What are the most important rules for successful trading?

In: Business.Investing Asked by: sherwin Jan 18, 2008 - 87 Months Ago.  Viewed 5064 times

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There are only few rules that are keys to successful trading. Easy to understand, but not easy to do.

1. Never trade anything without a trend. Most markets have random price action amost of the time. Don't try to infer a pattern when none exists.

2. Find a timeframe that suits your personality and abilities. (ie, You must enjoy watching ticks to daytrade.)

3. Never fight a primary trend. Never average down and hope for a reversal. (There's no such thing as too high or too low. )

4. Beyond New highs and lows are where the real profits lie. Real traders make money in the unchartered territories, when others distrust the trend.

5. Never bet a big through a new-high or new-low. You don't know if it's going to reverse or not.

6. New-high pullback is time to buy, not short. New-low bounce is time to short, not long.

7. Forget the fancy stuff. Don't bother with RSI, fibonacci or Elliot waves. There's nothing mystical or technical about the markets. Simply use prior long-term highs and lows (aka Support and Resistance), and enter at pullbacks to each trend.

That's it!
Answered by: sherwin - 87 Months Ago.
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The old rules are the best rules. They're simple, they work, and have been tried and proven. Adherence to the rules is difficult.

1. In bull markets, you must be long. It's okay to short the first rally in a bull market, but you can't continue to short afterwards.
2. Drop the "buy low, sell high" rule. Even "buy higher and sell higher" is oversimplified. You must "buy new-high pullback, sell ridiculously high."
3. Enter each position with the vision as if it has the potential to be the biggest trade of the year.
4. Before trading, plan your entries, plan your exits.
5. On minor corrections against the major trend, add to trades. Use the 33-50% corrections level of the previous movement or the proper moving average as a first point in which to add.
6. Be patient. If a trade is missed, wait for a correction to occur before putting the trade on.
7. Be patient. Once a trade is put on, allow it time to develop and give it time to create the profits you expected.
8. Be patient. Drop the "you never go broke taking a profit" rule. Small profits are not what real traders shoot for. The majority of your year is made from two or three large trades that each year.
9. Be patient. Once a trade is put on, give it time to work; give it time to insulate itself from random noise; give it time for others to see the merit of what you saw earlier than they.
10. Cut your losses quick. If the previous movement is close to fully retraced, don't trust the trend.
11. Never add to a losing trade. Getting a better price is a sure way to ruin.
12. Mental readiness is key. If a loss hurts, take a break. The urge "to get the money back" is dangerous.
Answered by: imisd - 87 Months Ago.
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Interesting answers. Here are my rules:

When money comes, take it. And don't give it back. Sometimes, I just get lucky on a trade. I don't question it, I don't push it. I just simply take it. And I won't look to re-enter on a small pullback, or any other tricks the market does to try to take my money back.

When money goes, leave it. I'm never trading large enough to have it affect me. But I won't ride a trend against me for long. I will leave the position as soon as a trend is defined against me, as mentioned, new lows would pretty well be it.

Be flexible, in both time and size. If you need a sizable position now, you're going to get a bad price. The market is always about getting the best price. So I scale in, and take whatever the market gives me. I often use Bollinger Bands to show me what a good price is. Then I wait, because I'm patient, and I don't need the position.

I follow some specific strategies, based on chart patterns, but it's hard to describe them rules.

Good luck and good trading.
Answered by: Major Tom - 77 Months Ago.
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All markets are tricky. They are designed to take your money, unless you're careful.

At the core, trading is simply "Anticipate and Invalidate".

- Anticipate meaning when you see a pattern emerging, you take your position.
- Invalidate meaning the market will often prove you wrong, so you gotta get out fast.

Trading properly requires you to assess objectively, and often that's impossible if you take a position. Say if you're long, every pattern looks bullish. To see the world without your tainted glasses is the "Zen" of trading.
Answered by: karz - 77 Months Ago.
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Top 10 Rules For Successful Trading
Rule No.1: Always Use a Trading Plan
Rule No.2: Treat Trading Like a Business
Rule No.3: Use Technology to Your Advantage
Rule No.4: Protect Your Trading Capital
Rule No.5: Become a Student of the Markets
Rule No.6: Risk Only What You Can Afford to Lose
Rule No.7: Develop a Trading Methodology Based on Facts
Rule No.8: Always Use a Stop Loss
Rule No.9: Know When to Stop Trading
Rule No.10: Keep Trading in Perspective

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