STAYING ONE STEP AHEAD

TRADING RULES

Albert Einstain
The

secret of creativity is knowing how to hide your sources

Seykotas Trading Rules

Cut losses Ride Winners Keeps bets small Follow the rules without question Know when to break the rules

Paul Tudor Jones Trading Rules

Dont ever average losses: Decrease your trading volume when you are doing poorly; increase your volume when you are trading well. Never trade in situation where you dont have control. If you have a losing position that is making you uncomfortable get out, because you can always get back in. There is nothing better than a fresh start. Dont be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position of that day, who care where I was long from? The most important rule of trading is to play great defense, not great offence. Dont be hero. Dont have an ego. Always question your self and your ability. Dont ever feel you are very good. The second you do, you are dead. Dont focus on making money but focus on protecting what you have.

Bob Prechter

A Method : By a method he is referring to an objective mechanism that help you to make a trading decision. Buffets and Templetons methods focus on the simple concept or buying undervalued companies that possess good potential for growth. The Discipline to Follow the Method. The Mental Fortitude to Accept That Loss Are Part of the Game. The Mental Fortitude to Accept Hung Gains

RULES OF TRADE

Never mix disciplines : If you are a day trade then day trade and do not let a day trade turn into a swing trade. If you are swing trade do not let your swing trade turn into an investment. Follow the rules based on discipline of your time frame. Never try to trade Back a Loser. In other words, each trade is a new one and should not be used to win back money lost in the last trade. Always trade in the present not in the past where too many emotional and psychology factor can affect the current trade. Revenge does not pay in or out of the market.

GOLDEN RULE FOR TRADE

You must have a trade plan You should follow the trade plan Always trade with a stop loss Diversify your trades Trade the big moves while filtering out the small Trade with the overall trend Do not listen to the News: only the market. Dont listen to your broker Have money management Rules Most important hove the Discipline to Follow the Rules.

NINE COMMON TRADING ERROR

Making trade with insufficient study and practice. Making trade out of harmony with the general trend. Taking a position too late after a move is well under way or is completed. Taking a position too soon due to impatience. Improperly estimating the distance a stock should move. Letting eagerness to make profit warp judgment. Failing to keep a position sheet and selecting stock on hunches rather than calculations Buying on bulges instead of waiting on reactions. Failing to place and move stops.

 19 Trading Rules for Greater Profit .

LAEXANDER ELDER

EVERY WINNER NEED TO BE MASTER THREE ESSENTIAL COMPONENTS OF TRADING: A SUOUND INDIVIDUAL

PSYCHOLOGY, A LOGICAL TRADING SYSTEM AND GOOD MONEY MANAGEMENT. THESES ESSENTIALS ARE LIKE THREE
LEGS OF A STOOL REMOVE ONE AND THE STOOL WILL FALL, TOGETHER WITH PERSON WIO SIT ON IT. LOOSER TRY TO BUILD A STOOL WITH ONLY ONE LEGE OR TWO AT THE MOST. THEY SUSALLY FOCUS EXCLUSIVELY ON TRADING SYSTEMS. YOURS TRADE MUST BE BASED ON CLEARLY DEFINED TULES. YOU HAVE TO ANALYSE YOUR FEELINGS AS YOU TRADE, TO MAKE SURE THAT YOUR DECISIONS ARE INTELLECTUALLY SOUND. YOU HAVE TO STRUCTURE YOUR MONEY MANAGEMENT SOTHAT NO S STRING OF LOSSERS CAN KICK YOU OT OF THE GAME.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

Here are some valuable nuggets I have gleaned from the book, How to Trade Stocks by Jesse Livermore, with added material from Richard Smitten. Its published by Traders Press and is available at Amazon.com. Most of the nuggets below are direct quotes from Livermore , himself. All through time, people have basically acted and reacted the same way in the market as a result of greed, fear, ignorance, and hope. That is why the numerical ( technical) formations and patterns recur on a constant basis. The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance. Or the get-richquick adventurer. They will die poor.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

