Robert Meier's Eleven Rules

 Robert Meier's Eleven Rules.

1. Ask yourself what you really want. Many traders lose money because subconsciously their goal is entertainment, not profits.

2. Assume personal trade responsibility for all actions. A defining trait of top performing traders is their willingness to assume personal responsibility for all trading decisions.

3. Keep it simple and consistent. Most speculators follow too many indicators and listen to so many different opinions that they are overwhelmed into action. Few people realize that many of the greatest traders of all time never rely on more than two or three core indicators and never listen to the opinions of others.

4. Have realistic expectations. When expectations are too high, it results in overtrading underfinanced positions, and very high levels of greed and fear - making objective decision-making impossible.

5. Learn to wait. Most of the time for most speculators, it is best to be out of the markets, unless you are in an option selling (writing) program. Generally, the part-time speculator will only encounter six to ten clear-cut major opportunities a year. These are the type of trades that savvy professionals train themselves to wait for.

6. Clearly understand the risk / reward ratio. The consensus is that trades with a one to three or one to four risk / reward ration are sufficient.

7. Always check the big picture. Before making any trade, check it against weekly and monthly as well as daily range charts. Frequently, this extra step will identify major longer-term zones of support and resistance that are not apparent on daily charts and that substantially change the perceived risk / reward ratio. Point & figure charts are particularly valuable in identifying breakouts from big congestion / accumulation formations.

8. Always under-trade. It is easy to forget just how powerful the leverage is in futures and options. It is not uncommon to find speculators holding positions two or three times larger than is justified by their account size. By consciously under-trading, that is taking positions much smaller than you might be able to, you will gradually learn to hold back until you find the real money-making opportunities and stay with major trends.

9. Define your broker relationship. A full-service commodity broker can be a valuable ally, but should not be pushed into the position of making your final decisions.

10. Never trade with serious personal problems. Ignoring this rule is a prescription for disaster. The clarity of thought and emotional control required even for part-time speculator is so great that it is impossible to handle along with serious personal problems. Likewise, trading should not be attempted during periods of ill health, even including a bad head cold.

11. Ignore the news media. The true goals of the national news media are to shock, agitate, entertain, and editorialize a socialist agenda - not provide useful information. Many of the finest traders avoid all contact with public news, knowing how profoundly it can undermine a trading plan. The more important trading profits are to you, the less you can afford to follow the "news."

From Investment Psychology Explained, Martin J. Pring, 1993, John Wiley & Sons.