Here’s an article by Adam Hamilton about how to speculate successfully. It covers what should be familiar topics — money management, position sizing, trailing stops and expecting the unexpected. Here’s a snippet:
This week I would like to discuss tactics that speculators can use to survive and thrive in a limitless environment. The markets could not care less whether you or I win in the end or go bankrupt speculating, so you have to actively and continuously protect your own capital. You can approach speculating in such a way that not even multiple adverse unforeseen events can threaten your ability to stay in the game.
The wrong way to speculate is the way most new speculators start out. They come to the markets starry-eyed, convinced that they are good enough to wrest away huge gain after huge gain with their trades. They know way back in some dark corner of their minds that the markets are risky in general, but they are so confident that their own egos override prudence.
In order to ensure that this common speculation hazard doesn’t crush you, there are crucial steps to take so you not only survive but thrive as a speculator. They involve emotional steeling, position-limited portfolio construction, mechanical profit and loss management, and a carefully cultivated understanding of the true random nature of the tactical markets.