These are some basic rules of trading. These are simple ones, but somehow we overlook them.Following these simple rules yield very good returns.
The Basic Rules of Trading
MONEY -Never trade with money you cannot afford to lose.
TREND -Always ride the trend and never try to decide a trend.
SELECTION -Always select the stocks, for there are always bullish stocks in a bearish market and bearish stocks in a bullish market.
TIMING -Never initiate your trade at the opening bell, wait for a market to make initial high and lows.
QUANTITY -Always while trading keep the amount same in each trade and not the quantity, ex: if have trade 50000/- in one, trade 50000/- in another rather than trading 100 shares in each trades.
LEARNING -Blaming market is trying to hide your mistakes from yourselves,making fool of one’s self, thereby losing an opportunity to learn, markets are never wrong, the blame lies with trader.
INTROSPECTION -Always introspect at the end of every trading day, next day will work wonders.
R/R RATIO -Never ever enter a trade where the risk to reward ratio is less than 1:4
NO OF TRADES -Always trade in 2 to 3 stocks at any given point of time, how lucrative the market be, be master of some than being jack of all, keep buffering profits, you’ll find stock markets a wonderful place to be in.
STOP LOSS -Stop loss is essence for trading, never trade without a stop loss.
AVERAGING -Averaging has no place in day trading, either u get out of the trade with the stop loss getting triggered or get the target.
SUCCESS -Always use trailing stop loss, when the trade initiated, starts bearing results, to get maximum profit.
GREED -Always be ready to take the profits home, if the initial trades have worked for you, be ready to go home , do not trade for the broker.
CONFIDENCE -If the markets are not making you confident do not trade, just for the sake of trading , wait for clear signals.
RUMORS -Never trade on news or rumors, always follow the levels, remember, news does not make levels, it just triggers levels.
LEVELS -Never get panicked or exited by the happenings on the screen, stick to the levels and stop loss, else you’ll always end up loser.
PSYCHOLOGY -Never follow the mass [the people sitting besides u], for 95% of them do not understand market.
DECISION -Be ready to book loss if the ship starts to sink, do no pray , just jump.
PATIENCE -Patience is the name of the game, always exercise patience and restrain during the course of trading, for if a couple of trades have worked against u, take a gap and try to get the trend.
SPECULATION -Check on the speculative tendency, every rise or fall has a logic behind it, just do not speculative, without logic.
FAILURES -Always treat failures [losses] if any, as an learning opportunity, for every failure opens the doors of success, failures should be used as a source of motivation rather than depression.