15 Trading Rules I Live By

Below are some essential trading rules I've instilled into my trading regimen. Grow your knowledge account and take these into consideration. For more info click the link below, Tim Sykes will further explain. Its a must watch for anyone who is considering Trading. Enjoy. 35 Lessons from Tim 


1. Be Patient: Wait for the opportunity to come to you. There will be day's when the ideal set-up that fits your personality is not present.During those time staying Liquid is an option. Don't be a degenerate addict, trading to stay busy will cost you. As I commonly say act like a Retired Trader, and only come out of Retirement when there is an set-up you couldn't afford too miss. Finding those set-ups that fit your personality takes time, but can be achieved overtime with constant studying and discipline. Overall don't trade random set-ups, because doing so will leave you with random results. Wait for the Markets to hand you a Gift. As Jim Rogers says "I just wait until there is money lying in the corner, all all I have to do is go over there and pick it up." Wait for the ideal set-up present itself then go from there.


2. Trade you own Ideas and Style: This one is a big one. Once entering into this game you'd think the best option is to blindly follow other successful Guru's Alerts and everything will come together. That couldn't be far from the truth. Following Alerts is a path you do not want to go down. Blindly following alerts may help you scalp for some quick profits, but those wins will not makeup for those loses. In simple terms, The Market Moves too quick to follow Alerts. Use the Alerts only to learn from and gain a idea of what the Guru's mentality is. When is comes to Style everyone will be different. Trading is NOT a one size fits all, you must tailor trading to fit your personality. Again discovering your personality as a trader comes from Market experience. Remind yourself that everyday shows a mere reflection of your level of development.


3. Never Trade impulsively, especially on other people's advice: In essence the common goal is to Filter Out the Noise. Common sense is often not common Practice. Avoid at all cost going on message boards such as Stock-twits or Twitter. Use those as a guideline, or as I say Belief Boxes.

4. Don't risk too much one one event or company: Never go all into any trade. Remember it only takes one trade to wipe you out. Don't get married to the stock, TRADE THE TICKER not the Company. Prices move before fundamentals. No one stock is worth it to risk all your hard earned money.


5. I am a Trader NOT an INVESTOR: I trade small-cap stocks. Better known as Penny Stocks. They are easier than Larger companies that are boring and already priced in. In my opinion, Penny Stocks are ideal for the average trader. They are very volatile - which makes it ideal for the small accounts. My goal is to take the meat of the move and grow my overall net worth. Investing is not bad, but it will not move the Needle on my account. For example lets say I put in $3000 into XYZ. Over the course of one year let's say you make 20% which translates to $600 in one year. Making 20% over the course of a year in according to Finance is outstanding, but you're not guaranteed to make 20%. 70% of investors fail to make to beat stock market indices. Sure, by the time you 60 you'll have enough to buy titanium Hip surgery. Another key factor is that larger companies are not Volatile, simply because the price is already priced in. Rather Penny Stocks are highly Volatile, which creates huge room for opportunity. The chart below $FNMA is a perfect demonstration on a true volatility. You will never see Larger companies have a perfect a fluid chart such as below.


$FNMA One Day

6. Stay focused, especially when the markets are moving: Always remind yourself that 3 out of 4 stocks follow the overall Market. Pay close attention to the next hot sector, but only react. It is not a question of if, but when, and if you'll be prepared. Take for instance this past year with the Weed sector created tons of opportunities.


7. Anticipate don't react: This one is one I am still trying to work into my trading regimen. When I began my Guru Tim Sykes would say to never predict reaction, only react to price action. I agree to some extent, but anticipating is not bad ONLY if you PREDEFINED a risk. In essence we are anticipating a trend once we enter a trade. Nothing is wrong if you anticipate a trend, but have a predefined risk. For example a classic ABCD pattern, where we are anticipating a trend pass A and using B as risk. Anticipating requires to have specific set of risk, which you must be willing to follow.





8. Listen to the Markets , not outside opinions: Filter out the noise at any cost. This ties into #3. Wait for the Markets to had you a gift. Use outside noise as a guideline never blindly follow. 


9. Think trades through, including profit/loss exit points, before you put them on: The best time to plan an exit of a trade is before you get in. It's your due diligence to predefined a risk of every trade before you execute it. Ask yourself how much are you willing to loose on any given trade. Remember it only takes one trade to ruin you if cutting losses quickly is not followed.


10. If you're unsure about a position, just get the Hell out: If you feel uncomfortable in any trade simply exit. Remember it is much easier to get in rather than exiting a trade. Don't risk potential disaster, rule #1 cut losses quickly. Holding and hoping is NOT a strategy. 


11.  Trade Pattern Recognition: In this niche the patterns will never change, because human nature never changes. It NOT a question of if, but rather when and will you be prepared. In my opinion this is like Tetras. Your job is to put the pieces together to form an overall Thesis about a stock. I read a lot that Algorithmic trading is the future, but unless other Trader's (humans) are behind the screen I disagree. Remember that beliefs move the Markets, and it will move in the strongest force. 


12. Look past tomorrow, develop a six month and one year outlook: Live life as a Marathon NOT a sprint. Everyday is another opportunity for you to gain knowledge in your field of interest. Majority of people do not have the patience to embrace the journey. I envision my self climbing the mountain everyday towards the summit. Most see the summit, but not the mountain ahead of them. It will take time, but the end is far worth it. 


13 When your Thesis is wrong simply GET OUT: Only go into a trade with a thesis, never a conclusion. Going into a trade with collusion means you're capable of predicting the outcome which is non-sense. When you're thesis is no longer valid you simply get out. Envision yourself as an scientist, testing and refining the process overtime. 


14. Prices move before Fundamentals: Price action is King. I understand the importance of fundamentals, I am not ignoring them. I simply use them as a guidelines to conduct my trading. Remember we are NOT trading companies. We are TRADING TICKERS. 


15. Admit when you're wrong: Admitting that your wrong is one of the many challenges of Trading. Majority of traders will at all cost avoid admitting their mistakes simply to not hurt their Ego. Being wrong is not bad, it's NOT admitting your wrong doing's.You must take full responsibility of your actions. Mistakes will happen, it's apart of the game. It's your job to recognize the mistakes that are reoccurring, and by doing so makes room for improvement. Always remember that the Markets don't owe you anything. As Mark Douglas noted " Taking responsibility means acknowledging and accepting  at the deepest part of your identity, that you not the market are completely responsible for your success or failure as a trader." In summary taking responsibility is the foundation of a wining attitude. 


 

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