Golden rules of trading: What top traders do on everyday basis

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Rules set by traders, which are followed and constantly monitored, make a difference between the successful and people dreaming about success in this business. It’s not that hard to seat down, take your time, use a pen and paper and write down what do you want from this business, where are you at the moment, and what can be done for you to be where you always wanted to be.

Every business is set like that, even trading. You set your goals and do the work needed for those goals to be achieved. This is why you need to write down a set of rules which you will always follow, nurture and take care of. Like they are a Gold bar. The biggest asset you have.

You ask why? It’s quite simple actually.

Throughout my career, and traders I have met and worked with, the ones taking the most from the market are not the smartest people in the room but the most focused and hard-working ones. They have set a list of rules which they stick by and follow them day-in, day-out.

This is how you win, this is how you go from being average to becoming pro. In any game.

I will list some of my rules( not in any particular order), which you can start with, and later when you make progress add yours. Just do your work, and don’t worry. I call this…

GOLDEN RULES OF TRADING: 

  •  Trade with the trend – “Trend is your friend”!

This is the first thing I have learned when I started doing this business. Never go against the trend, you will lose a lot of money and hurt yourself emotionally, financially, and psychically along the way.

Just follow the trend and check for the best possibility to enter and ride the wave with other traders.

  • Never risk more than 2% of your trading capital. 

I see people on the internet trading with 20%-30% of their account capital, risking all of this for a single trade. There is no need for me or anyone else who is serious about trading to explain why this is idiotic and why this will never work.

But if you are still wondering why this is not a good idea, just look it like this: all trading systems have losing trades, even streaks of losing trades. We, the traders, don’t know when and where we will have a bad trading day. If you risk 20% on your trade and you have a streak of 3 or 4 losing trades(which is quite normal, it happened to all of us) your account will have a drawdown of 60 to 80% percent. Get it now?

  • Always trade with a stop-loss order set.

Stop-loss is what determines how successful you as a trader you will be. It is one of the most important parts of your trade. Set it, have it, and never, and let me emphasize this again, NEVER move it down.

If you set it to 70 pips, for example, you can exit your trade at 50-60 pips loss but never put it lower than it was set. Never exit your trade even a pip lower than your first stop-loss target.

  • Know the market you are trading. 

It will be bad for you if you are trading something because you heard some random guy on YouTube talking about it. It would be even worse if you trade it regularly and don’t know what you are doing.

Learn the markets you are in, learn the people or figures which are influencing the market or markets you are in, learn the best time when to trade those markets, learn the market-movers, know the economic calendar.

I know to some of you this might sound pretty basic, but trust me, people are burning their accounts because they don’t know what FED is, or why is economic calendar important.

  • Never add to a losing position, cut your losses and move on. 

The most important part of trading is not being right, it is making money. Period. Not beats the principle of making money. Being right is simply not a part of this game. You can argue with people on any topic and place you want, but here, if you are not right you’ll get hurt. The market doesn’t give a fuck about you or me or anyone else being right. Neither should you.

If your trade is going against you, kill it. Liquidate it, accept the loss, and move the fuck on. The next opportunity is just behind the corner, don’t throw your hard-earned cash into a position that is going against you.

When I trade, I have two kinds of exit strategies. One is a predetermined stop-loss set to 1 or 1.5% of my account balance, the second exit is a mental stop-loss which is usually at 70 or 80% of the stop-loss I have set previously. This, to me, is a clear indicator that the market and trade executed is not going as planned.

Just check these numbers I borrowed from Steve Burnes Instagram profile( he took it from a Twitter account named Trader Lion) and let them sink in for a moment:

Cutting losses is critical

If you lose 7% on a single trade, you will need a 7.5% gain on the next one to get even.

If you lose 20% on a single trade, you will need a 25% gain on the next one to get even.

If you lose 33% on a single trade, you will need a 50% gain on the next one to get even.

If you lose 50% on a single trade, you will need a 100% gain on the next one to get even.

Get it now?

  • Have a trading plan and a trading routine. Always journal your trades and thoughts along the way. 

Do you remember what you had for breakfast last Tuesday? What about your breakfast on the 15th of June, 2018? Do you remember what you traded this week? What about January of 2019?

This is why you have to journal. And I know, a lot of you will say that journaling is boring and it takes time but it was not meant to be fun. Journaling is meant to preserve your capital and allow you to make more money on the next trade of the same pair you have traded last week, last month, or lost year.

The trading plan is not as same as journaling. The trading plan is about all the steps you will take to beat the competition and make money. I will be writing about it in future posts so make sure to subscribe and follow our posts if you don’t know how to write down a proper trading plan.

 

  • Risk only what you can afford to lose. 

This rule is quite simple, to be honest. If your total saved amount of money is around 10.000 euros, dollars, or pounds, it would be crazy from your side to put the entire amount into your trading account.

Instead, go with 10% of your total saved amount for example, and work your way up. With 1000 euros on your account you can not make a lot of money but at least you can test out your trading strategy, your psychological approach, risk, and money management.

Once you feel secure enough, you can add to your account and increase your trading position size.

Remember, trading is not a sprint, it is a marathon.

  • Treat trading like a business. 

Yes, trading is business. Like every other business. The biggest difference between trading and other businesses is that in trading you don’t need a lot of capital to start with. I know brokers today to get new clients, allow deposits as low as a couple of hundred dollars, which I consider good if you are a newbie and still learning.

With an initial investment of just 100 bucks, you can test out yourself and don’t get hurt seriously. Which is good for you.

In trading, like in any other business, you need to plan, analyze, take notes, and learn all over again, to become successful. Treat your trading like you would treat any other business, and watch your account balance grow over time.

  • Beware from “paralysis over-analysis”. 

You don’t need any custom indicator which costs a couple of thousand euros or dollars. You don’t need 5 indicators and 8 oscillators on your chart to see your next move on the pair you are watching.

The KISS( Keep It Simple Stupid) approach is usually the best approach you can have. Too much analysis can hurt your ego and trading. I have met traders who perfectly analyze the pair, and then go and take someone else’s opinion on the execution. And they fail.

Have faith in yourself, have faith in your system. Execute everything without hesitation and enjoy this business.

  • Educate yourself, constantly. 

This one I find very important. In the constant changes all around the world, if you as a trader don’t have time for additional education or simply think that you don’t need one, the competition will beat you to the ground.

Nowadays, you can educate yourself with a simple internet search. Thousands of blogs, websites, YouTube channels cover the trading topics and provide info that you can use to your advantage. Books on Amazon, webinars, courses, you name it you got it.

But like in every popular business, which trading currently is, you need to beware of scammers and people who simply are here for the money. Do your due diligence when it comes to education, know the person you are following online, check what others have to say about them and how good they are in what they do.

 

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