As a new trader, you need to build a strong foundation of principles so that you can both make money and avoid going broke at the same time. Make sure your trading strategy, risk, and own emotions and ego are all in line with the rules you set up for yourself. Here are 25 Rules For New Traders to Build a Strong Foundation in trading.
If you are a trader, your trading rules can cover three main areas:
- Your trading strategy
- Your risk management strategy
- And your trader psychology
These rules will help them build a strong foundation that they can build on as they learn and grow. There are a lot of different things to think about when you’re
- Learn how to make a trading system with a good chance of making money before you even start trading!
- If you don’t have a full trading plan with rules for when to enter, exit, and manage your risk, stop trading until you do.
- If you want to make money in the stock market, you need to follow a plan and system, as well as your own signals and the chart and price action.
- Before you trade futures, forex, cryptocurrencies, or options, make sure you know how they work and how much risk they carry before you do.
- In your trading time frame, trade in the direction of the trend, so you can make money.
- Trade what is going on, not what you think should be going on.
- Manage your trade based on how it changes in terms of risk and reward as it goes on.
- Stay away from downtrends or look to go short when there are downtrends.
- Unless you have a good reason to trade, don’t trade.
- You should never lose more than 1% of your total trading capital on a single trade.
- ‘The first rule we live by is that we never risk more than 1% of our total equity on any single trade.’ The name of the person who wrote this is Larry Hite.
- You can’t put more than 1% of your money into one trade.
- Don’t risk your whole life saving on one trade.
- Diversified trading can reduce the risk of having too much money in one thing, like stocks.
- There are 16 risk-reward ratios.
- Avoid big losses. They are the number one cause of unprofitable trading.
- Don’t trade so big that you have to keep track of every price change even though you aren’t a day trader.
- Don’t trade so big you dramatically increase your heart rate or sweat.
- Each trade should only be one of your next one hundred trades and not impact your emotions or ego.
- Forget about your last trade and focus on your next trade.
- You should think of your losses as lessons that you paid for to learn, not things that hurt. Look at money withdrawals as tuition, not failure. This way, you’ll learn from them instead of giving up.
- Following your trading plan means that, even if you lose money, you’ll still be on your way to making money. Think about the long run.
- You can’t have positions that are so big that they make you feel bad and make it hard to keep your trading plan in your head.
- Don’t try to make up for lost money by trying to trade back. Keep to your trading plan, no matter what your equity curve looks like.
- Your signals must be based on price action, not on greed, fear, or your own feelings about the market, like your ego.