Trading rules of successful traders


The Obvious Rules

  1. Always do your homework. Have a position (bullish, bearish, or neutral) before you take a position.
  2. Anticipate and plan rather than react; think of all the “what-ifs”.
  3. Be disciplined and rational. Work hard.
  4. Make your own luck through hard work and perseverance.
  5. Risk < 5% (1 to 2 %) of your capital on a single trade.
  6. Ride winners; cut losses; trade small.
  7. Pay attention to what other markets are doing.
  8. Don’t 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.
  9. Don’t trade until an opportunity presents itself. Wait for a trade you feel most confident about.
  10. Be patient. Avoid impulses. (There is nothing wrong with doing nothing. Wait for your number.)
  11. Scale in and scale out of positions to spread risk.

The Not-So-Obvious Rules

  1. Identify and commit to an exit point before every trade.
  2. Don’t trade too much or trade to play. This detracts from finding real winners.
  3. Never add to a losing position.
  4. Don’t get complacent with profits. The toughest thing to do is hold on to them.
  5. 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.
  6. Never play macho man. Never over-trade. (Organizations need to guard against trading “junkies”.)
  7. Don’t cast too wide a net. There isn’t 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.
  8. Follow your ideas, but be flexible enough to recognize when you have made a mistake.
  9. 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.
  10. Guard against making the worst mistake. The worst mistake is to miss a major profit opportunity.
  11. Separate your ego from trading. Making money is most important. Learn to accept mistakes and limit losses — quickly.
  12. Moderate your emotions. Don’t try too hard, and don’t be arrogant. When you get arrogant, you forsake risk control.
  13. Don’t place blind trust in anyone; be self-reliant. “Experts” are not traders. More money is lost listening to brokers than any other way.
  14. Be strong and independent. Think against the herd.
  15. Be a good risk manager, be a successful trader.