Golden Rules of Trading

While the following are not specific trading rules, they are general observations which will aid the speculator in formulating an understanding of markets.

It is a mistake to find yourself in a position larger than you can reasonable handle. When this occurs, you will find that the sheer size of the position, rather than the facts of the situation itself, affects your judgment.

Here’s the 12 Golden Rules of Trading:

  1. Adopt A Definite Trading Plan
  2. If You’re Not Sure, Don’t Trade
  3. You Should Be Able To Be Right 40% Of The Time And Still Show Handsome Profits
  4. Cut Your Losses And Let Your Profits Ride
  5. If You Cannot Afford To Lose, You Cannot Afford To Win
  6. Don’t Trade Too Many Markets
  7. Don’t Trade In A Market That Is Too Thin
  8. Be Aware Of The Trend (“The Trend Is Your Friend”)
  9. Don’t Attempt To Buy The Bottom Or Sell The Top
  10. Never Answer A Margin Call
  11. You Can Usually Sell The First Rally Or Buy The First Break
  12. Never Straddle A Loss

If a man is long from 100 points below the market and you are long from the opening that day, you both had the same amount invested in the market from the time both of you were long. Therefore, if the market goes up ten points, you each have made the same amount that day. If the market goes down 10 points, you have each lost the same amount.

You should not be confused by the fact that someone has taken a position before you. You must be concerned with your own situation primarily. Each day, start fresh. Your paper profits or losses from previous days should not enter into your decisions regarding the course of action you will take.

Treat paper profits as if they are your own money. They are! Naturally, the opposite also holds true.

The risk of loss exists in futures trading. Take control of your emotional and cut loss quickly.

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