If you are interested in being a successful trader in business, there are a set of rules that it is recommended to stick to. I could give a lot of general advice in this article about “cutting your losses”, or “work the market”, but it is not conducive advice to give general platitudes. So, what I aim to do is to give you some ground rules to follow. If you are a new business, startup or SME then this information would benefit you greatly.
To be successful in trading, following set rules that have helped with a diverse amount of trading account sizes. Each rule alone is important. But when they combine the effects are much stronger. Trading with these rules can greatly increase the odds of succeeding in the markets.
Use A Trading Plan
To the uninitiated, a trading plan is a written set of rules that details a trader’s entry, exit and money management criteria. Using a trading plan allows traders to do this well.
A way to test if a trading plan has legs, is to apply what is called backtesting. This is applying trading ideas to historical data. Doing this allows traders to determine if a trading plan is viable, and also shows the expectancy of the logic of the plan. Once a plan has been developed and backtesting shows good results, the plan can then be used in real trading. The best approach is to stick to the plan. Taking trades outside of the trading plan is considered poor trading, even if it is a successful trade. This destroys any expectancy the plan may have had.
Learn All You Can From The Markets
Traders need to remain focused on learning more and more each day. A lot of trading concepts require prior knowledge. So, it is important to remember that understanding the markets is an ongoing, lifelong process. If you are new to the markets, start with the basics. Use a site like Invested Reviews to give you a basic understanding before you progress. Or start with small fry, like penny stocks. Trading with smaller amounts can give you that confidence to build up experience and knowledge.
Know When To Stop Trading
Like when you are at the roulette table on winning streak, you need to know at what point you are going to walk away from the table. An ineffective trading plan can be the cause of this, and the other cause can be the trader themselves.
The trading plan may not be up to muster because of a change in markets, volatility in a trading instrument or simply the fact that the plan is not good enough.
If the trader is being ineffective, this could be due to external factors, for example, stress. A trader needs to be functioning at a high level to be able to cope with these external issues. A solution may be something as simple as taking a break and coming back to the table with a fresh perspective.
Using these basics, you can start to trade with confidence.