We exist in a world governed by rules. Rules of law, rules of physics, and rules of nature are each example(s) of parameters imposed on us, or our surrounding environment, either naturally or unnaturally.

Some rules [...]]]> Rule; noun, verb.
–noun: a principle or regulation governing conduct, action, procedure, arrangement, etc.: the rules of chess.

We exist in a world governed by rules. Rules of law, rules of physics, and rules of nature are each example(s) of parameters imposed on us, or our surrounding environment, either naturally or unnaturally.

Some rules are more rigid than others. When or if rules are broken there are typically consequences – mostly disastrous. Furthermore, even when a rule is broken and the outcome is favorable, such reward for bad behavior presents just as grave a hazard; being rewarded for bad behavior will cause more attempts at what worked better than the “system” or pre-defined rules until the law of big numbers catches up with you.

The breaking of the rules is what defines the “discretionary trader”, of which there are two kinds: the ones that have BLOWN UP and the ones on their way to blowing up. Following the rules is a critical skill to become a successful trader.

Perhaps the most cerebral game of skill is chess. Chess has a zero luck factor and your fate, win or lose, is absolutely pure and sterile. In games that combine both skill and luck, such as poker or trading, the players who impose on themselves the most mathematically sound, logical, well planned, and pragmatic sets of rules invariably rise to the top. Rules exponentially increase your chance of winning in any game involving skill, luck, or both. I compiled a list of what I believe to be some very important rules of trading to set you on a path toward consistently profitable trading.

Prepare to Trade

Preparation: pre-pare- [pri-pair] verb (used without object)
- To put things or oneself in readiness; get ready: to prepare for war.

A successful trader is no different than a great military strategist or a champion tournament poker player. Their battles are typically won before the first shot is fired or the first hand dealt.

The rules I have listed below are a primer for your trading success. These rules will be amended periodically as market conditions warrant (or “initial conditions” change) but are a basic foundation for any market environment.

Define Your Edge

The #1 RULE is to DEFINE your edge. If 90% of people lose in their trading, then its probably best to not start trading until you can define your EDGE in writing.

Now answer these questions BEFORE starting your campaign:

• How long will this “campaign” (or “test”) run (i.e., 30 days, 90 days…)?
• How much total risk capital will you contribute to the total campaign or premise?
• Which and how many vehicles will you trade?
• What is your “Daily dollar stop loss” per system ?
• What is your “Monthly dollar stop loss” per system ?
• What is your bet sizing plan if things are going well?

Follow Your Protocol

Once the above foundation is set, then follow the protocol – - also you must make a protocol for changing the protocol in advance.

Also, when it’s time to trade, I suggest you arrive 10- 20 minutes ahead of your scheduled trading hours so as not to charge in the door and start punching buttons.

For me personally, I feel its key to have the lab cleaned up, clear off my desk, get whatever beverages and meals prepared, address and clear off all my voicemails/emails/texts, turn off cell phones, and eliminate as many distractions that can interrupt the designated trading session. Inform family and friends and share with them that these designated hours you are unavailable except for emergencies.

Study the various financial news outlets such as; CNBC, Reuters, Bloomberg, Forex Factory for any news items relative to whatever vehicle you are trading, or market conditions in general.

Know the trading calendar(s) for the financial indices, energies, currencies, or other commodities you plan on trading. Know When Not to Trade – like 5 minutes before the Fed’s interest rate policy meeting announcement or right into the Oil inventory numbers release each Wednesday at 10:30 am etc.

If you are trading manually then review the vehicle(s) you are preparing to trade in terms of: average true range (ATR), volatility, percentage movements, current trend, and volume since your last session in the subject vehicle.

Always analyze and review the status of your current campaign. You should constantly analyze your campaign. Another suggested tool is a trading journal so you can review both the good and bad results and document the causality and look for ways to improve for the next campaign.

Lastly, BEFORE you leave your trading area, VERIFY that you have NO “open orders”, have a redundant backup process to make sure that you don’t wake up and find yourself in a trade!

Bonus Rule

IF you EVER have a “trading error” close your eyes and cover at “the market” period ! — try and NOT make errors! They, besides slippage and commissions are the destroyers on your monthly P&L…

Being prepared is an ongoing effort and process. Some of the rules listed above will simply become part of your routine. The key is to prepare and not become lazy or complacent – - I will strongly suggest that when it comes to trading: you are either getting better or getting worse — Entropy or changes in “Initial conditions” are NOT your friends … You should begin every session by running over you own set of rules much like a commercial pilot runs through a pre-flight check list.

