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.
While I hate definitions, in this case it is likely important as it ‘frames’ the rule-set.
I started out as a scalp* trader on 1 and 5 minute charts in a very choppy bear market (which could likely be considered a form of masochism). I never ventured anywhere near the longer time frames, I had this puritan belief that scalping was the only path and having cut my teeth here I was loathed to stray from what I knew (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, this trading ideology was going to be my tactic come hell or high water. (of course this meant I got wrapped up my in my own dogma and ended up not being able to see the forest for the trees…)
I consider myself more of a (well rounded) trader now, in so far as these sorts of wordy explanations matter. I now appreciate the longer time frames and my trades now vary from the infinitesimally short to (occasionally) several hours in duration. My workspace however is still very boring. (I think on the shorter time frames oscillators are a mostly a waste of time) I use Bollinger bands, a 20 period moving average and at the bottom of the screen I have the MACD (with the default (12, 26, 9) settings, RSI and volume.
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 and I often have to say this out loud to myself whenever I start mousing over the buy/sell button.
If someone had said this to me when I’d started out I would have rolled my eyes and dismissed it as lacking flexibility and probably labeled it defeatist.
For me at least this is meant to curb MY most dangerous and insidious tendency, the boredom trade.
Its easy to say ‘Don’t pick at it’… but… you know how it goes. While I hating quoting Warren Buffet or Charlie Munger (so cliched)…
The big money is not made in the buying and selling… but in the waiting – Charlie Munger
In any event. This is likely one of those things that you have to experience viscerally before you really start to believe. Its worth repeating, ‘Stick to the fucken plan’.
2. Quit while you’re ahead (or getting head)
The two most problematic psychological states (for me anyway) are greed and hope. Neither is desirable. In order to counter this I tend to take profits relatively quick. The reverse is also true, I prefer to cut my loses instead of getting stopped out a little while down the road.
I have a number that I like to trade towards. (that how-do-you-eat-an-elephant idiom)
When I’ve made my target I’m usually done for the day. Experience has shown me that I’m a lot less effective in afternoon trading anyway. Beside I trade so I can do other stuff (in theory). Sitting all day staring at charts is… not ideal.
Taking profits also helps me deal with my ego. (which brings us to rule #3)
3. Leave your ego at the door.
I don’t discuss my trades with anyone. Not even my wife. I don’t bend this rule. Not even a little. ‘How was your day?’. The answer is always, ‘my day was good’. This keeps my ego in check. As soon as your start to compare yourself or brag about what a hotshot trader you are is when things start to get murky. No one really cares…
…besides who exactly are you competing against anyway?
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 sideways on you (unless of course you didn’t follow your rules in which case you should be chastising yourself) and garnering sympathy.
I do sometimes discuss techniques or tactics with other traders, my own methodology is so incredibly bland that I find people that can interpret Eliott waves and other esoteric oscillators quite fascinating. I am really stupid so this higher order analysis would never work for me…. but occasionally you learn something. This is how I found how to incorporate volume into my trading decisions, someone had to break it down ‘Barney style’ for me first though.
Treat each day as a fresh start. You are not the continuation of yesterday.
A note about information consumption
While not a rule… I believe traders and market analysists 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 at all… and I 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). I will occasionally draw in a support level… and I’m cognizant of some of the more obvious patterns (like head and shoulders)… but really that’s mostly because everyone else thinks these things 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 is probably not someone you want to learn from. There something else at play here. Either they are placating some form psychological need (usually ego) or they’re just not very good traders. Same goes for people posting trading stuff on You-tube. Its 99% 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.