Important Trading Rules

Two Important Questions to Ask
Before Every Buy And Sell
 
1. The next time you’re about to make a BUY DECISION ask yourself: If I could only make 10 trades per year, would this be one of them?
2. The next time you’re about to make a SELL DECISION ask
yourself: How is this going to look on my spreadsheet?

Important Trading Rules
1. Always trade with a stop-loss; know where you’re getting out at a loss BEFORE you get in
2. Never risk more than you can expect to gain on average based on your own trading
3. NEVER add to a losing position (“AVERAGE DOWN”) – Only losers average losers
4. Scale up when trading well, scale down when trading poorly
5. Only go overweight a position in the direction of the trade
6. Cut overweight portion if the trade moves against you ASAP
7. Consider trimming excess position if the stock fails to move as expected
8. Never hold a large position into a major report
9. Never let a good size gain turn into a loss
10. Move your stop up to breakeven ASAP
11. When there is a material change in behavior, SELL IMMEDIATELY!
12. Look for follow-up buying after a breakout
13. Do not have favourites; buy stocks in order of breakout
14. Evaluate your position everyday; ALWAYS THINK IN TERMS OF RISK VS. REWARD

Top Reasons Most Traders Fail to Achieve Big Performance
1. Poor selection criteria – penny stocks, tips, rumors, media hype
2. Don’t cut losses – #1 mistake
3. Add to losing positions – average down – #1 reason traders blow up
4. Fail to scale back exposure when trading poorly
5. Fail to scale up aggressively on the heels of successful trades
6. Don’t nail down profits when they have them
7. Let decent gains turn into losses
8. Overtrade – love action more than making money
9. Under trade – paralysis by analysis
10. Don’t know the truth about their trading – fail to conduct periodic post-analysis
11. Fail to manage risk/reward relationship (the Holy Grail)
12. Don’t commit to a strategy – style drift
13. Want too much too fast – unrealistic learning curve objectives
14. Trade too large – sell down to the sleeping point
15. Overly diversified – trade too small
16. Concentrate too much on reward and not enough on risk
17. Don’t follow their own rules – lack of discipline

8 Keys to Super performance
 
4 Keys to Big Returns
1. Timing
2. Concentration
3. Turnover
4. Managing risk/reward relationship
4 Keys to Low Drawdowns
1. Sell into strength
2. Trade directionally
3. Progressive exposure
4. Protect breakeven