Basic rule for smart trading

10 Basic rule for Smart trading indeed, success in trading is difficult and the consistently profitable traders share specific rare characteristics. These 10 rules are tips that long-time pros use to stay in the winner’s circle.

Booking reliable profits in financial markets is harder than it looks at first glance. In fact, unofficial estimates suggest that more than 80% of would-be traders eventually fail, wash out, and turn to safer hobbies.1 But the brokerage industry rarely publishes client failure rates because they're likely concerned the truth will scare off new accounts. In reality, the washout rate could be much higher than 80%.

Rule 1- Stick to Your Discipline

Discipline can’t be taught in a seminar or found in expensive trading software. Traders spend thousands of dollars trying to compensate for their lack of self-control but few realize that a long look in the mirror accomplishes the same task at a much lower price. The important lesson is that, once a trader has confidence in their trading plan, they must have the discipline to stay the course, even when there are the inevitable losing streaks.

Rule 2 – Always keep your trading plan ready

Well, there can be no question of trading without a trading plan. A Trading Plan is a roadmap you would follow to implement a trading strategy or multiple trading strategies together.

A typical trading plan would be setting the target price, following a particular trend & price action, setting the maximum loss you are allowed to book.
Having a hard and fast rule that you will follow under a particular circumstance without becoming emotional about a particular trade is important.

Rule 3– Approach trading like a business to maximize your business’s potential

Trading should be approached as a business. A business has expenses and income. Likewise, trading expenses are the losses and income are the gains.

So, it’s not worth mentioning that we must maximize our gains and cut our losses (but still I am). If you find that is not happening for a slightly longer duration, you need to introspect further your methodology.

Rule 4 – Focus on learning from the markets like a student

Whether you win or lose, always make it a point to learn something from your trades. Observe, if things panned out as per your trading strategy, if not then what went wrong? Try and note your mistakes so that you do not repeat them. Try to figure out the “Cause” and “Effect”. Try to learn about stock market with various tools. Remember “Market humbles everyone”. No one is above the market.

Rule 5 – Don’t bite off more than you can chew

Trading as we all know is a risky business so let’s not make it easier to lose money. There is a “2 percent of the capital rule” which is one way to minimize taking extra risk. If you are using leverage, you should be very sure about it. Notice that your bet size is as per your trading strategy and not ‘at the moment’ type of decision.

Rule 6 – Do not ignore stop loss

We trade to make profits. But there will be situations where things will go against your trading strategy and you will have to book losses so that you survive to fight another day. Stop-loss does this for you. Setting stop loss for every trade is as essential as estimating profit. Always remember, while we aim for profits, we must at all times protect our downside. That will be automatically done another rule of trading that is by not ignoring stop loss.

Rule 7 – Stay focused when trading

“Do not take your eyes off the ball.”
As long as you are in a trade, staying focused is quintessential. Complacency can make you bleed. As it is tough to make money in the market and trust me you don’t want to ruin any further by being casual about it.

Being focused increases your chances of identifying trends and other trade indications.

“He was the toughest son of a bitch I ever knew. He taught me that trading is very competitive and you have to be able to handle getting your butt kicked. No matter how you cut it, there are enormous emotional ups and downs involved.”

Rule 8- Don’t Break Your Rules

You create trading rules to get you out of trouble when positions go badly. If you don’t allow them to do their job, you’ve lost your discipline and opened the door to even greater losses.

Rule 9-Don’t Fall in Love

If you're too in love with your trading vehicle or investment, you give way to flawed decision-making. It’s your job to capitalize on inefficiency, making money while everyone else is leaning the wrong way.

Rule 10-Use Your Head

It’s natural for traders to emulate their financial heroes, but it’s also a perfect way to lose money. Learn what you can from others, then back off and establish your own market identity, based on your unique skills and risk tolerance.

Conculsion  

Trading is tough-there is no denial about it. But the most important fact is that it can be learned through training and practice. Learning is possible with a wide range of resources.

FAQ

How do you trade daily?

Here is a day trading guide for beginners

• Learn the basics of the stock market. Before you start day trading, it is important to have a good understanding of how the stock market works. 
• Choose a broker. 
• Set up a demo account. 
• Develop a trading strategy. 
• Start small. 
• Be patient. 
• Manage your risk. ...
• Take breaks.

Is trading profitable?

You can also earn a huge number of profits from stock trading or by selling your stocks at the time when they are at their peak price, but you need to go back and monitor your portfolio on a real-time basis to know when is the right time to do the same.

Can traders get rich?

While this is quite difficult to achieve, it is definitely not impossible. There have been many cases in the modern world where investors have become rich through their investments in stock markets. Let us take a look at how investors can make the most of stock markets to become rich through long-term wealth creation.