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Al's 12 Trading Rules

  1. I am not smarter than the market
  2. I am not smarter than the market
  3. I am not smarter than the market
  4. I am not smarter than the market
  5. Treat trading as a business.  As such, it's object is to make a profit.  It is not a contest or an exercise in ego gratification.
  6. Remember that markets are driven by emotion.  Don't get caught up in that emotion.
  7. Remember that market participants act on their perception of reality, which doesn't necessarily correspond to reality itself.  For that matter, so do you.
  8. If a market behaves in a manner at variance with what you believe it should be doing, it's not wrong - you are.
  9. Have a plan.  Trade based only on specific entry and exit rules developed by thorough backtesting and/or real time paper (simulated) trading.  Do not vary from those rules during a trade.
  10. Do not change the trading rules on an approach based on a one-time or infrequent event.
  11. KISS - Remember that in trading there is such a thing as too much information.  Trading rules based on multiple indicators or conditions may not work as well as simple ones.  You only need to determine one of three things: is the market going up, down or sideways.
  12. Do not risk more than 4% of capital on any one trade.
Rules 1 - 4 need some discussion.  Market prices at any given time are the net sum of decisions of millions of participants.  Also, markets can get slammed one way or another by unforeseen natural or other events.  Thus to believe that I can accurately and consistently predict a market's future course is just plain foolhardy.  My apologies to all you Elliott wave fans, but if you know anything about EW you know there are always alternate counts.  Which just proves my point.