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Stock Trading Rules, Why Have them, and Examples

What are Trading Rules?

  • They are made to keep you disciplined and away from trouble.
  • You should come up with your own rules and set of expectations for when you trade.
  • Rules apply more toward internal psychology than stock trading in general.

Examples of Trading Rules

  1. Do not force a trade: Many times traders and stockbrokers become bored and try to make trades even if there aren’t trades available  If you don’t see an opportunity, do not trade. Spend the day doing something else.
  2. Take profits: Whether you are trading daily, monthly, swing trading, etc do not forget to take profits. The stock market goes in cycles so you need to make sure you’re taking profits because eventually, the stock will start retracting.
  3. Be patient: If a stock is going up, let it run its course. If a stock is going down, be patient and wait until it hits the bottom. Even if the stock is retracting slightly, be patient.
  4. Always honor stops: For example, if you bought a stock for $50 and you have a $1 stop, and the stock dips down to $48, you should get rid of the stock and take a small loss rather than waiting for it to continue to descend. The same goes for making profits.
  5. Never trade earnings plays: Even if the earnings are great, the stock might tank. It’s all a matter of the buyer/seller’s perception. You have to keep in mind the perception of the news, rather than the news itself.
  6. Always set monthly/yearly goals, not daily: Don’t focus on daily fluctuations.  This is why it is important to be patient. If the average of your trades is positive then you don’t need to worry.
  7. No trading once a day loss exceeds more than $X: This mostly applies to day trading. Decide on a figure that you’re comfortable with, and do not continue to trade once your day loss exceeds that number. You don’t want to keep killing your account.
  8. Get in before headlines: Get in before the headlines rather than trying to play the headlines. That way you get the full potential either on the upside or the downside.
  9. No tips, do your own homework: Don’t give out tips and don’t listen to them. If people are looking for feedback then do so in a neutral way. Do not be influenced by tips; this goes along with watching TV.
  10. Shrug off losses if the rules are followed: There is always another day and there is always another trade. The market will still be there. Don’t let your losses stress you out if you followed the rules because it will affect you in the future. You want to be able to trade confidently and effectively the next time.

You don’t need to follow all of these rules all of the time, but they’re a good starting point.

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This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

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