Here are fifteen golden trading rules that can get a new trader on the path to profitable trading or get an unprofitable trader back on the right path.
Trading System
If you don’t have a full trading system with an edge stop trading until you develop one.
Never trade anything you don’t understand completely. Don’t trade stocks, futures, forex, crypto or options until you understand the risk and how they work.
Trade in the direction of the trend in your trading time frame. Identify and go with the flow of least resistance.
Only look for low risk/high reward trades or high probability setups , when you don’t have any signals, don’t trade.
Your trading strategy must have a positive expectancy model.
Trading Psychology
Trade a position size that doesn’t interfere with your ability to execute your trading plan.
Trade your plan using the signals on the the chart by following price action and not your own opinions, bias, or predictions.
You must trade the methodology and time frame that you are comfortable with that fits your own beliefs about the market and your personality.
Your trading system must match your own available screen time, risk tolerance, and give you a chance to achieve your return goals.
A trader must have confidence in their trading system and faith in their self to execute it with discipline over the long term.
Risk Management
Liquidity is the most important fundamental of any security or asset. Wide bid/ask spreads are expensive for entries and exits and not being able to exit when you want can cause big losses.
Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that will eventually end badly when you find yourself on the wrong side of a strong trend.
Never lose more than 1% to 2% of your total trading capital on any one trade. This means use position sizing aligned with stop loss placement so when you are wrong the loss is not big enough to damage you financially, mentally, or emotionally.
The size of your wins and losses ultimately determine your trading success regardless of your winning percentage. No system is profitable with huge losses.
Your risk management rules will ultimately determine the success of your technical trading system.