Trading Rules –
your very own personal trading rules are very important to establish because they distinguish the nature of an investor that you are – and what you will do and won’t do with the investment of your dollars.
All successful investors and traders have a specific set of guidelines that they follow when making investment choices and managing investments – in the stock, bond, options, real estate or other investment markets. And a smart investor refines trading rules over the years of their experience to continue to hone their ability to experience success.
There are all kinds of ways to be an investor – some of these may suit you personally and some my not. And, the trading rules that we have are as different as the rules for soccer, football and baseball – and many investors this year have been playing baseball looking for a pitch (the market going up) – when the other team has the ball running toward the goal line in a football game (when the market has declined substantially).
Traders write down their trading rules – I’ve seen them taped to their computer monitors on the trading floor – and they remind them to not get managed by ‘emotion’ – but to stand on previously designed principals to manage money. This will lead to your success too.
What might your trading rules be? Here’s the start of my investing guidelines …
Importantly — First: Invest to Keep the Principal. Second: Invest to Make a Profit.
Let’s break this down a bit and I’ll share with you some of my trading rules when I’m investing in the stock market.
First, Keep the Principal – Second, Make a Profit
Read the Market – What is the Rotating Movement of the Market – is it Going Up, Down or Sideways?
Buy ETFs that Represent the Broad Sectors of the Market.
Invest Only When there is A Market Trend – a Distinguishable Pattern In the Market – Either UP or DOWN.
Pick a Strategy for the Market Pattern of Up or Down – or Stay in CASH if it is Not Clear – Because My First Principal Is….(Keep the Principal…).
Determine How Much I Am Willing To Lose. Mostly I Won’t Lose More Than Half of the Amount of Return That I Expect To Make in the Trade – and I Put a Reminder In to Sell My Position if this Happens – Because my First Principal Is…(Keep The Principal…).
Hold A Maximum of Three Positions At Any One Time – and Be Absolutely Clear About the Buy Price and the Sell Price.
Track Trading Positions On a Daily Basis. And Only Buy the Universe of Symbols that I am Familiar With On My Daily Watch List.
Be Out of The Market if I am On Vacation or Otherwise Not Available To Witness Market Movements.
Trust Myself to Make Choices.
Don’t Buy Packaged Products, like annuities.
Design your investing guidelines before you invest. Adopt some of my trading rules – and add your own – and then tape your trading rules up some place that you will regularly see them so you can measure your investment success!