Dont take action with a trade until the market, itself, confirm your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, dont be an impatient trader. Livermores money made in speculation came from commitments in a stock or commodity showing a profit right from the start. Dont hang on to a losing position for very long. It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Lets this thought be written indelibly upon your mind.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

Remember this: when you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes. When a margin call reaches you, close you account. Never meet a margin call. You are on the wring side of a market. Why send good money after bad? Keep that good money for another day.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

Livermore coined what he called Pivotal Points in a market or a stock. Basically, they were: (1) Price level at which the stock or market reversed course previouslyin other words, previous major tops or bottoms: and (2) psychological price levels such as 50 or 100, 200 etc. He would buy a stock or commodity that saw a price breakout above the Pivotal Point, and sell a stock or commodity that saw a price breakout below a Pivotal Point. Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

A prudent speculator never argues with the tape. Markets are never wrong opinion often are. Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly. I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans and human nature never changes.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

When you make a trade, you should have a clear target where to sell if the market moves against you. And you must obey your rules: Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade. I am fully aware that of the millions of people who speculate in the markets, few people spend full time involve in the are of speculation. Yet as gar as I am concerned it is a full time job. Perhaps even more than a job, Perhaps it is a vocation, where many are called but few are singled out for success.

NUGGETS OF WISHDOM FROM JESSE LIVERMORE, GREATEST TRADER EVER

The big money is made by the sittin and the saitin not the thinking. Wait until all the factors are in your favor before making the trade. An important point I want to make is that Jasse Livermores trading success came not because of any inside information or some huge store of knowledge he had about each and every stock or commodities market he traded. Livermores trading success was derived from his understanding of human behavior. HE realized early on that market and stocks can and do change but people and their behaviors do not. Therein lay his formula for trading success. That formula for trading success has not changed since Livermores hey day in the stock and commodities markets almost a century ago.

20 Nugget from a Book : a Better way to make Money

The secret to losing money in the market is to know why. The loser were playing the market, not using it intelligently. The fellow at the other end of the deal, who was suing is intelligently, not, playing the market, is the one who got the money. It is an undeniable fact that indiscriminate trading in a hectic market will send one to financial oblivion quicker than any other known process. The most careful preparation a systematic plan is one of the essentials of success. Market action is not complex but surprisingly simple. Yet is is often made to appear complex by newspaper forecasters and market letter writer.

20 Nugget from a Book : a Better way to make Money

Market action in human nature in action. All market movement are based on two deep seated and entirely natural emotion: the desire for gain and the fear of loss. So anxious are people to find some talisman, some magic want that will help them secure the hidden riches of the market, that they will try anything from coin-flipping to crystal gazing to secure the desired assistance. What marvelous results could be attained in the business of making money if those who buy stocks would take a little time to learn a few simple facts about the market in which they are blindly reposing their faith.

20 Nugget from a Book : a Better way to make Money

Market students are continually diverted from making true evaluation of securities and commodities because they study the statistics made by prices instead of the psychology of price. Adopt one system of trading and stick to it, just as you employ and stick to one physician in whom you learn to have confidence. One of the most important points in your market education is to learn as early as possible that the customary and supposedly weighty market news is of very small importance. The news only looks important. Dont trade just because you can afford to lose.

20 Nugget from a Book : a Better way to make Money

Practice make perfect is an old copy book adage that work well in the market palace. If a trade fails ot come out right, the error will be found in the operator not the market. Trading is simple another form of business. Treat is a such. Trend to the investor is like the vein of gold to the miner. Who must follow the vein faithfully if he expects to get the yellow metal.

20 Nugget from a Book : a Better way to make Money

Stocks are made to buy and sell not to be bought and held. No matter what a thing costs, stocks or otherwise, ;it is worth only what you can somebody to pay for it People will always be prone to be extravagantly optimistic or dolefully in the slumps and in this action is unlimited wealth for the men who realize this fact and will use it with confidence and decision.

