How many of you have your trading rules written down? How many follow some rules when you trade?

I want to share my 7 rules of trading

1) know your trading time frame before I enter a trade

I find this is one of the most important thing you need to decide BEFORE you place a trade. Is the set-up a swing trade (1-5days) or is it a position trade(more than 2 weeks)? if it is a swing trade , what is the set up? Are you trading on a breakout  or are you buying on retracement? Different trade setup will have different ETET( Entry price, Target price, Exit Price, Time frame). Their risk – reward ratio will also different too.

2) know what I willing to lose before counting my gain

This will help to determine my size of my trade. Eg. I am looking to long a stock at $2.00 and my stop loss is $1.90.The maximum I  willing to lose for this trade is $500. The number of share to buy will bee $500 / (2.00-1.90) = 5000 shares.

3) Don’t place a trade before market open

I will wait for the market to trade for about 30mins before taking a trade. This is help to give me a feel of the market.In fact, more than 50% of my trades are placed after 3:30pm. This is because most of the time the candlestick for that day will already been formed.

4) Don’t anticipate a trade

Unless a stock hit above my trigger price, I will not anticipate and get in early. I have to honest about this; there are times when I DO anticipate and try  to get in earlier but most of time the trade will turn out to be a loser.

5) Do my homework before market open

This will include things like the overall market analysis, stock scanning ,writing down my ETET and knowing my trading size. If I am going long , I will prefer the overall market to be bullish. Always buy the strongest stock and short the weakest stock.

6) Never average down but can consider average up

If the trade move against me, I am likely to cut my losses or reduce my position. If I am right within a short period of time ( less than day) and already in the money  ,I may consider adding my position near close of the day.

7) Always look out for increasing volume

This is especially true if I am going long. If I am buying a stock, I want other to join me in buying the stock. It will be even better if the stock in in the top volume list. If I buy a stock and the volume does not pick up, I may consider reducing my position at closing.

These are my seven rules that I follow. You may consider them to make them your rules too. My belief is that to be profitable in trading, you need to always sell the loser and add position on a winning stock.

Have a great weekend.