My 10 Trade Rules
1. Learn your market - New Traders should pick one trading instrument and watch it constantly. Knowing how to best analyze your particular market will help you avoid the many surprises and beginner mishaps that causes losses.
For example technical analysis results on Forex may not be as reliable on traditional stocks and ETF, when technical or fundamental results vary across instruments your trade risk management must be adjusted properly.
2. Manage Your Risk - Leverage should be no higher than 1:50 for new traders learning the market. The worst thing you can do as a trader is lose all your money. Experience is the best teacher and you must have capital in the market to gain real experience. Trade small and learn from the outcome of each trade.
Every situation is different no one should be taking real risk in their first year of trading. There is no real preparation method for investing, you can never learn enough. Market conditions are constantly changing and as soon as we think we have caught on and begin to feel confident about our knowledge of what’s to come, the market always humbles us. The best way to prepare for this is to always trade small and except losing trades as part of the learning process.
3. Monitor your positions. You should always be excited about the positions you're in. Profitable trades are very easy to identify. If you don’t like the way your trade has developed you should be looking for reasons to close the trade, not trying to convince yourself to keep dedicating capital to a bad investment.
Opening your account and seeing positive trading results can calm traders and allow them to make smarter decision due to less stress.
4. Don't buy more than 5 positions - even if your leverage is in check never overwhelm your thought process by having too many positions to evaluate. I understand that you may want multiple accounts and strategies, but the pressure of trading is real and you will always be your worst enemy, no one is perfect and we all miss things.
5. Buy Low/Sell High - Fear of missing out has emptied tons of trader accounts around the world. Evaluating a stock is one thing but actually entering at the right time is different. Technical Traders can Identify support (LOW) and resistance (HIGH), you don't necessarily need price to bottom out or reach its peak to enter a good trade. Patience is what makes traders profitable. Finding value requires patience. The best setups are the ones that you must wait to enter.
6. Take Profit at 10% - Getting rich quick is nearly impossible to do in the markets. $500 accounts can grow to 1 million in less than 2 years but constant profits will always increase your chances in compounding into something amazing. Always look to reinvest winnings and never expect big gainers to save an account dominated by losses.
7. Do not go into debt to invest - Trading is a mental experience that very few are ready for. If you haven’t managed your money correctly up to this point you're already starting at a disadvantage, That will only make that experience more challenging and your comprehension should never be tied to earning money. Focus on accumulating long term wealth, avoid trying to get rich quick and you will be executing profitable trades sooner.
8. Do not trade from your phone (rush decisions) Developing a decision making process that allows you to execute your strategy takes time and effort. Trading from a cell phone makes analyzing a trade difficult for so many different reasons. Your main concern should be connection speed but strategy always seems to be ignored when trading out of your element.
9. Know the difference between trading and investing. Traders should look for 1 hour windows to execute positions. Investors should be looking to avoid these windows and enter positions when traders are no longer active.
10. Trade with Volume and invest without it. The markets move slower than you think. There are only a couple hours a day where trading is a viable option. Always enter a long term trade after volume has decreased drastically.