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Trading Management Principles
Author: Linda Raschke
Trading Survival Rules
- Read these rules every day, both before the markets open and at lunch.
- Try to keep a current profits and loss record; it's easier to take losses.
- Never trade for trading's sake; it's better to do nothing.
- Never trade without a healthy attitude.
- Watch order flow (liquidity) before trading.
- When there's nothing to do -- do nothing.
- Trade what you see, not what you think.
- The trend is your friend.
- If you're having a good day, read these rules again!
- Always keep track of all open positions.
- Don't sweat it, trade it.
- If you're not sure, don't do it.
- Never trade against the big boys; if anything, trade in front of them.
- Never use hindsight; instead, look ahead to the next trade.
- Never say NEVER and never say FOREVER.
- The tape tells the story.
- Relax when nothing is going on.
- Never listen to opinions; deal only with facts.
- Never fantasize; focus on the next trade.
- Buy rumors, sell news.
- Keep expectations low; the profits will grow.
- Don't carry mistakes home overnight.
- BE PATIENT; profits for the whole day (week/month/year) can come from one good trade.
- Recap all trades at the end of the day..
Manage the Positions
A pattern, methodology, or system must have workable entries, exits and stops. They must be workable in that we are able to monitor and trade multiple positions at once. This means that sometimes the ideal trade location is sacrificed in order to simplify execution and keep a realistic and systematic approach to trading. diversification is always realized at the expense of trade location.
Manage the Mechanics
Make a game plan before the market opens. Have orders written out. Know what to buy or sell, when to buy or sell, and when to stay out. After market hours, record trades made. Update charts and record prices. Then, go play to let out the stress! Do your analysis work later, as your mind becomes too cluttered when doing the updating work. The next morning, BEFORE the openings, have your trades ready and set your stops on all existing opened positions. This is your safety net against freezing during the day.
Manage the Bad Trades
This is the most common block to success. What this really means is, managing to get OUT of the BAD TRADES. So, don't mange a bad trade, get out and manage to get out sooner rather than later. Otherwise, all the energy goes into watching a bad position and the good trades get left o the table. Have you ever noticed how it takes three times as much energy and emotion to watch a loser as opposed to a winner?
Keep yourself functioning! Strive to keep yourself functioning at your best. Do not allow yourself to become too intense. concentration requires oxygen to the brain and worrying will affect this. Contrary to what certain peoples' work might lead you to believer, spending more hors on analysis does not make you a better trader. Never make trades when depressed - the odds of self sabotage are too great.
About the author:
Linda Bradford Raschke is an active independent trader and member of the Market Technicians Association. She began looking for specific chart patterns at an early age leafing through hundreds of stock charts for her father. While attending Occidental College, she was selected for a program where 10 students managed a trust set up by an anonymous donor. Beginning in 1981, she spent six years trading equity options on the floor, first at the Pacific Coast Stock Exchange and the Philadelphia Stock Exchange. She began trading the S&P500 when it was first listed as futures market. In 1987 Linda left the trading floor to concentrate on trading futures only. However, she continued her 16-year study of technical analysis and price behavior, developing proprietary trading tools, methodologies, and systems based on her floor-trading experience. Linda continues to teach traders how to trade and is actively involved in presenting trading workshops and online seminar for companies such as the MarketClub Trading Service. To find out more about MarketClub, see what others are saying about this tool, visit the MarketClub Trading review.