8 Bulletproof Rules for Successful Trading

Posted March 15, 2023 by in Career

Are you drawn to the idea of becoming a full-time day trader? Perhaps you’re only interested in learning how to trade which can help you get the most out of your investments. Whatever your stance is, successful trading doesn’t come without its obstacles. To begin, you need financial capital, not to forget a strong stomach when you think about all the risks involved.

With discipline and thorough planning, you can make money from trading. Before you leap into the trading world, here are some bulletproof rules to follow and abide by. 

Plan, Plan, and Plan Some More

One of the most important rules to abide by is not rushing into trading straight away. Instead, you need to set aside time to establish what you wish to accomplish and create a set of rules that will enable you to achieve great returns and manage risk. Your plan should feature rules on when to purchase investments and when to sell. Make sure to pinpoint how much money you want on hand at all times too. Following a plan allows you to make disciplined, thoughtful decisions. 

Test It Out

While you may have an investing plan in place, how confident are you that it’s a sensible one? Thankfully, there are plenty of ways to test your trading strategy without the worry of putting your money at risk. Investors can use historical data to see how strategies would’ve played out in real life. You may want to hire a programmer to develop back-testing systems. Alternatively, some platforms enable for testing of strategies.

Make Use of Tech

You will find most investors make trades using online platforms nowadays. There are smartphones apps you can download too that enable you to make trades while you’re on the go. Sophisticated charting websites and software allow you to analyze market conditions and investments. Also, use an economic calendar too. These are used by investors to monitor market-moving events, like monetary policy decisions and economic indicators. TradingView has this US based economic calendar that you can use. They are a super-charting platform and social network that is used by investors and traders.

Keep Up with Reading

To get into trading and be good at it, you need to read, read and read some more. There aren’t any excuses when it comes to making trades that aren’t backed by a thorough analysis of the underlying investment. Essential reading for new traders includes financial documents like balance sheets, analyst reports, and historical pricing data. Once you get yourself more educated about investments in the markets, you will make smarter moves and decisions which will make you more money.

Use a Stop-Loss Order

Although you shouldn’t fret if an investment drops in value, it’s important to install protections to prevent losing a huge chunk of your savings. You also need to stay calm and keep your cool throughout. One thing to consider installing is a stop-loss order. This automatically sells investments should they dip in value by a particular percentage in a certain amount of time. You’re able to request a stop-loss order by speaking to your broker. 

Protect Your Trading Capital

Saving enough cash to fund a trading account won’t happen overnight. Instead, it can take a fair bit of time. It’s even more difficult if you need to do it twice. We must note that protecting your trading capital isn’t synonymous with never experiencing a losing trade. Every trader has losing trades. Protecting capital entails not taking unwarranted risks and doing everything in your power to preserve your trading venture. 

Be Realistic

Can you get a 40% annual return on one investment? Sure. However, is it wise to believe such a return is promised year after year? Absolutely not. Prudent traders should have a conservative and honest outlook regarding the future performance of their portfolios. All investors need to be aware that the success of your past performances doesn’t necessarily guarantee it will continue going forward. Never rely on one investment making unreasonably high returns.

Know Your Limits

Over time, you may come to the realization that you’re simply not the best at buying and selling investments regularly. If you’re losing money consistently, this may be down to not having sufficient knowledge or patience to trade. On the other hand, you may have made tons of cash in the markets and reached all your financial goals. Whatever side you’re on, you must understand when it’s time to quit trading. If you continue to trade year after year without any success, you’re simply throwing good money after bad. One of the key components of investing success is knowing when to step away.

While we all wish we could rush the process and make money fast, you need to follow the rules. When all the rules above work together, the effects are strong, and you will be on your way to becoming a profitable trader

Read more: