Emotions influence human decision making, especially in trading. Algorithmstic trading had already replaced human in market making activities. As a person working full-time with no time to watch market everyday, I have been following the rules and be mechanical as much as possible.
1. Be a contrarian. When everyone is fearful, aka when VIX jumps high, I become more greedy. When everyone is greedy, aka when the market reaches All-Time high after All-time high, and VIX tanks, I become more fearful and need to find hedges. The past few days just showed us how important this is.
2. Implied volatility rank or percental is my friend. As an option trader, I only trade when the IV is higher than its historical average. The higher the better, since IV often be overstated and makes premium selling more profitable.
3. Size is the most important factor. The risk and the size are highly correlated. I looked the size of each trade closely and will control it to 2% of my portfolio size. I will also control my Buying Power under certain percentage of my portofolio size based on VIX level (following rule number 1).
4. Ask Why first. Since I can only control my risk at order entry moment, I ask myself why this is the right trade and when it is not. This help me to pre-determine my profile and loss limit. Sometimes a good trade will become bad. Knowing the why helps me to make quick decision without second guess myself.
5. Only trade something that is liquid enough. This rule not only help me to reduce any slippage in price (the gap between bit and ask), but it also help me to only trade a handful of entities, which is also my next rule.
6. Trade something that I know well. I do not have time to do research or watch a lot of news. I focus on the main indexes and their futures such as /ES and /ZB and 3-5 stocks such as AAPL and Google. They are highly liquid with a lot of transactions and I know them well, foundationally and technically.
7. Take profit early and often and let time cure the pain. If a trade has 25-50% profile or 20 days to expiration, I will take the money and run. I would roll any losers to next expiration and forever, unless my WHY was wrong with new data presented. Recent example is BABA. I will not touch it for a long while.
7 plus or minus 2 is human short term memory capacity. I should stop here and hear from your suggestions, especially if you are trading options.