This weekend, I was going through some of my old trading documents and research and I found a set of rules for a swing trading system I traded for many years.  I thought I would share a few snippets from those rules, especially the parts dealing with trade management and behavior management.  I cleaned them up (made the language… um… PG), and removed specific system references… and I think this list is now relevant for traders daytrading, swingtrading, or even investing.  To me, it’s useful to re-read things like this sometimes, just to remind myself of the obvious.  I hope you find them useful.  (The last rule alone has saved me a lot of money over the years…)

Trade Management

• Let winners run. While momentum is in phase, the market can run much further than might be expected.
• Do not exit winners without reason!
• Be quick to admit when wrong and get flat.
• Sometimes a time stop is the right solution. If a position is entered, but the anticipated scenario does not develop then get out.
• Remember: if one thing isn’t happening the other thing probably is. Historically, this has never been good for me…
• Be careful of correlations. Several positions can often equal one large position bearing unacceptable risk. Please think.

Other thoughts

• I am responsible for risk management, money management, trade management, doing the analytical work and putting on every trade that comes.
• I am not responsible for the outcome of any one trade. Markets are highly random. I do not have a crystal ball. I am not as smart as I think I am.
• Risk management is the first and last responsibility. I can [mess]anything else up and be ok as long as I do not violate my risk management parameters.
• Opportunity comes every day. Do not neglect the work. Must do analysis every day.
• Opportunity comes every day. Get out of [crappy] positions. Move on.
• I am a better countertrend trader than a trend trader. Sometimes the crowd is right, and they will run me over at those times if I’m not quick to admit I’m wrong.
• If you’re going to do something stupid, at least do it on smaller size.