PLAN YOUR TRADES, THEN TREADE YOUR PLAN

Your job as a trader is to follow a trading plan. And whos going to write this trading plan? You are. Notice the world Write. It need to be written down, on your trading desk, in front of you. Your trading system will give you the rules to follow. All you do is translate these into your plan. The point is that trading plan conveys every eventuality. You know what to look for in the market, when to get into a trade, and when get out. Keep it simple. Then follow it Religiously.

Five uncommon rules of wealthy traders.

They plan every single trade. EVERY SINGLE ONE They stopped trying to pick tops and bottoms years ago. They are patient with winners -- and ridiculously impatient with losers. They trade one market. ONE Their benchmark for success in anything but money.

How can the top trades make big profits when the risk are so high?

They decide a long time ago to take responsibility and find out what works. They have a system that fits them. They plan every trade along to the finest details. They have complete confidence in the both the system they follow and in their own skill to flawlessly execute it. they definitely view trading as a game in points and stopped counting the Money a long time ago. Most of the top traders are very wealthy so they are not trading for enjoyment and winning they did simply retire. Finally they a long time ago that they alone con not control the market. Watching a quote machine and hanging on to Guru advice all the day is a losing system. Most of the top traders have a life out side of trading. Ralising the importance to keeping it all in balance.

If You Dont spend Much, You cant Lose Much.

One of the biggest mistake you can make as a trader is have too much money riding on a trade. The more money you use the more emotional fuel you are pouring onto the fire. Eventually, you are likely to be burnedbadly. And the post traumatic stress may be irreparable. Most beginning traders stake too much in the hope of a quick win. Experienced traders known the better. In ad day trading , where the traders can come thick and fast, a few big losers can eat you alone very quickly. Good day traders who survive will risk only a tiny amount of their capital on any one trade. If youre under capitalized then consider using a trade system which offers a tight stop loss. Alternatively, trade a shorter time-frame, like the 1-minute chart, where losses can be maximized. Overconfidence is the other cause of excessive risk. : Hey .. Heads has come up to 10 times in a row lets put half the trading capital on trail ( which is sure to come up to next) and clean up The problem with sure thing trades is that : A the market hardly ever oblige: B Every else sees them as sure things as well and jumps aboard. So when they go wrong, they go wrong big time. Risk in tiny amount on each trade. You will be more relaxed, and more able to execute the trade properly.

TRADING PSYCHOLOGY

Pareto Principle Discipline Stop & profit targets Goals ( Financial & Otherwise) Trading Result Outside influences Bad vs good trades How to avoid self destructions BELIVER YOU CAN ASK THE 80/20 Rules : pareto principle 20 percent of activities produces your 80 percent of income. Simply but it means that you should spent 80 percent of time on 20 percent of your activities really responsible for driving your income.

TRADING PSYCHOLOGY

What are your habits/routines before /during / after regular trading hours. come prepared - psych yourself up No distractions Stay clam, collected but focused Skim news but dont let it affect you Bad trade? dont sweat it. Good trade? dont get over confident. Go out for a walk after close. Come back, review trades daily. Understand what I did wrong / right REPEAT.

STEPS TO INCREASE DISCIPLINE

Develop a routine

Trading, relationship, miscellaneous Be a voracious reader, have an insatiable appetite to learn more

Visualization Ask yourself: how bad do I want it?

Continue doing things that work. discontinue thing that are not.

Youre in it for the long haul

Compound your money

STEPS TO INCREASE DISCIPLINE

Hand around other successful people

Not just traders Realtors, businessmen/ women, police chief etc.

Resonate success

Act successfully ( whatever that means to you) Dress successfully Walk the talk

Hit it with every thing youve got

As if your life depended on it. Youve got one shot at life, make it a good one.

38 steps to becoming a trader They are as follows:

1. 2. 3. 4. 5. 6.

We accumulate information - buying books, going to seminars and researching. We begin to trade with our 'new' knowledge. We consistently 'donate' and then realise we may need more knowledge or information. We accumulate more information. We switch the commodities we are currently following. We go back into the market and trade with our 'updated' knowledge.

