Rules For Trading | Alpha Street

Rules For Trading

July 19, 2019




  1. Always manage your risk. It doesn’t matter if you are a day trader, swing trader or long-term investor in a company; you have to always manage your risk.
    1. Position sizes, depending on your risk tolerance should not exceed 5% of your capital. Aggressive investors should never exceed 25% of capital.
    2. Always have a defined exit strategy, you can be the best investor on the planet but its possible to be wrong from a timing perspective.
    3. Take profits on the way up, 25% of position should be sold after the first 5 – 10% move.
    4. Establish a MAX draw down, goes back to point B. I set mine at 20% as I tend to be a longer-term investor. Examples. 20% loss on 5% position is 1% decline in Portfolio, 20% loss on 25% position is 5%. Many times, I see retail investors ride stocks down 50% or more in hopes of recovery. It is a lot easier to recover 5%, than it is to recover 10%.
    5. Day traders should utilize max draw down based on capital. For example, if you go long 100% of your capital, you should keep a 5% max draw down on the investment.
  2. Diversify holdings; At no point should 100% of your total savings be in the stock market. Always keep some money on the sidelines.
  3. Typical Aggressive portfolio should be made of 8 diversified holdings (10% Each) and 20% Cash at all times.
  4. Do your own research, never listen to a self-proclaimed expert. Or even worse a twitter/Stocktwits stock jockey. 3 sites I like to go to,, & Finance section. That is honestly all you need to do it yourself.
  5. Investing is a marathon, not a race. Example. DRYS, catching 100% to 1000% returns is a fluke, just ask 9 out of 10 investors who lost everything.



DO YOUR OWN RESEARCH AND SPEAK TO AN ADVISER FOR INDIVIDUAL INVESTMENT ADVICE, makes no endorsements or guarantees on investments.