Trading is a profession which requires a person to be disciplined, control over his emotion, risk management.
90% of Traders fails in this profession only 10% excel.
So what makes trading so difficult?
I have compiled few rules which you should adhere with and read it daily when you had a bad day.
These are some of the trading rules which are universally valid for stock/commodity trading.
Take a print out and nail it on your trading desk.
- Never risk more than 10% of your trading capital in a single trade:Try to distribute your trading capital in different trades. Do not risk it in single trade .
- Always use stop loss orders: Never keep mental stop loss because as soon as your SL will hit your emotions will take over you and will never exit the position.
- Never do overtrading. Do not overtrade if you are doing extremely good to make more money or extremely bad to recover your losses. Either you will lose all your profits or will add more losses to your existing losses.
- Never let a profit run into a loss: Most of traders will let your profit turn into loss because of GREED.
- Don’t enter a trade if you are unsure of the trend.
- When in doubt, get out, and don’t get in when in doubt: It’s your money at stake so if you are in Doubt never trade.
- Only trade active stocks: Trade in Stocks having liquidity.
- Never average a loss: Loss should never ever be averaged. If you are in Loss means you did not made a right trading bet.Exit the losing trade asap.
- Never get out of the market because you have lost patience, or get in because you are anxiously waiting.
- Avoid taking small profits and large losses:90% of traders who loses will exit when Stocks moves 1% in their favor and if it moves even 5% down from purchase exit is out of sight.
- Never cancel a stop loss after you have placed it.
- Avoid getting in and out of the market too soon.
- Be willing to make money from both sides of the market: Do not have one sided mentality. As a trader your job is to earn money, It does not matter you trade long side or short side.
- Never buy or sell just because the price is low or high: Unitech went down 10% lets buy it. Nifty went up 200 points lets SELL it. Well if things were so easy everyone will make money. Trading never works in this way.
- Never hedge a losing position.
- Avoid trading after long periods of success or failure
- Don’t try to guess tops or bottoms.
- Don’t follow a blind man’s advice.
- When you lose don’t blame it on luck.
The Most important aspects of trading is you need to have a Trading System.
I have interacted with many traders and one common mistake I have observed is
NO ONE TRADES WITH A TRADING SYSTEM.
Most of traders buy because they feel like buying and sell because they feel like selling. If one follows this approach you will never earn in stock market.