Reprinted with permission from SCOPELABS

Yes? Well then it’s understandable that you failed to [...]]]> Were you one of the faithful, one of those unfortunate soles caught in the Reality Distortion field, the phenomenon that was so often associated with the late, and great, Steve Jobs? Were you smitten by the thousands of people waiting in line for an iPhone 4S.

Yes? Well then it’s understandable that you failed to see why earnings fell short. By all accounts, both credible and covert, Apple was to reveal an iPhone 5, but they didn’t. Many thought they would have released the iPad 3 by now as well, but they didn’t.

Instead we got a rehashed iPhone 4 and a spruced up iPad 2. Was it to save money? Or was it because they felt the first incarnations of the iPhone 4 and iPad were bombs…not externally, but internally. And Steve couldn’t live with that. No pun intended.

Let’s face it, when the iPhone 4 came out it was by all accounts an incredible achievement, but it had a serious flaw. Apple did a masterful job at covering it up. I’m speaking of the antena of course. They masked the flaw with a free bumper.

But that wasn’t the way Steve envision his phone in the wild. He saw the iPhone 4 as a thing of beauty; a piece of hardened steel sandwitched between two saphire-hard sheets of glass. How Zen! That vision was spoiled by antena-gate.

I’ll bet anything that Steve Jobs was infuriated when the antena flaw came to light. He probably thought you might as well have wrapped the iPhone in electrical tape. So, he insisted on getting it right before moving on to the next generation iPhone. And so, that’s what Apple did, they got it right, because that’s the way Steve wanted it. Diddos for the iPad.

And if you think Steve was concerned about missing numbers at earnings, versus getting the product right, then you’re delusional. Steve would have taken a 20% hit in earnings rather than settle for less than perfect. And so that’s why the iPhone 5 and iPad 3 were delayed, and why Apple earnings came up short…because Steve said let’s step back, do it right, then go forward.

The problem is that the rest [...]]]>

Same Old Outside Packaging

At least in the eyes of the stock market and investors, the iPhone 4S was a HUGE disappointment. To us fans of ALL things Apple, it includes some pretty awesome features, albeit in the same old packaging. But still, we recognize the magnificence of engineering, and the beauty within…right?

The problem is that the rest of the world is FAR more concerned with superficial stuff. I guarantee you if the iPhone came in a sleek new package, thinner with a teardrop form factor and slightly larger screen, the critics would be raving over this device.

But the fact of the matter is that the current packaging, at least in my eyes, is pretty near perfect. So why mess with perfection? Sure, the screen could be a bit bigger…I guess, and a rounded teardrop design might feel a little more comfortable in my hand, I guess. But that isn’t what makes the iPhone great…right?

It’s not perfection of any single element of the device that makes it great, it’s the culmination of details, the overall usability, the incredible flexibility, the industrial design that is both beautiful and functional. And so what Apple has done is take a form factor that is near perfect and made its internals WAY better.

Probably the single most important feature is Siri, the intelligent voice activated assistant. I never used voice command before with the iPhone because I felt it was more an after thought, a tack on, a gratuity, rather than an integral way of using the phone. But Siri takes voice command to an all new level.

The second most important feature has to be the much improved camera. It’s now 8 megapixels with a superior lens and wider aperture. This combined with the new dual-core processor, means that taking pictures and videos with the iPhone, have been elevated at least two levels of magnitude. Taking pictures and videos are at least 60 percent of what I use the iPhone for. Every time I sync my phone, I have at least a few pictures and vids to sync as well.

Now if Apple would only follow up with better integration of photo and video editing within iPhoto, they’d have a HUGE winner. I suspect it’s only a matter of time.

The third and probably most misunderstood important feature is iCloud. Now don’t misunderstand me, I say third most important in terms of public perception, but I personal believe that iCloud is by far the most important feature being introduced here. iCloud is what Dot Mac was intended to be, and that’s my data anywhere and everywhere, knowing where I left off, where I’ve been, and letting me access it seamlessly.

iCloud is going to be central with everything we do with our Apple products, and it won’t be fully realized unless you own more than one Apple device, say an iPhone and iPad; or an iPad and a Mac, or all three; or 8 macs, 4 iPhones and 3 iPads, like in my house! iCloud will be central in iOS for the iPhone and iPad, and those features will gradually become fully integrated with the Mac OS, as they a;ready have with auto-save and auto-restart features for Lion aware applications.

But the market is in denial. Those non-Apple users out there that are more interested in making money off of Apple stock and are not true users, true believers, simply don’t see the grand plan, so they discount the stock. Unfortunately there are a lot of those people/investors out there, so the stock is going to get hit and hit hard. But all that means is a great buying opportunity, to pick up some stock from the best run company in the world at a discount.