A Complete Guide to the Futures Market, 2nd Edition

CHAPTER 37

Seventy-Five Trading Rules and Market Observations

Live long enough and you will eventually be wrong about everything.

—Russell Baker

Few things are easier to ignore than trading advice. Many of the most critical trading rules have been so widely circulated that they have lost their ability to provoke any thought in the new trader. Thus, valid market insights are often dismissed as obvious clichés.

Consider the rule “Cut your losses short”—perhaps the single most important trading maxim. Lives there a speculator who has not heard this advice? Yet there is certainly no shortage of speculators who have ignored this rule. Not surprisingly, there is also no shortage of speculators whose accounts were virtually obliterated by one or two losing trades.

The truth is that most speculators will ignore advice until they have “rediscovered the wheel” through their own trading experience. Moreover, most traders will repeat a mistake many times before the lesson finally sinks in. Thus, I have no illusions that the advice presented in this and the next chapter will spare the reader from committing basic trading errors. However, it is hoped that several readings of these chapters (particularly following periods of negative trading results) will at least help some novice traders reduce the number of times these mistakes are repeated—hardly a trivial achievement.

The observations in this chapter are based on personal experience. Thus, the following list of rules should be viewed ...