Do We Really Need Rules?

Jake HuskaGeneral Comments1 Comment

At SMBU we believe those with a passion for trading ought to start trading in college. We created the SMB College Training Program run by Iceman from The PlayBook for this very reason. Jake is a passionate college trader trying to create a track record while in school to land a spot on a prop trading desk. He will write a weekly blog about his trader learning experience. You can e-mail him at [email protected].

This post was written on August 23, 2013.

If you have developed a clear set of rules (entry signal, exit signal, risk management, money management, etc.) that you feel comfortable with, then you should not hesitate to follow those rules at all times. While this is easier said than done and even the best of traders do not always follow their own rules, the key is to be aware of your process and overall strategy. If you are not satisfied with your strategy, then change it. I believe in order to be a successful trader (regardless of your time frame) you must constantly tweak your process to conform not only to your style and personality but the general market conditions. While your process and set of rules may not quite be perfected today, the key is to experiment and backtest your process. It is, after all, your set of rules that keep you in line.

For example, I went long VMW about three weeks ago @ $82.30. This was a swing long position. My reasoning for entering: the stock had gapped up after earnings and then proceeded to consolidate in a relatively tight range (aka a bull flag). I had intended this to be a multi-week, perhaps even a multi-month, position, as my price targets were $92 then $98 (all technically based). However, I exited the position on 8/16 based on the daily close below $84, which was my exit signal. The stock is now trading about $88. While I can look at the chart and say to myself, “I should’ve just held it,” or “Man, I wish I didn’t sell that thing,” doing so would have broken my rules. Debates can go on forever as to which set of rules are better. Just remember: know your rules and process, follow it as best you can, and adjust your overall strategy where you see fit. It’s a never-ending journey. Good luck!

 VMW Chart

no relevant positions

One Comment on “Do We Really Need Rules?”

  1. Hi, I think that’s ok to stay on with your rules, but if u had couple of lots, u could close 50% of poss @84$ as u planed before just to cover your risk, and other 50% of poss just hold till it goes flat or your target, but I think those targets are overvalued, just saying, not a swing trader, lets see what happen in 1 month

Leave a Reply