Trading Rules of Successful Traders
The Obvious Rules
- Always do your homework. Have a position (bullish, bearish, or neutral)
before you take a position.
- Anticipate and plan rather than react; think of all the "what-ifs".
- Be disciplined and rational. Work hard.
- Make your own luck through hard work and perseverance.
- Risk < 5% (1 to 2 %) of your capital on a single trade.
- Ride winners; cut losses; trade small.
- Pay attention to what other markets are doing.
- Donít be concerned about where you got into a position. The only relevant
question is whether you are bullish or bearish on the position that day.
- Donít trade until an opportunity presents itself. Wait for a trade you
feel most confident about.
- Be patient. Avoid impulses. (There is nothing wrong with doing nothing.
Wait for your number.)
- Scale in and scale out of positions to spread risk.
The Not-So-Obvious Rules
- Identify and commit to an exit point before every trade.
- Donít trade too much or trade to play. This detracts from finding real
- Never add to a losing position.
- Donít get complacent with profits. The toughest thing to do is hold on
- Place your stop at a point that is difficult to reach (above resistance,
below support). If this implies an uncomfortably large loss, trade smaller.
Scale the stop.
- Never play macho man. Never over-trade. (Organizations need to guard
against trading "junkies".)
- Donít cast too wide a net. There isnít a "best" commodity or stock to
trade. Narrow your scope to commodities or stocks you are comfortable with
and you will have more time to focus on good trades.
- Follow your ideas, but be flexible enough to recognize when you have
made a mistake.
- Adopt the key characteristics of successful traders: discipline,
patience to wait for the right trade and stick with a winner, adequate
capitalization, a strong desire to win, and a noble goal.
- Guard against making the worst mistake. The worst mistake is to miss a
major profit opportunity.
- Separate your ego from trading. Making money is most important. Learn to
accept mistakes and limit losses --- quickly.
- Moderate your emotions. Donít try too hard, and donít be arrogant. When
you get arrogant, you forsake risk control.
- Donít place blind trust in anyone; be self-reliant. "Experts" are not
traders. More money is lost listening to brokers than any other way.
- Be strong and independent. Think against the herd.
- Be a good risk manager, be a successful trader.
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