44. It is better to be more interested in the market’s reaction to new information than in the piece of news itself.
45. If you don’t know who you are, the markets are an expensive place to find out.
46. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will
happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what
supposedly will happen but reacts instead to what does happen.
happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what
supposedly will happen but reacts instead to what does happen.
47. Except in unusual circumstances, get in the habit of taking your profit too soon. Don’t torment yourself if a trade continues winning without you. Chances are it won’t continue long. If it does, console yourself by thinking of all the
times when liquidating early reserved gains that you would have otherwise lost.
times when liquidating early reserved gains that you would have otherwise lost.
48. When the ship starts to sink, don’t pray – jump!
49. Lose your opinion – not your money.
50. Assimilate into your very bones a set of trading rules that works for you.
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1. Don't be greedy: Invest smartly, with some professional help and some study on your own.
2. Avoid 'hot tips': Stay away from 'experts'. Use your own judgement.
3. Avoid trading/timing the market:
4. Avoid actions based on sentiments: Don't be emotionally attached to stocks:
5. Don't panic if the market drops: Hold onto your winners and sell your losers.
6. Stay invested, possibly continue to invest more: It is natural to book profits with the markets at higher levels.
7. Buy stocks if there is a 5-8 per cent drop in the market: In this bull market, a 5-8 per cent drop in prices offers you a good opportunity to buy scrips.
8. Avoid checking the price of stocks or mutual funds after you've sold them:
9. Avoid penny stocks:
10. Diversify: We suggest you diversify a bit, looking at stocks, mutual funds, commodities and gold. (I disagree with this one in form at least)
11. Don't commit large amounts of money: Even if you have a strong risk-bearing capacity, we suggest you do not commit large sums of money at this stage.
12. Don't trade for short-term
13. Don't expect to be a millionaire overnight. Patience pays, so be realistic. Stick to the desired asset allocation: Asset allocation is the key to successful investing, say experts. Even though equities may outperform debt substantially, it will not be wise to put all your investments in equities.
14. Distinguish between stocks for keeps and trading: A variation of "never let a trade become an investment."
Buy with adequate margin of safety: That's where attractive purchase prices can help. As a matter of fact, selling stocks is no different from buying them. Keep a sufficient margin of safety when buying a stock and don't rely on making a good sale ever.
15. Sell when value is realised: If you feel that your investments are adequately valued, you should exit regardless of how long you have held them.
16. Keep a watch on relative valuations: The real cost of a stock is not the price you pay for it, but the opportunity cost of not putting your money in another one.
17. If you realise a mistake, exit immediately
18. Start investing early.
19. Try to invest in things you know.
20. Try to adopt a long-term perspective with regard to investing.
21. Know your risk: Understand the level and amount of investment you are comfortable with.
22. Play safe, invest in a mutual fund: For those who are still not sure about their research, use mutual funds.
23. Encash when stock prices dip: Reduce some exposure, lock in some profits.
24. Don't blindly follow media reports on corporate developments, as they could be misleading.
25. Don't blindly imitate investment decisions of others who may have profited from their investment decisions.
26. Don't fall prey to promises of guaranteed returns.
What I learn from all these things trading brings is CHARACTER. How patient or impatient we are. How we are when we are losing and how we are when we are winning. Our attitude when it comes to money. I thought to myself. This is why I love the idea of being in the stock market. I also hope that I will become one of the good if not the best trader out there. But hope is not a strategy so better practice due diligence in doing my homework
...and if not, I just simply want financial freedom.
Caveat!
I posted my financial adventure like this here because I noticed that after the 2,000th mark, nobody reads my posts anyway. This article does not constitute a recommendation or an offer to sell or a solicitation to buy any financial product and stocks.I'm an independent trader and not affiliated to any financial institute. I encourage you to do independent research for your judgment with respect to the matter contained from this site. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein.
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