Business

16. IF YOUR TRADE IS NOT GOING ANYWHERE IN A GIVEN TIMEFRAME, IT’S TIME TO EXIT.
This rule relates to the theory of capital flow. It is trading capital that pushes a
market one way or another. An oversupply or imbalance of buy orders will push the
market up. An oversupply of sell orders will push the market lower. When price stagnation is present (as typically happens many times throughout the trading session), the market and its participants are telling us that, at the present time, they are happy or satisfied with the prevailing bid and offer.

You dont want to be in the market at these times. The market is not going anywhere. It is a waste of time, capital and emotional energy. Its much better to wait for the market to heat up a little and then place your trade.

17. NEVER TAKE A BIG LOSS. ONLY A BIG LOSS CAN HURT YOU.
Please review rules #5, #8, #10, #11 and #15. If you follow any one of these rules you will never violate rule #17.

Big losses prevent you from having a winning day. They wipe out too many small winners that you have worked so hard to achieve. Big losses also kill you from a psychological and emotional standpoint. It takes a long time to get your confidence back after taking a big loss on a trade.

18. MAKE A LITTLE BIT EVERYDAY. DIG YOUR DITCHES. DON’T FILL THEM IN.
When I was a young bond trader, my goal every day was to make 10 bond tics. A tic is
$31.25, so if I made 10 tics on the day, I would be up $312.50.

It may not sound like a lot of money to you, but it surely was to me. My mentor, David Goldberg, told me that if I could make 10 bond tics every trading day of the year, at the end of the year I would be up $72,500 in my trading account. Not bad for a 23-year old kid in 1982. It is amazing how quickly your trading account will build up over time just by making a little bit every day. If you are a new e-Mini S&P trader try to make just 5 or 6 points per day. If you can do that you’ll have
that $72,000 at the end of the year.

19. HIT SINGLES NOT HOME RUNS.
Just as I dont know of any successful speculators, I dont know of any trader who goes into a trade expecting to hit a home run and then actually having it happen.
You should never approach a trade with the idea that it’s going to be a huge winner. Sometimes they turn out that way, but the times that I have a hit a home run on a position is most definitely luck, not skill. My intent on the trade was to produce a small winner but, because I had the trade on, and at the same time (as luck would have it), the Fed unexpectedly entered the market, I unwittingly had a huge winner.
This probably has happened to me less than five times in 20 years.

20. CONSISTENCY BUILDS CONFIDENCE AND CONTROL.
How nice is it to be able to turn on your PC in the morning knowing
that if you play by the Rules, trade with discipline and stick to your methodology, the probability of a successful day is high. Ive had years where I could count on one hand the number of losing days that I had. Dont you think that this consistency allowed me to be extremely confident? I knew that I was going to make money on any
given day. Why would I think otherwise? Making a little bit everyday (Rules #18 and #19) will allow you to trade throughout the trading session with confidence and control.

Remember Rule #9: If you make a little bit every day, then you have earned the right to trade bigger. Thus, by following the Rules of Discipline, your little bit can soon turn into much more profitable days. (Douglas E. Zalesky)