Today, I want to share with you five pivotal rules that I’ve gleaned from one of the most accomplished traders, which have significantly enhanced my own trading journey. Care to guess who this trader might be?
While these principles may seem straightforward to some, they constitute fundamental steps in trading—one that every trader will inevitably encounter in their career, if not already.
Let’s delve into these rules:
Rule #1
“I strongly advise setting aside 50% of profits from a successful trade, especially when doubling your initial capital. This money should be withdrawn, placed in the bank, held in reserve, or secured in a safe deposit box. Ignoring this rule is my single most significant financial regret.”
Lessons Learned and Applied
Though as old as trading itself, many traders overlook this crucial rule. Regularly withdrawing half of your profits is a simple yet often neglected practice. Early in my career, I neglected this rule and paid dearly for it. Learning to apply this principle is essential for long-term success.
Rule #2
“Stick with winning trades. If a stock is performing well, don’t rush to take profits. Have confidence in your judgment and let it ride, provided there are no fundamental concerns. The courage of your convictions will be rewarded.”
Lessons Learned and Applied
Initially, as a losing trader, I neglected this rule, leading to inconsistent results. Only after years of experience and losses did I develop a robust money management system, crucial for staying in winning trades. This system, now a key component of my day trading program, allows for substantial gains.
Rule #3
“No matter how skilled a trader you are, losses are inevitable and should be considered part of your trading expenses, along with interest, brokerage fees, and capital gain tax.”
Lessons Learned and Applied
Early in my career, I believed success required a winning ratio above 90%, an unrealistic expectation. Finding a strategy that works even 30% of the time but generates substantial returns on a few trades is key. Perseverance and sticking to a proven strategy, despite losses, eventually lead to success.
Rule #4
“If a stock doesn’t behave as expected, exit the trade, regardless of being even, in profit, or at a loss. Admitting a judgment error is essential for success.”
Lessons Learned and Applied
This powerful lesson is integrated into my day trading strategy, yielding higher returns. Students in my program religiously follow this rule, enhancing their trading outcomes.
Rule #5
“I firmly believe that price movement patterns repeat because human nature remains constant.”
Lessons Learned and Applied
Being a price action trader, I rely on supply and demand zones and specific price patterns to minimize risk and maximize returns. A sound strategy should allow profitable trades to progress and limit losses, following timeless guidelines laid out by traders of the past.
In conclusion, these principles, shared by a seasoned trader, stand the test of time. Trading success requires diligence, perseverance, and adherence to proven strategies. Let this serve as a guide, share it, help others grow, and never hesitate to seek advice!
Good One