There are a lot of rules out there that people say that you need to stick by, some of them are simply an opinion, others have been around for years, we are going to be looking at some of the original rules set out by early traders which still ring true today, they are all things that are regularly told to people, yet people still manage to not take them seriously.
Create a Plan and Stick With It
You must have been told about this one when starting up, but you need a plan, a plan that you can stick to. So what does this actually mean? The plan that you create needs to contain a few different things, the strategy that you will be using, a risk management plan and a money management plan. If you have these three things then you have a recipe for success, however, it will only be a success if you stick to it, as soon as you deviate from the plan, you will begin to experience far more losses than when trading with it.
Use Stop Losses
Any trading strategy with its weight will have stop losses built into it, these enable you to limit the number of losses that you will be able to take on a single trade, they are also part of what works out the risk and reward ratio of a strategy. Stop losses are vital, they have saved thousands of accounts and will continue to save thousands more, as a trade goes against you, it will help to protect your account by closing before you get too far into the negatives. Never trade without them, when they get hit it can be a little disheartening but you should understand that they may have just saved your account.
Learn How to be Patient
The markets can be boring at times, really boring. When they are not doing what you need to do for your strategy to work, you can’t really do anything. The last thing that you want to do is to get bored and start to place trades that are outside of your strategy, instead you need to learn to wait. Having the knowledge that your strategy will work when you need to deploy it should be enough, otherwise, take a break and walk away from the markets. Being patient will enable you to get into the markets only at the optimal times instead of increasing risks and forcing trades.
Only use Techniques and Analysis that Suit Your Strategy
Part of learning and developing a strategy is that you know it inside out, you know everything that there is to know about it and the analysis that is required for it. So why would you use something else that doesn’t actually fit in with your strategy? The easy answer here is that you shouldn’t. You should only be working with things that actually fit in with your strategy, it is what you know and it is actually relevant to the trades that you will be making, using things that arent is just wasted energy and time.
So those are a few of the older rules with trading, there are of course plenty of other rules that are just as relevant to trading and for newer traders. It is important that you find a set of rules that work for you, but sticking to your plan, using stop losses, learning patience, and using techniques that are relevant to your trading plan should be top of that list.