Rule 1: Always follow a trading strategy.
A trading strategy is a series of written guidelines that detail a trader's entrance, exit, and money management requirements for each buy.
It is simple to test a trade concept using today's technologies before risking real money. Backtesting is a technique that allows you to evaluate your trade concept against previous data to see if it is viable. The strategy can be implemented in real trading once it has been established and backtested successfully.
Imp : Your trading strategy may not always work. Exit the situation and begin over.
The trick is to stick to the strategy. Even if the trades turn out to be winners, trading outside of the trading plan is considered poor strategy.
Rule 2: Consider trading as a business.
Trading should be treated as a full- or part-time business, not a hobby or a profession, if you want to be successful.
There is no real dedication to studying if it is regarded as a hobby. If it's a job, the lack of a regular income can be aggravating.
Trading is a business, which means it comes with costs, losses, taxes, uncertainty, stress, and risk. As a trader, you are essentially a tiny business owner that must conduct research and strategy in order to maximize the potential of your company.
Rule 3: Only take risks with money you can afford to lose.
Make sure that all of the money in your trading account is actually expendable before you start using real money. If not, the trader should continue to save until it is.
Money in a trading account should not be used to pay for college tuition or mortgage payments. Traders must never believe they are merely borrowing money from these other significant commitments.
It's bad enough to lose money. It's much worse if it's money that should never have been put at danger in the first place.
