Michael Marcus discussed causes of financial disablement in Market Wizards: Interviews with Top Traders.

I think the leading cause of financial disablement is the belief that you can rely on the experts to help you. It might, if you know the right expert….Typically, however, these so-called “experts” are not traders. Your average broker couldn’t be a trader in a million years. More money is lost listening to brokers than any other way. Trading requires an intense personal involvement. You have to do your own homework, and that is what I advise people to do.

Michael Marcus mentioned some important rules in Market Wizards: Interviews with Top Traders.

Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay the losers.
You also have to follow your own light. Because I have so many friends who are talented traders, I often have to remind myself that if I try to trade their way, or on their ideas, I am going to lose. Every trader has strengths and weakness. Some are good holders of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach. When you try to incorporate someine else’s style, you often wind up with the worst of both styles. I’ve done that a lot.

Linda Bradford Raschke mentioned some wisdoms of short term trading in The New Market Wizards: Conversations with America’s Top Traders.

I put a great deal of effort into getting the best entry price possible. I feel this is probably one of my strongest skills. In day trading, a good entry price is critical because it buys you time to see how the market will react. If you buy because you think the market should bounce, but it only goes sideways, you’d better get out. Part of the trading process is a matter of testing the water. If your entry timing is good enough, you won’t lose much even when you’re wrong.

Here is another piece of trading rule from Paul Tudor Jones, quoted from Market Wizards: Interviews with Top Traders.

The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.

Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

Jesse Livermore, one of the greatest speculators of all time, reportedly said that, in the long run, you can’t ever win trading markets. That was a devastating quote fro someone like me, just getting into the business. The idea that you can’t beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check.