Protect Capital First
Buffett + Munger: preserving capital matters more than winning arguments.
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Rules Library
A library of trader and investor rules translated into easy-to-read cards for swing trading, active position trading, passive investing, and risk management.
Some are tactical entry and exit frameworks, others are process rules, psychology reminders, and portfolio habits worth keeping close when markets get noisy.
10 Golden Rules
Use the 3-5-7 Loss Ladder
Cut 1/3 at -3%, another 1/3 at -5%, and the rest at -7%.
Buy Strength, Not Weakness
Darvas and Minervini: let price prove itself before you commit.
Cut Losses Around 7–8%
O'Neil: never let a manageable loss become portfolio mold.
Trends Need Confirmation
Charles Dow: price, trend, volume, and confirmation belong together.
Press Winners, Cut Losers
Druckenmiller and PTJ: asymmetry beats ego.
Stay in Your Circle
Buffett: only own what you can explain without interpretive dance.
Diversify Intelligently
Dalio and Bogle: balance risk without diworsification.
Respect Cycles and Psychology
Howard Marks: risk rises when people stop noticing it.
Think in Years When Investing
Blay, Lynch, and Buffett: patience is still legal and still profitable.
Swing
Breakout, momentum, and tactical trend-following rules for multi-day to multi-week trades.
Mark Minervini
Wait for tight price structure, rising relative strength, and clean volume confirmation before committing capital.
Core Rules
- Buy strength, not sloppy weakness.
- Only enter when price and volume confirm each other.
- Keep losses small and let exceptional winners pay for the rest.
“Being wrong is inevitable. Staying wrong is a choice.”
William J. O'Neil
Use earnings strength, leadership, and chart confirmation, then cut weak trades before they mutate into portfolio termites.
Core Rules
- Buy market leaders with strong earnings and sales growth.
- Cut losses quickly, often around 7–8% from entry.
- Add only after the position proves itself.
“The whole secret to winning in the stock market is to lose the least amount possible when you're not right.”
Jesse Livermore
Follow the tape, sit with the trend, and never argue with price just because your ego bought the stock.
Core Rules
- The market is never wrong; opinions often are.
- Cut losing trades before they become identity projects.
- Only press a trade when the market confirms your original thesis.
“It was never my thinking that made the big money for me. It was always my sitting.”
Nicolas Darvas
Buy stocks making new highs out of constructive boxes, not the junk lying in the bargain bin pretending to be value.
Core Rules
- Buy breakout strength, not falling knives.
- Use price boxes to define entry and stop levels.
- Ignore noise that does not affect the box structure.
“I made my money by sitting tight and following my rules.”
Paul Tudor Jones
Play aggressive offense only after building aggressive defense; the first job is surviving the stupid trade you haven't made yet.
Core Rules
- Cut losses fast and keep powder dry.
- Think in risk first, return second.
- Never average down on a position just because it got cheaper.
“Losers average losers.”
Marty Schwartz
Trade the market in front of you, not the one your brilliant cousin swears is about to happen.
Core Rules
- Trade with the trend instead of forecasting heroically.
- Wait for your setup instead of manufacturing one out of boredom.
- Respect stop levels as part of the setup, not as optional decorations.
“Great traders are not right a lot. They just lose a lot less when they are wrong.”
Active Position
Thesis-led trading rules mixing macro, catalysts, fundamentals, and timing.
Stanley Druckenmiller
Concentrate when conviction is real, but only after trend, fundamentals, and macro all stop arguing with each other.
Core Rules
- Press winners when evidence strengthens.
- Avoid over-diversifying your best ideas into mediocrity.
- Exit fast when the thesis changes.
“It's not whether you're right or wrong, but how much you make when you're right and how much you lose when you're wrong.”
George Soros
Markets are messy, reflexive, and often irrational, so your job is adaptation, not prophecy.
Core Rules
- Study how price and narrative feed each other.
- Change your mind quickly when the facts change.
- Treat discomfort as information, not as a reason to freeze.
“It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.”
Bill Ackman
Size up high-conviction ideas only when the thesis is specific, evidence-backed, and sturdy enough to survive public drama.
Core Rules
- Know the catalyst, the downside, and the time horizon.
- Concentration requires homework, not charisma.
- When the thesis breaks, admit it before Twitter writes your obituary.
“Concentration is fine when your research is not fiction.”
David Tepper
Go where the risk-reward is skewed and stay open-minded enough to admit that the easy money may already be gone.
Core Rules
- Focus on asymmetry, not just quality.
- Be willing to buy when others are indiscriminately panicking.
