I believe self imposed trading rule-sets and methodology are very much personality dependent and that there is no generic one size fits all. Trying to emulate someone else is often just smashing a square peg into a round hole. (which while possible I suppose, is not ideal)
While I hate definitions, in this case it is likely important as it ‘frames’ the rule-set.
I am a scalp*-trader on a 1 minute chart. Everything else tends to feel quite glacial and I have never really with great enthusiasm ventured near the longer time frames. I had this puritan belief that scalping was the only path for me and having survived in this space I was (or maybe am) loathed to stray from what I know (that the violence of the shorter time frames can become a comfort zone is quite weird)
*literally it was the word ‘scalp’ that appealed to me. With an inflated sense of self, a (not always metaphorical) tomahawk in hand, I was going to make this my trading ideology come hell or high water.
Of course not all my trades are brutally short-lived, but for the most part I tend towards quantity over quality and in the ‘classic’ day-trader sense I close out all my positions before the end of the day.
My workspace is fairly boring. I only have one screen (albeit a really big one). I trade price action almost exclusively… and while I suppose I could (probably) trade naked charts, at the bottom of the screen I have the RSI (with the default 14 – 70/30 settings) and in among my candlesticks I have a 50EMA and a 200EMA.
I don’t have a lot of rules. Probably because I have an incredibly short attention span and more than three seems like a lot to remember. This is what works for me…
1. ‘Stick to the fucken plan…’
It’s a quote from Grand Theft Auto V… that I saw on a Day Trading subreddit once. I realize quoting Grand Theft Auto as your #1 trading rule… probably leaves much to be desired… but I don’t think I can phrase it any more succinctly than this.
For me at least this is meant to curb MY most dangerous and insidious tendency, the (iffy) boredom trade. It’s easy to say ‘Don’t pick at it’… but… you know how it goes.
While I hating quoting Warren Buffet or Charlie Munger…
The big money is not made in the buying and selling… but in the waiting – Charlie Munger
In any event. Waiting for your stars to align is likely one of those things that you have to experience viscerally before you really start to believe. ‘Stick to the fucken plan’ also flows into rule #2 which is…
Actually no… while I wish I could make this work… and likely quite a good rule in CQC… my trading rule #2 is actually…
2. Quit while you’re ahead (or getting head)
The two most problematic psychological states (for me anyway) are greed and hope. Neither are desirable in trading. In order to counter this I tend to set limit orders and take profit as soon as those limit orders are hit. My stops are also (some might argue unreasonably) tight… which means if a trade doesn’t go in the direction I imagine almost immediately its usually over and I have to wait for another set up.
Taking profits also helps me deal with my ego. (which brings us to rule #3)
3. Leave your ego at the door.
I try not to discuss my trades. This theoretically keeps my ego in check. This is also one of the hardest rules to follow, because, well, day trading is quite lonely. And I am also naturally competitive. But as soon as your start to compare yourself or brag about what a hotshot trader you are is when things start to get murky. Also no one really cares about what you do (at best they are humoring you and at worst they secretly want you to fail)
Good trade, bad trades… they’re done and in the past. I see no benefit in reliving your glory trades through embellished narrative. Or indeed, on the converse, beating yourself up about trades that went ‘bad’ on you (unless of course you didn’t follow your ruleset (or tactics) in which case you probably should be chastising yourself). Treat each day as a fresh start. You are not the continuation of yesterday. This is also part of the reason why I close out my positions at the end of the day, a clean break or maybe some form of compartmentalization. Whatever it is, I find I’m better going in every morning fresh and having to get a feel for things anew.
A note about information consumption
While not a rule… I believe traders and market analysis peeps are… for the most part… (how do I put this delicately) motherfuckers. I don’t think any other industry peddles so much bullshit. I very rarely follow the news cycle (sometimes I’ll go have a look, post event, to see what caused the market to tank)… and I’m inclined to lump Technical analysis (with a skeptical raised eyebrow) into the same category as homeopathy and chiropractics. Ie. I don’t believe it works. (you can likely make a case for the placebo effect of technical analysis… but really I don’t have the energy or enthusiasm for this). Thats not to say I don’t draw all over my charts… but really this is mostly because everyone else thinks these things matter… and because of this I guess they do matter.
Be super wary of anyone offering to teach you how to trade or any form of subscription service. Anyone who needs to subsidize their trading income by running a website or service… I’m weary… and my spidey sense tells me there is (usually) something else at play here. Either they are placating some form psychological need (like ego) or this is their side hustle.. which makes me wonder about their ability to generate trading income. Same goes for people posting trading stuff on You-tube. 99% of it is dangerous bullshit (and potentially evil)… I think you’re much better off with a free demo-account and trying to figure it out on your own.