Do you have a set of trading rules that you follow?

Trading Rules that I Adhere To

October 16th, 2013 singapore stock broker  

Here's the trading rules that I follow when comes to pure trading (as compared to investing):

*    Capital management: each position should not risk more that 2% of total investible capital.

*   If a position already in profit, avoid allowing it to slip into negative.

*   Keep the number of open position to a manageable number for yourself.

*    Set strict cutloss. Position risk management: Do not risk more that 7-8% of each trade position (this 7-8% of the trade position has to be lower than % of capital cutloss). Follow it religiously.

Important: At initiation of position – must know exactly where is the cutloss point.

*    If have no conviction of the trade but still want to proceed, always trade small(er).

*    Wait patiently for the best possible entry points.

*     Always trade in the direction of the major trend (trend is your friend).

*     Averaging:

Never ever average down. Only average up – either in same size or reducing size (in dollar value).

After adding position, must know what is your weighted average cost and where is your trailing stop – and execute accordingly when time comes. No thinking, just act according to plan.

*  Let winners run, cut losses short. (i.e. Keep losses small, and have big winners).

* Discretionary: Great traders reduces their trade size when things are not happening in their favor and increases (note: use with care and perhaps gradually, depending on your skill level) their trade size when they trade well.

Side note: On averaging down, I restrict myself to not average down except for dividend paying, quality blue chips counters and at far enough prices.

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Always make sure to  manage risk, trade safe and well ;)