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RULES OF TRADER

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RULES OF TRADER



W hen traders move from the world of investing to the realm of short- term trading, the psychology and mindset behind each approach tends to become mixed and, if not separated, can cause problems while carrying out your trading plan. However, although the shift from investing to this new way of trading demands some changes in strategy, some common traits need to be reiterated relating to money management and a strict stop loss regiment.


When I first began trading for a living, the advice by those I was most closely associated with provided the only rules that pertained to investing. Two of the most detrimental phrases were that “it is only a loss when you sell it” and “stocks always come back.” Although these statements do have some truth to their reasoning in certain issues, the application of this to active trading is the primary cause of failure to many aspiring traders.


The mainstay of investing has been to trade the markets in the fashion of Warren Buffett. Buy st…