As the flight to Charlotte leveled off I reached into my carry on for my Gateway 2000 laptop. It was March 1998, I had just been promoted and was off on my first business trip to new management orientation.

My E*Trade account was fully funded with two grand, which I equally split between two semiconductor manufacturers. I built a spreadsheet in flight (to track my gains of course) and closed the one inch thick grey beast of a laptop to peer out the window.

I guess I thought I was on my way. I had it figured out.

Most “traders/investors” had it all figured out in the late 90’s right up to point where they didn’t.

Both of my semi stocks quickly pegged zero (of course), but not before I sold and rotated what little I had left to a server farm stock that went on to split 3 times in 1999. Once again, I had it all figured out.

We all know what happened next, right?

In June 2000, I remember abruptly cashing out the E*Trade account in a rage and using the funds to buy a Kawasaki Ninja ZX-9R sportbike. I still have it to this day, all stock, mint condition. At least I have something to show for those early years!

23 years later it is referred to these days as simply: The Nine.

I will never sell it.

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A few years ago, I sat down and tried to narrow down a set of trading rules.

I have read more books than I can count, some saying the same thing, others more off the reservation. Blogs and websites outlined a little of the same, enforced a few keys, but eventually I was able to narrow it down to what I felt was a good list.

It just so happened to be nine items.

I called it: The Nines.

It is outlined below exactly as it was hand written with no further commentary, I hope you find it useful as you set your own boundaries.

After all…

” A man’s got to know his limitations”.

Harry Callahan – Magnum Force (1973)

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The nines

1. Market is always right
   • Prices reflect the collective opinion of everyone based on everything available at that precise moment in time
   • You have an edge if and only if you can identify “misplaced bets” or “emotional influences”
2. Capital Preservation always takes priority over Capital Appreciation
   • Stops or trailing stops on every trade – You cannot survive waiting to be right
   • Doing absolutely nothing – sitting on your hands – is perfectly acceptable and preferred vs. forcing a trade for the sake of trading
3. Acceptable Risk always applies regardless of position size
   • 2% of Account Equity – rounded down – is the maximum allowable loss on any trade – start actively monitoring at 1%
   • Position sizing is important so the trade has room to breathe – larger the position, tighter the stop
4. Never trade on margin
   • The only thing worse than losing your capital is losing borrowed capital
   • Use margin only to allow stops to exit trades before they settle (T+2)
5. Never trade anything you wouldn’t be willing to own
   • Trade Thesis must apply equally regardless whether the holding period is 2 days or 2 years
   • Spend your time managing the winning trades, let the stops manage the losers
6. Never add to a losing trade
   • Acceptable Risk determines the position size
   • Add to a position only if the trade is positive and the stop has been adjusted to protect profit
7. Never let a winning trade turn red
   • Adjust the stop to keep it positive
   • If the trade stops out you can always put it back on if it still makes sense
8. Never too early to take a loss
   • If it starts to move against you or your thesis begins to erode, act quickly
   • If it starts to rain, you can always go inside – “a shirt dotted with only a few raindrops dries very quickly”
9. Opinions are many, Decisions are one
   • There is no substitution for due diligence and you must fully own every trade
   • Revisit your trading history frequently to see what is working and what is not

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