Basic Rules of Trading

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.
Posted in  on June 21, 2008 by  |