Trading rules are like rules when driving on a road. You are not supposed to stop on a highway but if all the cars in front of you are stopped it would be foolish to keep on the gas.

I am starting to think rules are not really rules. They are fairly rigid guidelines. Rules must not be broken but trading does seem to leave room for feel. And feel cannot be bound up in rules. The rules should be boundaries, places beyond we should not go. But traders intuition can often give you a real sense of when to trade even when the "rules" say no and when not to even though the rule says ok. That being said, I don't think the traders intuition really comes into play until you have around 5000 hours in it watching the same instrument and the same set ups. Its where experience meets opportunity.

I guess my question boils down to: does anyone have a set of rules good enough that simply following them is "the answer"?

...every time I make an automated system, it underperforms what I can do discretionarily by a wide margin...when I trade discretionarily, I bend and break my "rules" fairly often.

Yes any suggestions would be welcome. I think that's a topic every trader has to deal with.

I can give you the best rules in the world and the best methods for determining the position of a commodity, and then you can lose money on account of the human element, which is your greatest weakness. You will fail to follow rules. You will act on hope or fear instead of facts. You will delay. You will become impatient. You will act too quickly or you will delay too long in acting, thus beating yourself on account of your human weakness, then blaming it on the market. Remember that it is your mistakes that cause losses and not the action of the market or the manipulators. Therefore, strive to follow rules, or keep out of speculation, for you are doomed to failure.

If you will only study the weakness of human nature and see what fools these mortals be, you will find it easy to make profits by understanding the weakness of human nature and going against the public and doing opposite of what other people do. In other words, you buy near the bottom on knowledge and sell near the top on knowledge, while other people who just guess do the opposite. Time spent in the study of price, time and past market movements, will give you a rich reward.


W.D Gann in
How to Make Profits in Commodities
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These lines were written in the 1940's. And only because we now use blue-tooth we're supposed to be more advanced!

/George

how to handle psychology after huge draw drawn when system indicates 10 consecutive losses and we incur more than 20 with couple of small wins in between and fear of loss stops u to put on trades only to regret later?

please suggest some books on psychology, money management?

I was trying to explain trading to a buddy of mine last night and it was obvious he was becoming more confused the more I went on. Finally, he said, "if you're supposed to treat trading like a business, what would you tell a bank if you went in for a business loan?".

This question really took be aback as I never really thought about it that way before. But I plodded along anyway.

"Well, you see, the markets are fixed. It's not exactly collusion but it is definitely a game controlled by big money. And the big money can only maximize their profits by tricking retail traders. Let's say a strong uptrend is underway and you're waiting for a pullback so you can go along for the ride."

He stopped me right there and asked me, "Why wait for a pullback? If you have a confirmed trend then simply enter upon confirmation."

Guess what? I couldn't come up with a concrete answer to his question. Although I explained margins, slippage, commission, etc. to him it still didn't do the trick. Then I went into trading strategies and some indicators. In short, he said I was over-thinking the situation. Since no one can predict when a "run" will end and the pullback begins, just hop on the train and get out of the way.

I think he's right.