This book may overwhelm new traders at first. If you feel like you’ve lost the forest for the trees, I hope these lists help you focus on what’s most important.

6 Commandments for New Traders

  1. Only trade Stocks in Play with the highest volume and volatility and a fundamental reason for the recent volatility.
  2. New traders should define a trade playbook and risk management plan before trading in simulator.
  3. Trade playbook and risk management plan must remain unaltered for the entire trading block, except when the Losing Streak Circuit Breaker is triggered.
  4. Everything related to simulator trading – from daily routine to risk management plan – should be the same as it will be in live trading.
  5. New traders should trade in simulator until at least three successful trading blocks have been achieved.
  6. New traders should join a trading community. Having daily discussions with other traders is crucial to your development as a trader.

The RST Way – Principles of Risk Management

  1. The risk/reward ratio should be the same for all trades*.
  2. Share size should be automated to ensure identical win/loss amounts across trades*.
  3. Trade exits (profit and loss) should be defined when entering the trade*.
  4. Never risk more than 1-2% of account equity on any trade.
  5. Maximize win rate by giving trades the right amount of room to breathe (i.e. properly “clawing the trade”).
  6. Analyze trade performance on blocks of at least 100 trades. Adjust stop loss placement and risk/reward ratio as needed to improve profitability for the next block.
  7. Use whatever risk/reward ratio works best for you.

* Key components of binomial process trading.

The RST Way – Trading Philosophy

  1. Keep trading as simple as possible. Remove all unnecessary variables and rules from the trading process.
  2. Trade only stocks with volume, volatility, and clean price action that match your playbook.
  3. Large variation in daily/weekly/monthly results is natural and mathematically unavoidable and should not trigger changes to the risk management plan or trade playbook.
  4. Make a plan and follow it. “Trading psychology” is irrelevant.