Prop Trading Futures

10 Trading Principles

“Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions. Every game has principles that successful players master to achieve winning results. So does life. Principles are ways of successfully dealing with the laws of nature or the laws of life.”

Ray Dalio

Here are the 10 key principles of The Prop Trading Futures Project:

  1. Risk adjusted performance is the 3-word most important keyword in trading and investing.
  2. We trade breakouts from classical chart patterns whose length is 10 weeks or more.
  3. We do not trade on rumors, tips or inside information. As position traders we have two friends: short and intermediate term trends are respectively our first and second best friend.
  4. We cut losses short. Rarely trades are closed with more that 1.5 percent loss (150 basis points). Our stricter risk management rule doesn’t allow a trade to close in the red for more than 1 day.
  5. We use Scale-In/Scale-Out to construct long-term positions. Scale-Out is by far our preferred management practice: it allows us to reduce account volatility and risk.
  6. We anticipate that over 60% of our trades are losers, and only 10% of the total make our positive bottom line. We believe that a trading system that has minimum drawdown and positive expectancy with more  losers than winner is a good and robust system.
  7. We believe that our first goal is to stay around long enough to be able to catch any big move that would eventually develop in the markets. Capital preservation is the 2-world most important keyword in our business.
  8. We consider patience an important virtue as well as standing out of the market a position.
  9. We think that a trading campaign is like a fishing rig. There are waters and situations where we can easily get a big fish, others were we eventually just lose our time. But that is only a matter of possibilities. No one can predict when and how we will get the big fish. Traders shall have a leap of faith and believe in their system to stay around a long time.
  10. Usually we use a combination of OCO orders to protect our capital in each trade. But we always have a worst-scenario hard protective stop, we call it EHS: Emergency Hard Stop.


image: source: fernandoprats