5 Basic Rules Of Successful Trading

5 basic trading rules for successful tradingAs we head into a new year of trading, I wanted to rehash some very important points to help ensure that this year is not your last year of trading.

These are pretty simple but here is a secret…..simple works.  Really!

I am not simply talking about trading basics but even trading systems can be simple and work very well.  The more moving parts a system has, the more prone to parlysis in entering or exiting a trade.

Actually, the only people with many degrees of freedom in their systems are the ones who live in the trading forums.

Simple.  Works.  Period.


5 Trading Basics Expanded

 Never risk more than you can afford to lose. 

Simple right?  I personally do not like to mark any sum of money as “afford to lose”.  Puts the wrong energy out into the universe.  Let’s word this into “never risk an amount where one trade can ruin you”.

That is much better.  Simply stated…..risk a tiny portion of your account in terms of % where you can handle a series of losing trades.

 Cut losses short.

Pretty vague.  How much is short?  How far to run?  A good rule of thumb is to cut your losses when you are proven to be incorrect.  Cut them when the variables for your trade are no longer present.  If you are buying at support….get out when that support is no longer support.

Let winners run.

Pretty vague.  Run to where?  A smart way is to let them run until a reason to go short….or the potential of a short play….is staring at you in the face.

Use protective stop orders

That is straightforward.  Do not trade without having an exit strategy in the market.  Keep it just out of the reach of the stop runs but close enough that when proven wrong, you are out for a small loss.

Have an exit point. 

Have you heard that you must know where you will exit your trades before entering?  I have heard that.  It also violates rule #3.  I can’t be true to letting winners run if I know where I will have a profit target.  I can know WHEN I will exit but the exact point?  Not really unless I am setting targets.

Focus On What Matters In Trading

Funny how the usual rambles we hear like “let winners run” are too vague to be of any use.  To be honest, much of what you will read is of little value.  What I find value in is reading about the psychological biases we have when it comes to trading.  I enjoy reading books by Mark Douglas


Keep Your Trading Simple

Trading can be as simple as plotting trend lines and trading tests.  Use a moving average to determine trend if you like.  There is no shame in not “trading naked” and I hazard a guess that many who boast how they use zero indicators make the same amount of money….zero.

I think indicators allow you to frame the market.

They allow you to zone into areas where you may want to take a trade.

Don’t trade them blindly but they can zero you in on areas where you let price action tell you what to do.  Keep it simple and don’t over think things.

Check out my Black Diamond Trader review for a trading system that is simple to learn and use to bank profits.