WTL Trading

Following are rules and tips that successful traders learn and live by.  Many of the rules are just common sense, though common sense is a rare commodity -- and rarer still among some traders and portfolio managers.

Obvious Rules
1. Always do your homework. Have a position (bullish, bearish, or neutral) before you trade.
2. Anticipate and plan rather than react; think of all the "what-ifs".
3. Be disciplined and rational. Work hard. 4. Make your own "luck" through hard work and perseverance.
5. Risk no more than 5% of your capital on a single trade.
6. Ride winners; cut losses; trade small.
7. Pay attention to what other markets are doing.
8. Don’t be concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position that day.
9. Don’t trade until an opportunity presents itself. Wait for a trade you feel most confident about.
10. Be patient. Avoid impulses. (There is nothing wrong with doing nothing. Wait for your price.)
11. Scale in and scale out of positions to spread risk.

Trading rules should reflect your risk management "policy", leading to transactions consistent with your risk tolerance.

Basic terms
Bullish: you think the market is going up.
Bearish: you think the market is going down.
Neutral: you're not sure.

Key tips
1. Form a market opinion before taking a risk.
2. Match the transaction with the opinion.

A word about options --

Transactions are not just limited to outright buying or selling the commodity or security.  Options provide flexibility, and lead to a range of transactions consistent with a given market opinion -- with less risk.

Learn more about options here 

Not-So-Obvious Rules
1. Identify and commit to an exit point before every trade.
2. Don’t trade too much or trade to play. This detracts from finding real winners.
3. Never add to a losing position.
4. Don’t get complacent with profits. The toughest thing to do is hold on to them.
5. Place your stop at a point that is difficult to reach (above resistance, below support). If this implies an uncomfortably large loss, trade smaller. Scale the stop.
6. Never play macho man. Never over-trade. Guard against being a trading "junky".
7. Don’t cast too wide a net. There isn’t a "best" commodity or stock to trade. Narrow your scope to commodities or stocks you are comfortable with, and you will have more time to focus on good trades.
8. Follow your ideas, but be flexible enough to recognize when you have made a mistake. 9. Adopt the key characteristics of successful traders: discipline, patience to wait for the right trade and stick with a winner, adequate capitalization, a strong desire to win, and a noble goal.
10. Separate your ego from trading. Making a profit is most important. Learn to accept mistakes and limit losses quickly.
11. Moderate your emotions. Don’t try too hard, and don’t be arrogant. When you get arrogant, you lose risk control.
12. Don’t place blind trust in anyone; be self-reliant. "Experts" are not traders. More money is lost listening to brokers than any other way.
13. Be strong and independent. Think against the herd.
14. Be a good risk manager, be a successful trader.