Stock Trading Rules

Rules are made to be followed. I am a systematic person and I love creating system. In my trading days, I stand by my trading plan at all times. It is not easy initially, but I believe I am getting used to this. If you recall my post on my business plan for my stock trading, one of the important aspects is to have your beliefs and rules to follow. I created a checklist which is online on my Evernote - so that I can check on it occasionally. My room wall is too decorated with my trading rules :)

How do I define my trading rules? I read many books on real and successful traders and started to jot down their traits, quotes and advice. If you find these advice make sense, go ahead and adopt them in your trading rules. To categorize it in a systematic way, I split my rules into three main classes: MIND, METHOD and MONEY!

Take note of my rules below. Some are very conservative and sometimes causes me to be extra cautious in making decision to trade. Adopt what your think make sense to you. If they are not, ignore them.

MIND
[ ]When in doubt, get out. Only trade when you feel confident about your trading strategies.
[ ]Never get into the market because you are anxious from waiting, and never get out of the market just because you have lost your patience.
[ ]Never change your position in the market without a good reason. If you execute a trade, base it on a fundamental reason or technical rule.  And then do not get out without a definite indication of a change in trend
[ ]Do not guess where the top and bottom of the market is, but let the market prove its top and bottom
[ ]Perception is not reality. Only trade on "quality" advice.
[ ]Use self-discipline as your guide when the market goes against your position. Take your loss and wait for another opportunity.
[ ]Avoid taking small profits and big losses
[ ]Ignore the minor price fluctuations and place positions with the basic trend of the market. Remember, the odds are on your side when you trade with the trend rather than try to pick trend reversal points.
[ ]Guessing key reversal points can be risky. Therefore, let the market tell you when it is over by a patterned reverse in direction.
[ ]Always remain true to your trading plan, and follow the trading style that works best for you.
[ ]Put your trust in the markets, and do not be afraid when they reach historic highs or lows
[ ]Never let greed or fear take control over your winning positions

METHOD
[ ]Use stop-loss orders and always protect a trade when you use a stop-loss order by using reasonable price limits
[ ]Never over-trade and adhere to your risk management rules.
[ ]Remember, "the trend is your friend," and never buy and sell if you are not sure of the trend according to the fundamentals and technicals.
[ ]Trade "at the market" whenever possible and try to avoid using orders with a fixed buying and selling price (except a stop-loss)
[ ]Never buy just because the price of the stock is "low", or sell just because the price is "high."
[ ]Never Average Down.
[ ]Never make a mistake without asking yourself why. Learn from your trading mistakes. If possible, keep a log of your trades - why you made them, what happened and why, etc
[ ]Remember, the key to any plan is how well it performs over time

MONEY
[ ]Only trade with genuine risk capital, and be aware of the risk of losing.
[ ]Do not treat all markets the same. Learn to adjust the size of your positions and the frequency of your trades for different markets.

One tips I find it useful is to run through all the list when you are about to buy or sell. If any of the rules is broken, simply do not trade.