Every business has a set of rules for those who wish to become successful and stock trading is certainly no different. Here is a list of the 10 rules of stock trading which will serve you well on your journey to trading success.
Rule Number One — Always have a stock trading plan. Naturally, having a good plan is not nearly enough. Following through on the plan is very important.
Rule Number Two — Know why you want to trade stocks. Trying to excel at something without knowing why you're doing it isn't very motivating is it? Those who are successful know exactly why they are involved in the stock market in the first place. This is important trading psychology information which should be included in your trading plan.
Rule Number Three — Never trade without adequate capital. We're all familiar with the saying, “it takes money to make money”. This doesn't mean that you can start trading without having a fortune. What it does mean is that far too many traders are under capitalized. Don't fall into this trap.
Rule Number Four — Be patient. It is a very likely that your fortune in the markets will not be made in one day. It is imperative that you maintain your level of patience, especially during those trying times when there will be inevitable dips in your account equity.
Rule Number Five — Learn to take losses in stride. No matter what experience level you're at this is a hard lesson for any of us to learn when we are starting out. We've been taught since childhood that losses are bad, but let's put all this in perspective. If you make $10 profit for every $1 you lose, then is that bad? Of course not.
Rule Number Six — Be a student of the markets. Grabbing a stock trading tip here and there or relying upon a stock trading robot every now and then isn't necessarily the worst thing in the world. It is, however, not what successful traders do. Those who excel in the stock market are perpetual students of the markets. You would be wise to follow their lead and become a student of the markets yourself.
Rule Number Seven — Always be in control of your risk. Those who are not in control of their risk will not be trading for very long, that is a mathematical certainty.
Rule Number Eight — When you find something that works stick with it. Jumping from trading system to trading system is utter nonsense. When you have a good stock trading system your objective is to keep that “money machine” cranking out $100 bills as often and as long as possible.
Rule Number Nine — Don't trade any untested theory or method. If you have ideas about a new trading method, then test the trading method out first before committing real funds to it. This is more common sense than anything, but you'd be very surprised by the number of people who still take arbitrary trades.
Rule Number 10 — Exercise good money management. We are not necessarily talking about risk “control” here, but we are talking about adjusting how much we have it risk so that we can maximize our return on investment. No trader gets wealthy without exercising good money management.
We've just covered the 10 rules of stock trading. These are simply some basic rules to help get you started and keep you focused in the hopes that your trading journey will be a long and prosperous one. If you're interested in more rules, then keep reading.
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