Please Share Your #1 Trading Rule You Adhere to with Discipline

[rxs0005 10]

Dear Fellow Traders

 

 

all of you by now must have a number one rule that has been ingrained in your DNA so that you do not lose money when you are red / green please do share that rule so all of us can benefit from your wisdom and experience

 

I will start

 

My number 1 Rule is

 

Never Trade before news ( I have been whipsawed several times and it hurts!)

 

I Wait for all the news to be baked in and let the markets show me the direction.

 

thanks

[brownsfan019 17]

Do not trade Crude Oil from 10:15am-10:35am EST on Inventory days.

 

On the rare 11am Inventory days, adjust times appropriately.

[macdfx 10]

Do not trade Crude Oil from 10:15am-10:35am EST on Inventory days.

 

On the rare 11am Inventory days, adjust times appropriately.

 

You could say the same thing for Natural Gas (NG) on Thursdays too, IMHO.

[TheDude 10]

Rule #1: Don't lose money.

[brownsfan019 17]

You could say the same thing for Natural Gas (NG) on Thursdays too, IMHO.

 

For sure! I don't trade Nat Gas so that rule doesn't apply to me, but a good rule for those trading Nat Gas.

[Tams 20]

#1 rule:

 

don't argue with the market

[TIKITRADER 10]

stick with the plan and trade whats displayed

ignore the urge to create before it too late

[srag&birdie2 10]

No. 1 Trading Rule: Show up sober.

[rxs0005 10]

great practical wisdom thanks y'all

[AgeKay 10]

NEVER average down. You only learn this the hard way.

[MadMarketScientist 11]

Don't trust optimizations your run on strategies unless every outcome of your various variables yields a positive result AND don't forget to input both commission and slippage into your calculations or you could be in for a surprise.

[METrades 10]

#1 Rule: Cut your losses quickly. Once a trade turns against you, kill that emotional thread that says, "It'll come back". You may look at cutting losses, as losing money, but actually, it's a strategy. It's proper management, that will "save" you money, and a piece of mind, in the longer run.

[minoo 11]

I just had a sunday conversation with one of my pals & something similar pop up

Your question is challenging, Rule, Discipline & Adherence .. .

Below is my good attempt to answer it

 

Pre-Market Routine and Preparation of Thyself and System (both)

 

As per myself, the above is more of a Process or Good Habit.

In my book, If my mind knows of a Rule it inadvertently wonders off to break it

 

I learned to choose less tussle with my grey-matter and discipline for ones own good.

Tried different approach with Process, Routine, Guidelines rather than to let my mind know that 'Its a Rule' This way it seems to work more regularly for me.

 

Note:

When learning to trade and struggling, I went through the Rule base plan where I found both my system and method unnecessary challenge more by my traderself than technically or by trading events. But it was necessary to experience this phase in a rule based environment. Its like when learning to drive the car, you are aware of the rules of the road but hardly can drive correctly. Also become too cautious and you put the mental breaks on your ability to learn.

 

For me rules work better in my learning plan (with repetation, balance & progression) than ever in my trading plan. I have experienced & derived at something different now, which works mostly.

 

A good question my friend, Hope this helps

 

Regards Minoo

[amswak 10]

#1 Rule: Cut your losses quickly. Once a trade turns against you, kill that emotional thread that says, "It'll come back". You may look at cutting losses, as losing money, but actually, it's a strategy. It's proper management, that will "save" you money, and a piece of mind, in the longer run.

 

Agreed. This is my #1 as well. Never rationalize a loss. The moment you say "It'll come back," you've probably already gone too far.

[trade101 10]

Hello,

 

I agree with Minoo - our mind will always find many ways to walk around the rules. One way to trick the mind is to "buy" it - real money - cash only....

Of course rules is only one link in the whole game but important one.

I would say #1 (universal) rule is: " Follow the rules".

Edited May 17, 2010 by trade101

[MadMarketScientist 11]

I can virtually guarantee you that you can teach 10 people a very effective system with clear-cut rules. And, 9 out of 10 of them will end up breaking those rules, usually immediately. It is one of the hardest things to do, to have the discipline to follow a system and its rules, even if it is actually a profitable one at that.

 

It's just very difficult for human nature when following those rules also lead to loss. We just instinctively always want to "fix" it. Fight or flight when it comes to trading.

[TheDude 10]

This is a tricky point (rules).

 

Some rules you must stick to - mostly those are around the running of the business. e.g. risk limit per day, how/when to increase size.

 

Rules regarding entry and exit however aren't worth the cyberspace they're written in. The market is constant flux as we all know. No 2 conditions/opportunities are ever the same. There will be different participants in the market, there will be different influences in the market etc. Trying to apply a rule to such an environment is a fools errand in my view. It's just way to mechanical. Sure, it will be useful to have a set of guidelines, but rigid rules is a big no no in my book. Context is far far more important.

 

Tying to find a 'rule', 'set-up', whatever to give that elusive edge is a hiding to disaster. The market cycle is always changing and to expect a rule to apply all the time and generate serious coin just aint going to happen - in my humble opinion.

