Golden Rules

Golden Rules for Trading and Investing

  • 1. Follow your rules.
  • 2. Don’t forget rule number 1.
  • 3. Always trades with a stop loss, define it before you enter a trade.
  • 4. Always decide your profit booking method in advance, greed may come in between.
  • 5. Do not count on your money when the trade is open.
  • 6. Do not overtrade; trading a position which is bigger than your portfolio size in excitement can be a big risk.
  • 7. 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.
  • 8. Cutting a big amount of risk with a nominal cut in profitability is a good tradeoff.
  • 9. Trade a position which has reward: risk ratio at least 1 :1 or greater.
  • 10. Do not trade illiquid stocks, which cannot fulfill your order when required (low volume stocks)
  • 11. Do not over leverage your positions; with extra reward it brings extra risk.
  • 12. Set your daily, weekly, monthly, yearly targets and so on for risk as well as reward.
  • 13. Do not trade on a day with holiday type volumes.
  • 14. Make your trading boring; if it is interesting there is some flaw.
  • 15. Trading is a Business! Plan well in advance all the requirements and rules before your execute.
  • 16. Maintain a trading journal, paper trade after a loss.
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