38 steps to becoming a trader They are as follows:

7. We get 'beat up' again and begin to lose some of our confidence Fear starts setting in. 8. We start to listen to 'outside news' and to other traders. 9. We go back into the market and continue to 'donate'. 10. We switch commodities again. 11. We search for more information. 12. We go back into the market and start to see a little progress.

38 steps to becoming a trader They are as follows:

13 We get 'over-confident' and the market humbles us. 14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated. MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

38 steps to becoming a trader They are as follows:

15. We get serious and start concentrating on learning a 'real' methodology. 16. We trade our methodology with some success, but realise that something is missing. 17. We begin to understand the need for having rules to apply our methodology. 18. We take a sabbatical from trading to develop and research our trading rules. 19. We start trading again, this time with rules and find some success, but over all we still hesitate when it comes time to execute.

38 steps to becoming a trader They are as follows:

20. We add, subtract and modify rules as we see a need to be more proficient with our rules. 21. We feel we are very close to crossing that threshold of successful trading. 22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology. 23. We continue to trade and become more proficient with our methodology and our rules. 24. As we trade we still have a tendency to violate our rules and our results are still erratic. 25. We know we are close.

38 steps to becoming a trader They are as follows:

26. We go back and research our rules. 27. We build the confidence in our rules and go back into the market and trade. 28. Our trading results are getting better, but we are still hesitating in executing our rules. 29. We now see the importance of following our rules as we see the results of our trades when we don't follow the rules. 30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better. 31. We continue to trade and the market teaches us more and more about ourselves.

38 steps to becoming a trader They are as follows:

32. We master our methodology and our trading rules. 33. We begin to consistently make money. 34. We get a little over-confident and the market humbles us. 35. We continue to learn our lessons. 36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size. 37. We are making more money than we ever dreamed possible. 38. We go on with our lives and accomplish many of the goals we had always dreamed of.

38 steps to becoming a trader They are as follows:

Most traders will identify with this list and should be able to place themselves within these steps. Keep in mind that very few people progress through these steps in an orderly fashion. Developing your trading skills is an iterative process. For example, you may reach Step 13., find that although you were making money, your basic premise for trading was flawed (you might have been benefiting from the bull market, rather than your own trading prowess and then have been rudely awakened when the market entered a bear phase) and you may drop back to Step 4. and start 'climbing' the steps again. Having the proper mindset, attitude and psychological makeup becomes increasingly important as you progress through the steps. The focus of the earlier steps is on external issues, i.e. developing proficiency in the mechanics of trading while the focus of the latter steps (particularly from Step 30, on) is on internal issues, i.e. improving ourselves mentally and psychologically, maturing as trader

Ten Commandments of Trading Discipline

3 4

trading discipline should dramatically improve your trading success if adopted and followed. They Trade free from fundamental prejudices hold no judgment on a stock. Dont try to rationalize a losing position, or fall in love with a winning Truth is its price. Focus on proper trading strategies and not on making money. Money is merely a consequence of skill level, or lack thereof. As long as you trade with un waver in mode of thinking. Both winning and losing trades should be reviewed during your journey towards Develop a trading style that is consistent with your personality and philosophy. Trade your nature! Determine the risk/reward ratio of each trade before entering. Risking the farm to make peanuts is unwise. Create the plan before the trade, and not during! At times, the best action is no action. Dont search for action and think that you must trade every day.

Ten Commandments of Trading Discipline

6

8 9

10

Trade with the trend since stock prices flow in the direction of least resistance. If a stock goes against the trend you expected, get out. When in doubt, stay out or get out. There is no room for emotions in trading. Disciplined traders can observe the market from the perspective as if they are not in a position, ever think it should do. Make the market come to you. If it doesnt play your hand in your world, step aside. Be strict, be disciplined, and be patient, and The true battle is not with the market, but learning how to control your own emotional in many internal battles of letting fear and greed interfere with logic and discipline can unfortunately placed stops based on technical analysis. There are no holy grails, magic software, or short cuts to success. Professional traders never cease being students of the markets. Spend time each day developing your own trades and actions

Simple Rules

Being a wrong is acceptable, but staying wrong is totally unacceptable. Being a wrong is not your choice but staying wrong is. Understand that you shall always make a mistake. The only way to prevent mistake from turning into disasters is accept losses while they are small and than move on.

