Golden Rules for Trading and Investing
- Follow your rules.
- Don’t forget rule number 1.
- Always trades with a stop loss, define it before you enter a trade.
- Always decide your profit booking method in advance, greed may come in between.
- Do not count on your money when the trade is open.
- Do not overtrade; trading a position which is bigger than your portfolio size in excitement can be a big risk.
- Choose to stay in market only when required, choosing a strategy that keeps you in market only 50-60% of times helps you avoid price shocks.
- Cutting a big amount of risk with a nominal cut in profitability is a good tradeoff.
- Trade a position which has reward: risk ratio at least 1 :1 or greater.
- Do not trade illiquid stocks, which cannot fulfill your order when required (low volume stocks)
- Do not over leverage your positions; with extra reward it brings extra risk.
- Set your daily, weekly, monthly, yearly targets and so on for risk as well as reward.
- Do not trade on a day with holiday type volumes.
- Make your trading boring; if it is interesting there is some flaw.
- Trading is a Business! Plan well in advance all the requirements and rules before your execute.
- Maintain a trading journal, paper trade after a loss.