Trading Rules: Strategies For Success

Earlier this month a member sent me a copy of Trading Rules: Strategies For Success by William F. Eng. And, I have to say, I found myself enjoying the book quite a lot and I highly recommend it. Mr. Eng covers 50 rules and most of them are real gems:

1. Divide your trading capital into ten equal risk segments

2. Use a two-step order process

3. Don't overtrade

4. Never let a profit turn into a loss

5. Trade with the trend

6. If you don't know what's going on, don't do anything

7. Tips don't make you any money

8. Use the right order to get into the markets

9. Don't be whimsical about closing out your trades

10. Withdraw a portion of your profits

11. Don't buy a stock only to obtain a dividend

12. Don't average your losses

13. Take big profits and small losses

14. Go for the long pull as an outside speculator

15. Sell shorts as often as you go long

16. Don't buy something because it is low priced

17. Pyramid correctly, if at all

18. Decrease your trading after a series of successes

19. Don't formulate new opinions during market hours

20. Don't follow the crowd - they are usually wrong

21. Don't watch or trade too many markets at once

22. Buy the rumor, sell the fact

23. Take windfall profits when you get them

24. Keep charts current

25. Preserve your capital

26. Nothing new ever occurs in the markets

27. Money cannot be made every day from the markets

28. Back your opinions with cash when they are confirmed by market action

29. Markets are never wrong, opinions often are

30. A good trade is profitable right from the start

31. As long as a market is acting right, don't rush to take profits

32. Never permit speculative ventures to turn into investments

33. Don't try to predetermine your profits

34. Never buy a stock because it has a big decline from its previous high, nor sell a stock because it is high priced

35. Become a buyer as soon as a stock makes new highs after a normal reaction

36. The human side of every person is the greatest enemy to successful trading

37. Ban wishful thinking in the markets

38. Big movements take time to develop

39. Don't be too curious about the reasons behind the moves

40. Look for reasonable profits

41. If you can't make money trading the leading issues, you aren't going to make it trading the overall markets

42. Leaders of today may not be the leaders of tomorrow

43. Trade the active stocks and futures

44. Avoid discretionary accounts and partnership trading accounts

45. Bear markets have no supports and bull markets have no resistance

46. The smarter you are, the longer it takes

47. It is harder to get out of a trade than to get into one

48. Don't talk about what you're doing in the markets

49. When time is up, markets must reverse

50. Control what you can, manage what you cannot

While this may provide a sense to what is covered, you really must read the book to fully understand, appreciate, and apply these trading rules. Fortunately, even if you don't like reading trading books or don't have a lot of free time to spare, each rule is about five pages in length and takes around 10 minutes to read on average. Reading one rule per day (perhaps at the start of each trading day) will be a worthwhile addition to your daily routine.