Trade rules by Jack Schwager


32. Do not rush to close the position after a break in your direction. Use the gap as the initial stop, and then enter the tracking station.

33. Try using the tracking stops, placing them on the basis of the development of the market situation, rather than to take profits on the target levels. Use objectives often prevents the full potential offered by the main trend. Remember, sometimes you need a big win to cover failures.

34. Despite the previous rule, still be useful to determine the initial goal in the opening of the transaction, which will apply the following rule: if for a short time after the opening position is reached most of the profit target (for example, 50-60% of one week or 75 - 80% for two or three weeks), you should take profits parts, referring to the restoration of abandoned contracts at market correction. The idea is that it would be wise to take a quick substantial profits. Although this rule can often lead to loss of income from the rest of the eliminated positions, holding positions in such cases often lead to the elimination of feverish at the first sharp prices return.

35. If the goal is reached, but the position you still like it, leave it, stop using the tracking. This rule is important in terms of the opportunity to trade in the direction of the main trend. Remember, patience is necessary not only in the moments when you are waiting for good deals, but in order not to close a position when it is profitable. Inability to obtain adequate returns on the correct deal with the trend - a key factor limiting the yield of trade.

36. One partial exception to the previous rule is that if you have a very large position and the value of your assets is growing before our eyes, we should consider the possibility of a partial profit. When everything is too good to be true, watch out! Perhaps it's time to start gradually take profits and place close tracking station.

37. When the profit in a transaction which, in your opinion, still has long-term potential (but possibly vulnerable to a short-term correction), develop a plan for the resumption of the position. If the market does not make a substantial return, allowing to resume the position watch for pricing models that can be used to select a new time entry. Do not be afraid to re-open position, even if the new entry point into the market is worse than the exit point if the idea of long-term trends and assess the current position of the alleged renewal. Inability to return to the market at a worse price can often lead to loss of the main part of the larger trend.

38. When trading multiple contracts, avoid the emotional trap that is the desire to be right 100%. In other words, fix the profit part. Always try to keep at least a partial position in the direction of the trend - as long as the market does not generate a convincing reversal pattern or reaches an important defensive stop.

Other principles and rules

39. Always pay more attention to the behavior of the market and education pricing models than the target levels and areas of support / resistance. Past can often be the cause of what your opinion on the correct market changes early.