Some Trading Rules

• Posted by Joe Fahmy
• on December 31st, 2009

As we enter into the New Year, I believe it is imperative to do “post analysis” of one's trading. In other words, go back and review what worked for you last year and more importantly, correct the errors. Becoming a successful trader involves constantly improving your skills and not being blind to past mistakes. I would like to share a few trading rules which have helped me over the years:

1) Cut your losses. Part of sharpening your skills should be to study the best traders and investors. As you do this, you will find they all repeat the same theme: CUT YOUR LOSSES. In a Bull Market, anyone throwing darts at the Wall Street Journal can make money, but not everyone KEEPS it! When this uptrend is over, learn the discipline of loss cutting and of protecting your portfolio.

2) When in doubt, sell half. If you have a stock that is making your nervous, sell half in order to take the pressure off and to gain more clarity. Look at it this way: If the stock goes up, at least you still own a position, and if the stock goes down, at least you took some off the table.

3) Always protect your confidence. Find an investing/trading philosophy that you are comfortable with and one that fits your personality. Once you have discovered this, work hard, study it, and try to perfect it. My best advice to gain more trading confidence is to make decisions, evaluate if your ideas are working, and constantly make adjustments until you can replicate a successful and disciplined trading methodology.

4) Separate your ego from your trading. The market does not care what college you went to or how many kids you have to feed. Take profits when you have them and NEVER think you are smarter than the market. As they say, “humble yourself or you will be humbled.”

I hope some of the rules listed above will help you improve your trading in 2010 and beyond. Sticking to these rules helped me to significantly outperform the market in 2009. Going forward, I have decided to focus my attention on my money management business and on the clients who are paying me. As a result, I will be updating this blog and “tweeting” less frequently. I sincerely hope you understand.

I joined StockTwits with the intention of sharing some market ideas and exposing my abilities to the community. I feel it is now time to channel more energy into my business. If anyone is interested in any of our managed account products, please email me directly at jfahmy@zenithasset.com.
Again, thank you to all my followers for the tremendous support in 2009.

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