- Stay liquid enough to act when bargains appear.
“I look for situations where the reward is much greater than the risk.”
Michael Burry
Independent thinking matters, but it only pays when your research is deeper than everybody else's headlines.
Core Rules
- Do original work instead of borrowing conviction from the crowd.
- Wait for price and reality to converge, even if it takes forever.
- Understand balance sheet risk before chasing upside stories.
“If you're going to be a great investor, you have to fit the style to who you are.”
Carl Icahn
Value can stay asleep for years unless somebody kicks the door, so activism can be the catalyst.
Core Rules
- Look for businesses where change can unlock value.
- Catalysts matter as much as valuation.
- Be clear on governance risk before taking a concentrated stance.
“In life and business, there are two cardinal sins: The first is to act precipitously without thought and the second is to not act at all.”
Passive Position
Long-horizon investing rules built around valuation, quality, dividends, and patience.
Warren Buffett
Protect capital by buying understandable businesses with durable economics instead of whatever the market currently treats like a rock concert.
Core Rules
- Stay inside your circle of competence.
- Prefer quality businesses over cheap mediocrity.
- Think in years, not headlines.
“Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
Charlie Munger
Avoid stupidity, stay rational, and stop making the same expensive mistake in six different sectors just to feel diversified.
Core Rules
- Invert problems before acting.
- Favor a few understandable great businesses over many mediocre ones.
- Build checklists so emotion does not run the portfolio.
“It's remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid.”
Peter Lynch
Buy what you understand, but then do the homework so 'I use the product' doesn't become your entire valuation model.
Core Rules
- Look for businesses you can actually explain.
- Match the stock type to the right expectation.
- Let earnings growth, not excitement, drive the long-term case.
“Know what you own, and know why you own it.”
John Bogle
Costs matter, simplicity matters, and most people would outperform themselves by stopping the circus.
Core Rules
- Keep fees low and turnover lower.
- Diversification is a tool, not a personality trait.
- Own the market when stock-picking skill is uncertain.
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.”
Howard Marks
The key is not being bold all the time; it's being appropriately skeptical when the crowd gets intoxicated.
Core Rules
- Respect market cycles and investor psychology.
- Second-level thinking beats obvious thinking.
- Risk is highest when people stop seeing it.
“You can't predict. You can prepare.”
Manuel Blay
Build wealth through quality businesses, rising dividends, and patience long enough to bore people who need daily entertainment from their account.
Core Rules
- Prioritize durable companies with shareholder-friendly behavior.
- Focus on growing dividends and long-term compounding.
- Ignore short-term market noise unless the thesis changes.
“Time in quality businesses beats frantic prediction.”
Universal
Risk, process, psychology, and market structure rules that travel across styles.
Charles Dow
Trend, confirmation, and volume still sit underneath half of modern technical analysis whether traders admit it or not.
Core Rules
- Markets discount available information.
- Trends persist until reversal is confirmed.
- Volume and cross-market confirmation matter.
“The averages discount everything.”
Ray Dalio
Diversify intelligently so one wrong macro call doesn't turn your portfolio into modern art made of losses.
Core Rules
- Balance exposures instead of worshipping one scenario.
- Study cause-and-effect, not just price screens.
- Use principles so emotion doesn't improvise the playbook.
“He who lives by the crystal ball will eat shattered glass.”
Progressive Loss Cutting
When a trade is deteriorating, scale risk down progressively instead of praying over a full-size loser like it owes you rent.
Core Rules
- Drop 3%: cut 1/3 of the position.
- Drop 5%: cut another 1/3.
- Drop 7%: cut the rest and move on.
“Small losses are tuition. Giant losses are elective surgery you didn't need.”
Risk-First Position Sizing
Before you ask how much you can make, decide how much pain the position is allowed to cause if it behaves like a gremlin.
Core Rules
- Risk a fixed percentage of capital per trade.
- Position size from the stop, not from feelings.
- Limit portfolio heat across all open trades.
“The first objective is to survive. The second is to compound.”
Process Over Prediction
A repeatable process beats hot takes because the market does not hand out trophies for confidence.
Core Rules
- Define entry, exit, and invalidation before entering.
- Journal decisions so mistakes become data.
- Never revenge trade to prove a point to a chart.
“Prediction is optional. Process is not.”
Thesis Before Trade
Write down why you own it, what would prove you wrong, and what would make you add—otherwise you do not have a thesis, you have a crush.
Core Rules
- State the setup or business case in one sentence.
- Define what breaks the thesis.
- Review positions on schedule, not on panic.
“If you can't explain the position simply, you probably don't understand it yet.”