Trading Rules of Thumb You Should Keep in Mind

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Trading is something that will definitely test your skills and patience.  You need to be smart and disciplined.  And, as time goes by, trading requires more energy, more time, and more of your focus. 

rules of thumb written on a piece of paper


That’s one of the biggest reasons why many people quit trading, without ever winning a trade.

In order to last in the game, you have to be intelligent and keen.  However, you don’t really need to be super-clever just to get something substantial out of the market.  All you have to remember are the following rules of thumb.  Read on!

Trading Plan

First and foremost, you should already have a trading plan set up before you dive into the world of trading.  Make sure that it’s well planned, inclusive of all the things you might do and encounter in the market.  And, more importantly, you have to have the discipline to stick to your trading plan.  Do not ever deviate from it!

Learning curve

Learning curve refers to the amount of knowledge, experience, and expertise you gain from trading.  Never forget to update yourself on the latest happenings and development in the market.  Events and developments usually have connections to more stuff in the market than you think.  Keep up!


Exiting

You have to know when you should stop.  Usually, when a trade goes against a trader, the trader tends to find a way to pursue it, disregarding the initial losses for the chance of seeing the trade still succeed.  Most of the time, this isn’t what happens.  You should have a clear exit strategy.  Determine conditions the appearance of which will make you close and exit the trade.


Strategize

As a trader, you must be exposed with different kinds of strategies.  You want to get the feel of each strategy.  However, you don’t really have to be the Jack of all trades.  Exposing yourself to various strategies only lets you know what goes on with that strategy.  But what you really have to do is pick a strategy that you think will suit you best—and master that strategy. 

Technical Analysis

For most traders, technical analysis is the key to successful trading.  Some new traders think that technical analysis is difficult.  But the truth is that it’s not really as “technical” as some traders believe.  You just have to learn to read charts and indicators.  Then, try to use your analysis or interpretation of the chart on your trading strategy.


Setting Goals

While it’s not bad to set the bar high and aim even higher, make sure that your goals are specific, realistic, and achievable.  That means you can start bottom up.  This is especially necessary when you are a rookie trader.  Make sure that your goals fit the market you are trading in, whether it’s in the currency, stock, commodity, real estate, derivatives, or other markets.

Conclusion

In the end, all you have to do is be prudent and careful of the decisions that you make.  Firstly, do not play everything by ear.  Set aside enough time to prepare and conduct some research before you kick off your trading career.  You may also want to look at some alternative investments as well as the advanced investments available.  Such things give you better view of the intricacies of the market.  Once you’re in, know the proper management of your risks.  Lastly, know when to stop and quit before you lose everything you have invested.




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