Gyroscopic Investing

Top 10 Rules For Successful Trading


June 09 2010 | Filed Under » Active Trading, Investing Basics



Most people who are interested in learning how to become profitable traders need only spend a few minutes online before reading such phrases as "plan your trade; trade your plan" and "keep your losses to a minimum." For new traders, these tidbits of information can seem more like a distraction than any actionable advice. New traders often just want to know how to set up their charts so they can hurry up and make money.

To be successful in trading, however, one needs to understand the importance of and adhere to a set of rules that have guided all types of traders, with a variety of trading account sizes. Each rule alone is important, but when they work together the effects are strong. Trading with these rules can greatly increase the odds of succeeding in the markets.



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by
Jean Folger

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Jean Folger is co-author of the award winning book Make Money Trading: How to Build a Winning Trading Business, and has written numerous articles appearing in Futures Magazine, Smart Trade Digest and other online venues. She is co-author of the eBooks Volatility Indicators: Techniques for Profiting from the Market's Moves; and High Profits in High Heels: Secrets from Today's Top Women Traders.

Jean is a system researcher for PowerZone Trading, LLC , a company she co-founded to develop commercial indicators and custom trading systems for the TradeStation and NinjaTrader platforms. Previously, Jean was a real estate broker and a high school English teacher. Jean can be reached at jean@powerzonetrading.com.


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7 Habits of Successful Traders You May Not Know About


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I am not a big fan of trading. But if someone asked for advice on the subject, I would probably steer them to Jim Cramer's books and or TV show.

The best rule for "successful" trading would probably be not to trade.

"Trading" is mostly for suckers, IMHO.  It often takes a long time for this realization to completely sink in, though. 

To be a successful trader you have to realize that your competition is the most well educated, savy wall street brokers plus others who have available to them the fastest computers with the most sophisticated software trading programs available.  Also, by the time you receive any information on various stocks, they have already received this info, digested it and acted on it.  I just don't like the odds.

I'm not saying you can't make money trading but to do so on a consistent long term basis is very difficult.

I remember in the heyday of the late 1990s a co-worker with his day trading screen up at work all the time. I'd walk by and he'd be mesmorized by these red and green lights and arrows pointing all sorts of directions. I asked him how he was doing and he was just thrilled with the system he was using and the money he was making.

About a year later or so I found out he lost everything or very close to it. I will just say that it was not an insignifcant sum, either.

BUT, this is the Variable Portfolio forum so I try not to post these kinds of depressing stories here. Just do this stuff with money you can afford to lose.

I love these type of lists. They make it sound so easy. You can find 100 of these list on the internet and most of them are very similar.  I would wager that 99 out of 100 of the authors of these lists are net losers in their trading.

"let your winners run"...... "cut your losses quickly"..... "don't trade off fear and greed"..... "always trade with the trend"..... "blah, blah, blah, blah"

I do mean that with all due respect Odysseusa.  I just find most of these articles, books and gurus to be nearly worthless and full of psychobabble.

clacy wrote: I love these type of lists. They make it sound so easy. You can find 100 of these list on the internet and most of them are very similar.  I would wager that 99 out of 100 of the authors of these lists are net losers in their trading.

"let your winners run"...... "cut your losses quickly"..... "don't trade off fear and greed"..... "always trade with the trend"..... "blah, blah, blah, blah"

I do mean that with all due respect Odysseusa.  I just find most of these articles, books and gurus to be nearly worthless and full of psychobabble.

In general, they are sound principles.  If you let your winners run and trade with the trend, you only have to be right about 30% of the time to at least break-even. That means you will lose 7 out of every 10 trades and have humungous drawdowns.  That's far from the fantasy that neophytes have in mind when attracted to trading though.

The real issue is psychology as that is 90% of the composition in being a successful trader.  One most have a strict procedural or methodology on a market structural edge that is religiously followed over and over like a pilot doing a pre-flight checklist.  this is not fun or glamorous and it requires an enormous amount of discipline that has to be learned.  Books and so-called gurus generally do not teach that kind of self-development, because that is BORING!...  the sizzle is all in selling the 10% which is tactics.  So most neophytes traders are lost in the 10% tactical jungle flirting from method to method searching for the holy grail and never getting the mental infrastructure laid down.  The big money, from that perspective, is in the Hilton hotels philosophy of selling shovels to wannabe gold miners.  Personally, my morals stop me from taking that approach.

I agree the principles are sound and in reality if you can pull them off, you will do just fine trading.  However, without some sort of edge and a sound money management formula, you cannot "let your winners run and cut your losses short".

Again, it's just much easier said than done, and these lists always stop short of actually showing you proven ways to live up to their rules.