Golden Rules

Trading

  • Trading is not gambling.

  • Trading is years of hard work, learning, and discipline. If you are looking for a place to make money easily, look elsewhere.

  • Trading is purely a game of psychology and discipline. Numbers, data etc. are secondary.

  • Never trade with a target set in mind. 

  • Capital preservation is the only job you have as a trader. You need to preserve your capital for great trades with high probability of huge profits. If you lose money on wrong trades, you will not have any money to take the right trades.

  • There is a life outside trading. It is easy to lose sight of that and get addicted to gambling.
     

Planning

  • Always plan a trade well in advance, a trade is not just ups & downs.

  • Most of the trading happens outside the market hours, The actual trade is just 5% of it. Do your homework and plan your trades the previous day itself. 

  • Keep your trading plan simple. Just look at 3-4 indicators. More numbers equals more complications.
     

Trade Selection

  • Remember, there is always a next trade. Don't take unnecessary risks in the current one.

  • It is okay to miss an opportunity. It is not okay to lose money because of impatience.

  • Most of the times the best strategy is to sit and watch the market.

  • If you are stuck in the wrong trade, you will miss the right trade.
     

Trend Following

  • Reversal in a trend happens only once. If you bet on a reversal you will be right only once. If you bet on continuations, you will be right most of the times

  • Never buy a stock because its price is less. Never sell a stock because it has gone up.

  • Never catch falling knifes. Corollary - never short shooting rockets.

  • Buy a technically strong stock, ideally on dips, and sell a technically weak stock ideally on upticks.
     

Bet Sizing

  • Risk only what you can afford to lose. 

  • If you cannot sleep peacefully with a position, you need to scale down.

  • Do not have too many positions open. You will not be able to monitor them or think straight.

  • Trade with enough buffer margin. Keep at least 30% extra margin.
     

Stop Losses

  • Let your profits run, cut your losses short.

  • Always keep a stop-loss. Your stop-loss is not a number in your mind. It is an order in your trading terminal. Keep a stop-loss as soon as you place the order.

  • Holding on to a losing trade is not courage. Getting out of that trade with the belief that you will make it back in another trade is courage.

  • Never let a winning trade become a losing trade. Always keep a trailing stop loss.

 

Never

  • Never gamble on events.

  • Never trade when you are in an emotionally unstable place.

  • Never trade to recover lost money. It is extremely dangerous.

  • Never average. Averaging is an easy way to make twice the losses. Stay away from it as much as you can.

  • Never look at the markets or look at your floating P&L all the time.

  • Never try to trade at the top or bottom.


Good practices

  • Always learn something new. Do not let a day go by without learning.

  • Write down your plan and stick to the plan. once the market starts Do not change your plan.

  • Always do post-trade analysis. Keep a trading journal.

  • Keep taking breaks. If you are always trading, you are doing it wrong. After a big win, relax and take a break. After a loss, take a break for at least a day or two. After a big loss, take a week off.

 

Option Trading

  • Buy Options ONLY if your move is quick and big.

  • Do not buy options close to expiry.

  • Do not play OTM unless you are damn sure about it.

  • Option sellers win in the long run. Do not let anyone else tell you anything different.

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