Trading Rules of Thumb

Do you trade using rules of thumb?

  • Yes

    Votes: 2 25.0%

  • No

    Votes: 4 50.0%

  • Maybe

    Votes: 2 25.0%
  • Total voters
    8
trhudson

trhudson

Just wanted to know if anyone out there is trading based on Rules of Thumb...

If you have any good ones, shoot them my way, so I can try to take the other side...

:D
 
Thanks...Don't think I will be doing that one.

I was referring to my previous post when I was told that a Gap that hadn't filled after three days would probably run.

I asked probably? He said it was a time-tested 'Rule of Thumb'...if that is the case and it was a profitable venture, then it would back-test that way as well.
 
The normal ones:

Don't average down
Cut losses short
Let winners run
Don't risk more than 2% of your account per trade
Stop for the month after a 6% drawdown

I pretty much break all of those rules constantly. Those are the rules most traders follow... most traders loser money.
 
If you rush into a trade, chances are it will be a bad one. For example, ABC or XYZ stock suddenly makes a big move, and you're thinking I've got to have some of that. Well, probabilities suggest you're going to wish you hadn't got any of that.

Conversly, if you wait for a trade, chances are it will be a good one.

Summary: Be extremly wary of what I call 'rushed trades'.
 
Quote from Roark:

Never average down.
More...


Agreed. Most FH's can't resist the allure of a perceived "bargain".

Making a mistake is acceptable. It's why pencils have erasers (and divorce courts).

Staying wrong is not acceptable. Cut your loss and move on.


Adding to a mistake is compounding the error. Reflects an stubborn ego. Egos are expensive "pets"


Paul Tudor Jones: "only losers average losers"
 
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