Trading Rules
Posted by trywalker / 1:44 p.m. @ Hong KongMar 10
- Never, under any circumstance add to a losing position.
- Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
- The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral.
- Sell markets that show the greatest weakness, and buy those that show the greatest strength.
- To trade successfully, think like a fundamentalist; trade like a technician.
- Keep your technical systems simple.
- The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable. Life is meant to be tough.
- An understanding of mass psychology is often more important than an understanding of economics.
- Be patient with winning trades; be enormously impatient with losing trades.
- The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom.
- Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
- All rules are meant to be broken: The trick is knowing when… and how infrequently this rule may be invoked!
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