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Single most important rule of trading
Started:February 27th, 2013 (01:21 AM) by Big Mike Views / Replies:3,658 / 51
Last Reply:October 4th, 2015 (04:51 PM) Attachments:0

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Single most important rule of trading

Old October 3rd, 2015, 10:21 AM   #41 (permalink)
Trading Apprentice
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be successful risk taker !

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Old October 3rd, 2015, 02:00 PM   #42 (permalink)
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Most important rule for me is, trade the smallest size possible, until you become proficient..most traders are underfunded and risk too much too soon..

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Old October 4th, 2015, 01:52 AM   #43 (permalink)
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Learn how to create a trading plan and adapt.

So you know when to enter and exit, and how large the positions will be; so you can measure your progress, or lack thereof; so you can continually improve, or know when to throw-in your hat; so you can hopefully, eventually sustain your business. Success depends upon having a good plan.

It all starts with education, then the creation of a plan that you must follow consistently; even when the plan is changing all along, you must follow it to evaluate your assets and liabilities and make course corrections.. Without a plan, how will you gain the experience to know how or when to adapt? Without a good plan, you won't trade consistently, and will have doubts.

Translation? Backtest, and consistently execute a plan that is "good enough for now". Evaluate, then change as-necessary. Nothing is set in stone, and don't be afraid to change things-up.

Translation? Stay hungry, and keep learning. Stay teachable. And looking for the holy grail. There's nothing wrong with that, as that's the passion that keeps you going. Just have a plan to keep you focused too.

Translation? You will find multiple "grails", multiple "edges". Why throw-out edges when you can collect them? How can you improve if you stop looking?

Translation?! It all starts with education, then a plan, then ends with diversification as you adopt nuances, and hopefully additional plans. Just keep learning. You will learn how to be consistent, and learn the knowledge you need to make a plan and how to follow a basic plan.. Even if that plan changes, and it must.

The goal is to learn to adapt, because nothing stays the same. The best way to adapt in the face of uncertainty is to have multiple tools of the trade, and tricks up your sleeve. As experience and maturity grows, so will your plans, and your diversification. But, you must FIRST learn how to plan and adapt, as trading is the art and science of planning and adapting to the market.

Problem: The "inertia" that you must overcome, is you initially don't know how to create a trading plan, and initially aren't diversified enough to adapt. The deck is thus doubly stacked against you, because success only is achieved with a robust overall plan that likely encompasses as much diversification as possible. And how can you diversify without resources that any business requires (money, time, systems, markets, etc.)? You must learn much, when there is no "one" path, and your resources are limited. Once you know how to plan and adapt, you can learn how to be satisfied with one working plan, then two, etc. To diversify, you will scale your plan vertically (add symbols) or horizontally (add systems, or add money+additional "time" frames).

The bottom line is, to be a successful "trader", you must learn to "trade", and that means learning how to create working trading plans (backtest) that somehow adapt to (account for) diverse market states, hopefully gaining experience and surviving another day, so you can grow enough to diversify your method, and make returns even easier (less volatile) for yourself.

You start out on bumper cars (breaking even) since you're under 4' tall, then move to the roller coasters (volatile, exciting returns), then on to a merry-go-round (horizontally diversified) or ferris-wheel (vertically diversified, most enjoyable to many riders), which is more boring but let's you reflect on other things in life besides "the ride". The more boring the trading, the more you can focus on other life ventures.

So maybe the next most important rule is, as you age, "make it simpler". :-)

So, to summarize: "learn to take baby-steps" (plan and adapt), then "learn to make it simpler" (distill more truth and diversify) so you can "run with the Bulls". :-) Trading is an orienteering race with a map that you must choose, a compass that you must locate, and endurance that you must build. We all start out blind-folded. Just don't fall off the mountain or stop looking for inefficiencies!

Last edited by CurrentCatcher; October 4th, 2015 at 02:43 PM.
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Old October 4th, 2015, 03:14 AM   #44 (permalink)
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giving yourself options

The most important rule of trading, or anything for that matter, is giving yourself as many options as possible. This was discussed in a ted-talk about how intelligence is measured.

Basically what it boils down to is not only diversification, but also the ability to pick time frames, the amount of money you're risking, and being able to hold trades and/or scale in or out. Basically meaning the amount of options you have to play the game. This is because the single most beneficial advantage you have in trading is TIME.

I know this works because I'm more profitable now that I have the option to pick between instruments, hedge, scale etc. than simply trading one contract on one instrument linearly.

Last edited by Itchymoku; October 4th, 2015 at 06:12 AM.
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Old October 4th, 2015, 06:07 AM   #45 (permalink)
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Futures Edge on FIO
1. Knowing and Accepting the Risk in every trade

2. Why?

Not knowing and accepting the risk you will take in a trade leads to fear

Fear will lead you to bad trading decisions.

And finally to sooner or later blow up your account.

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Old October 4th, 2015, 07:19 AM   #46 (permalink)
Elite Member
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The way I see it, is a mindset of frekvens.

If you have working in a kindergarten for 30 year, you are on a specific frekvens. If you have work as an engineer for 30 year, you are on another frekvens.
If you switch those, It will probably be funny in the beginning, then all the trouble starts.

So that raise 2 very important questions.
1. Wich frekvens is market on.?
2. Wich frekvens are you on.

So even try to set the rules gives alot of conflict with frekvens so people wont see the same thing even if it is in front of there eyes.

How to adapt:
1. What do you want.?
2. What is it about you there keeping you from doing what you want.?

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Old October 4th, 2015, 08:28 AM   #47 (permalink)
Market Wizard
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Be comfortable in the uncertain. Trading is gray, there is no black and white answers.

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Old October 4th, 2015, 09:08 AM   #48 (permalink)
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trendisyourfriend View Post
Mike this question is in the same league as the search for the holy grail. There is no single most important rule. They are all as important. You are looking at it as a programmer looks at things. I would tend to believe in trading like in life the whole is greater than the sum of its parts.

I tend to agree with this, but if I had to pick the one that has made the most difference for me, it would be consistency.

Why? Because I see it all the time and nearly everywhere - people get excited about how much money they can make in trading, and when they jump in and get started, they jump from one method or strategy to the next. I have been there and done that too as most of you have too I would suspect.

I personally think that there are many different ways to trading the markets and each has its own success rate if you will, but the key is sticking with it long enough to let the edge kick in over a number of trades, and then to start analyzing your trades to make small improvements over and over again till you get to the level you want to be at. - Probably will never get there because the learning never ends, but you get what Im saying.

I can think of a few more "key" points to add to my list but you asked for one only......

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Old October 4th, 2015, 02:35 PM   #49 (permalink)
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Its not about the money. Don't let the desire for money dictate your trading. Its a weird concept that won't click right away, but when it does it'll hit you like a ton of bricks. I pray that it clicks for you before you ruin your accounts.

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Old October 4th, 2015, 04:02 PM   #50 (permalink)
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Understand what you see --- do what you understand.

Why? A rational decision right now requires you to have understood what you see right now.

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