[MadMarketScientist 11]

TheDude - you do make an excellent point. I think part of the problem is many people come up with trading rules that are completely inflexible and not dynamic to market conditions as they change.

 

What I might disagree on is the fact that there are many who can trade successfully without having a number of clear cut rules and an exact trading plan. While context and subjectivity can be quite powerful, I haven't seen many traders in my time possess those skills to the level necessary to succeed. If you do or someone gets that level it can be fantastic but it would probably end up being the exception.

 

What I think most need are those clear rules, almost mechanical perhaps up to 90% and then use experience for the other 10% and flexibility. Or, ensure their mechanical system is not rigid, meaning it can adapt immediately to changing market conditions, as in more volatile markets with bigger range it adjusts targets and stops, when it's quiet those contract. I feel that can work. You only have to look at Wall Street and the fortunes the big firms are making off of their program trades to know it's possible. But that's a whole other conversation....

 

Thanks for your input.

[TheDude 10]

MadMarket- Yes, I think I agree there. Perhaps it may help to put some context from my own trading?

 

Generally, I have levels that I am looking at. Whether I take a fade or a break out of that level will depend on the context of the market. Volume may play a part in that, so in effect, is that a set up? Not in my book, as I'm looking at the context of the activity v recent activity. You cant predefine that in a list of attributes that create a 'rule'. I'm not being mechanical in that I wait for 3 bars of pull back or less, an indicator to be at a certain level, etc. I've made that error before. For me it's too ambiguous. I started off years back looking at Joe Ross and his TLOC ideas. Great on paper, but for me it just didn't work. How many times did a 1-2-3 turn in to congestion. Same with hooks.

 

You raise a good point about programme trades. Yes, thats another area - and correct me if I'm wrong but it tends to be based around market microstructure and logical relationships. Are those relationships often based around equivalents 'rules', or 'logic'. Now were (well, me anyway :crap: ) playing with semantics......

 

Cheers.

[MadMarketScientist 11]

I think we're on the same basic page, just coming at it from different directions.

 

I always think there's a place for "art" in trading -- call it a 90/10 rule for me. But, I think that 10% is the hardest thing for most to master, and if we're ever going to see more people succeed than fail it probably has to be as a result of some fairly strict rules that keeps them "alive" and then hope the art can be developed. Most tend to washout before that I think, and many times either chasing a bogus EA or having no clue of whey they are buying or where they should exit. Just doing a transaction.

 

Funny you mention Joe Ross, years ago I did same, bought an expensive book that looked really cool -- but I could never make any money at it -- maybe not being the author and in their head was the reason -- I had high hopes but didn't make it for me. It's on a shelf or packed in one of many boxes packed with books, systems, software - I could open a museum.

[TheDude 10]

lol - Good post! You cant learn to ride a bike by reading books either!!!

 

rule 1. turn pedals.

rule 2. turn handle bars in direction of corner

rule 3. apply brakes to stop

.....

 

Just doesnt seem right does it?

[emg 12]

here is my rule #1. control emotion

[Attila 10]

1: DO NO PREDICT (a.k.a. having a BIAS not based on what is actually happening)

 

Today trading NQ I figured once past 1920 1940 and 1950 were a given.. I got long 1922 and allowed an 11 pt gain become 1pt gain.. Went long again 1919.25.. this time a 6 pt gain became a 1.75 loss... Went long 1894 for an 8 pt gain a few minutes later..

 

Point is once I had that 1922 entry I KNEW I would have an EASY 10 to 20 points to 1940/1950.... I had decided I WAS GOING LONG whether NQ liked it or not. If I hadn't predicted due to the daily channel and my emotions I would have reaped 30 POINTS in the other direction.. My system was screaming short on the 1920 break but I COULD and WOULD not see due to my premarket bias...

Edited May 18, 2010 by Attila

[SIUYA 11]

Attila - interesting point..... re pre market bias.

 

I think the best plans are ones that say -

if this does this, then I will go long as I think that this is the most likely outcome.... however if this does this instead then the least likely outcome that I thought would happen is occurring then I will go short.

 

Amazing how many times the move that occurs from the least likely action occurring can be very profitable.

 

Its a fine line between having a plan that is biased, and also having the flexibility to add that extra dimension to the plan to then actually listen to the market. Of course then there is the third dimension of "I cannot see what is happening in the market today, so I dont need to be there, walk away"

[MadMarketScientist 11]

I think a key to these rules and discipline is to realize you don't have to be right every time. I think traders throw away systems, rules, strategies the moment they're wrong. The key is not to worry if you interpret the action wrong, or if this time it doesn't break your way. You trading might be just fine, your expectations are what is off (the need to be 100% accurate)

 

Last post here reminded me of a good trader I know -- everyday when the day is done he gives himself a letter grade for how he traded. A or B he gets to trade tomorrow. C or worse, he does not allow himself to trade tomorrow - that's the penalty and an awful good motivation not to make mistakes or be foolish and do things like revenge trade.