Top Ten Mistake

1 Failure to have a trading plan in place before a trade is executed. When you enter a trade, you should know when or where you will exit the trade or how much risk exposure your account has. Its your trading business plan. 2 Inadequate tools or resources to develop a trading plan. Jumping into trading may seem easy but, to be successful, you need education and reliable tools to understand relationships among markets and to develop a sound decision-making process based on clues and strategies provided by a trading tool like Vantage Point.

Top Ten Mistake

3 Inadequate capital assets or improper money management. You can trade successfully with almost any size account, but you need to size your trade to the size of your account. Dont over-trade with too many markets or positions and dont gun for those highly risky "home-run" trades that involve too much trading capital at one time. 4 Expectations that are too high, too soon. You cant become a successful doctor or lawyer or business owner in the first couple years of the practice. It takes hard work and perseverance; trading futures is no different. 5 Failure to use protective stops. Protective stops arent perfect no money management tools in futures are but they give you an idea how much money you are risking on a trade, should the market not act as you expect. Vantage Point provides several unique indicators to improve stop

Top Ten Mistake

6 Lack of "patience" and "discipline." Don't trade just for the sake of trading or because you haven't traded for a while. Let those very good trading setups come to you, then act upon them in a prudent way. 7 Trading against the trend or trying to pick market tops and bottoms. Sure, you want to buy low and sell high (or vice versa), but the best advice for most traders is still to trade with the trend. Vantage Points predicted moving average crossovers can help you identify trend reversals. 8 Letting losing positions ride too long. Successful traders do not sit on losing positions for long. Instead, they take their losses (usually minimal) and move on to the next potential trading setup. A tool like Vantage Points Scan for Opportunities can help you avoid losers by spotting trades that meet your criteria.

Top Ten Mistake

9 Failure to accept complete responsibility for your own actions. Dont blame your broker or the market or something else for a losing trade. You make the trading decisions; you are responsible for your own success or failure. 10 Not getting a bigger-picture perspective on a market. Look at a longer-term chart than the period you are trading to see what history says about your market. This puts current market action in the context of overall market action.

22 TRADING RULES FOR TRADER & INVESTOR 1.

2

3 4 5 6 7 8

All successful traders use methods that suit their Personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Dont assume you can trade like them. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control. To be a winner, you have to be willing to take a loss; (The Stop-Loss Breakdown) HOPE is not a word in the winning Traders vocabulary; When you are on a losing streak and you will eventually find yourself on one reduce your position size; Dont underestimate the time it takes to succeed as a trader it takes 10 years to become very good at anything; (There Are No Shortcuts) Trading is a vocation not a hobby Have a business/trading plan; (Write This Down)

22 TRADING RULES FOR TRADER & INVESTOR

9. 10. 11.

12.
13.

14.

Identify your greatest weakness, Be honest and DEAL with it There are times when the best thing to do is nothing; Learn to recognize these times (Nothing Doing) Being a great trader is a process. Its a race with no finish line. Other peoples opinions are meaningless to you; Make your own trading decisions (The Wrong Crowd)! Analyze your past trades. Study what happened to the stocks after you closed the position. Consider your P&L game tapes and go over them the way Vince Lombardi Bill Parcells reviewed past Super bowls Excessive leverage can knock you out of the game permanently

22 TRADING RULES FOR TRADER & INVESTOR

15. 16. 17. 18. 19. 20. 21. 22.

The Best traders continue to learn and adapt to changing conditions. Dont just stand there and let the truck roll over you Being wrong is acceptable staying wrong is unforgivable (I liked this one! BMB) contain your losses (Protect Your Backside) Good traders manage the downside; They dont worry about the upside Knowing when to get out of a position is as important as when to get in To excel, you have to put in hard work Discipline, Discipline, Discipline