Hi everyone, I'm Mage Evolution.
Recently, I reread Livermore's trading principles. Looking at these 21 rules in the image sent chills down my spine. When I look back at my trading over the past decade or so, I realize I hit almost every one of these 21 pitfalls spot on.
Rule 2 in the image: Don't add to a losing position. Averaging down is a dangerous habit.
This is the rule that did me in back then. I thought every dip was an opportunity, so I kept buying more as the price fell. Eventually, my position got so large that even the slightest rebound could have gotten me out at break-even. But the rebound never came, and just before dawn, I got liquidated on a position worth dozens of BTC.
Rule 12 in the image: Don’t try to catch every market move.
When I first got into crypto in 2019, I wanted to watch the charts 24/7—trading futures and spot, going long and short, and getting burned both ways. I traded every day, basically working for the exchanges. Overtrading meant I could lose money even in a bull market.
Rule 19 in the image: Accept small losses. Don’t gamble.
This is the rule that goes most against human nature. We retail traders tend to hold losing positions, refusing to let go, but when we’re in profit, we’re quicker to exit than anyone. The result is cutting profits short and letting losses run.
These 21 rules may look like trading principles, but they’re really a mirror that lays bare human nature.
After some hard lessons, I stopped placing trades blindly over the past two years. I went back to naked charts and price-and-volume analysis, and started working with friends to use AI to write quantitative strategies. I have just one goal: replace human nature with a system and code these 21 rules from the image into my strategy.
Today I’m sharing these 21 trading rules with those who happen to come across them here. I hope they’ll encourage everyone to reflect on their own trading.
If you’re also struggling with holding losing positions and trading too often, take a look at this image and see how you compare.
(This is solely a personal trading record and a technical discussion. It does not constitute investment advice of any kind.)