Trading Rules

I don’t usually advocate trading due to the higher probability of loss ascribed to the predominance of cognitive bias and behavioural economics. Note from personal experience that an awareness of such risk is insufficient to curtail the risks. For those that will continue to trade, here are my trading rules, most of which I have learned the hard way. Learn from my mistakes and take it to heart!

Trading Rules

1. Never let a single position be more than 15% of the total portfolio exposure
2. Never let a single investment narrative, sector or theme take on more than a third of the portfolio value
3. If you feel stuck or uneasy on a position cut it in half
4. Never let a trade thesis drift
5. Don’t trade illiquid product
6. Don’t take counterparty risk
7. Never enter a position without thinking about your exit and the risks
8. Never risk more than you can afford to lose
9. Never trade lumber or any other manipulated market
10. Plan your work and work your plan getting swept up in the market action incites emotional responses and sub optimal or bad decisions
11. Portfolios levered more than 3x to capital base or subject to additional monitoring requirements, including diversification, risk VAR, and simulation, placed stop loss orders
12. Before entering a trade, consider if a suitable investment could be made instead freeing the trade thesis from narrow time constraints