Page 6 - Trading #101 Course – PART II TWO: SUCCESSFUL TRADING PIE – www.traderscoach.com

TRADING #101 COURSE – PART II TWO: SUCCESSFUL TRADING PIE – WWW.TRADERSCOACH.COM

Ultimately, you’re the one to decide what is right for you now. And, you may have the
personality that needs to be involved in faster action because of your nature, so you
may prefer day trading. Or, you may prefer to be involved in slower action because of
your nature and choose position trading. It comes down to knowing yourself and what
will work for you.

I will say one thing about position trading as opposed to day trading, and that is you can
make a very good living from position trading. By making fewer trades and capitalizing
on overnight risk opportunities, you will lower your commission expenses and can very
often come out with a better net profit at the end of the year.

Sample Trading Rules to Start With

You will ultimately do your own research to determine what the most profitable rules are
for you in your unique situation, in the market you are trading, and for the time frame
you are trading. You will find that identifying effective common-sense rules is simple.

Adhering to the rules can sometimes be more challenging than identifying them.

To kick off your research, here are some popular entry and exit rules that have stood
the test of time:

• Enter and go long when a bull market begins. A bull market is defined as
having higher highs and higher lows.
• Enter and go short when a bear market begins. A bear market is defined as
having lower highs and lower lows.
• Do not add in to a losing position.
• Exit upon a reversal in trend.
• Scale out upon a hyperbolic profitable move. And wait for your stop to be hit
before exiting the entire position.
• Diversify your trades between among sectors.
• Utilize stop-loss exits.
• Use trailing stops. This will enable you to lock in profit as the position goes in
your favor and will help you avoid having a winning position turn into a losing
position.
• Calculate trade size to limit risk. Generally, the trade size risk amount should
be about 2 percent% of one’s trading account size. That way if the trade gets
stopped out the most you would lose would be 2 percent of your account.
Example: Account $10,000 X 2% = $200.
• Reduce trade size during a draw down.
• Increase trade size during winning streaks.
• DOT - don’t over trade.

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