Rule No. 7: Keep It Simple
I’ve found that the best trading systems are simple. It’s easy to understand why they work and it’s easy to follow their rules. The more complicated a system is, the more room for error there is. That’s probably why I’m such a fan of the PAC Trading System, which remains a very simple trend following strategy.
Rule No. 8: Trade Less, Not More
I see a lot of new traders who think they have to be in the market at all times. They also tend to think that every trade decision needs to be all-in or all-out. The truth is, there are times when the right trade is no trade at all and you have to wait for the market to show you where it’s heading. Trying to be all-in, all the time will lead to whipsaws that whittle away at your portfolio.
Rule No. 9: Focus on Fewer Stocks
Due to popular images of the trading world’s go-go culture, many people think that being a successful trader means frantically chasing hundreds of stocks. The truth is, most of history’s great traders – legends like Jesse Livermore, Gerald Loeb, and Nicolas Darvas – spoke often about the danger of trading too many stocks. For Chopad System traders, we focus on the 4-8 true market leaders. The big money is made in those elite leaders, so there’s no reason to be trading dozens of lesser-quality stocks.
Rule No. 10: See the BIG Picture and Follow the Larger Trend
For trend traders, it’s important to focus on the big trends in the market and in individual stocks. Getting too caught up in the intraday action can cause you to make poor, emotional decisions. Often times, the best traders only need to check the market once or twice a day. Some check it even less. When you find yourself getting rattled by the day-to-day market noise, switch to weekly charts or step away from the market altogether for a day or two. A big picture perspective is essential.
Rule No. 11: NEVER Stop Learning
The moment you think you’ve got it all figured out is the moment you’ve likely topped out. Great traders never stop learning, researching, and getting help from other traders. Though the general trading strategies that have been proven to work for decades will continue to work, the details are changing often and need to be adapted to. Be humble and don’t ever stop learning.
Rule No. 12: Don’t EVER Quit
You have to have patience, discipline, and perseverance to succeed at this game. Every trader will hit losing streaks and frustrating times. It’s during these times when the urge to quit or change strategies is at its highest. Don’t do it. If it was easy, everyone would be making millions trading. It requires hard work and mental toughness to be a successful trader and there will be times when you have to swallow your pride, buck up, and persevere even when you don’t feel like it. But remember, as Mike Ditka said, “You’re never a loser until you quit trying.”