Norman Ralph Augustine, a successful business tycoon of the USA had once remarked:: "If stock market experts were so expert, they would be buying stock, not selling advice." And, in these words lie the unpredictability of anything associated with the stock market and largely to many other financial markets. Nevertheless, over a period of time, traders and investors in equity stocks, derivatives, other financial assets and commodities have perfected many Trading Rules apart from various Investment Theories and Investment Strategies.
These Trading Rules have evolved based on real time experience and are sum total of trading experiences of scores of stock traders and other investors and traders, trading and investing in financial, as also certain types of other assets. Generally, the Trading Rules outlined below pertain to trading in equity stocks, derivatives and other financial assets - though to a large extent the same rules are also applicable to trading in commodities.
Some of these Trading Rules are listed below, followed by a brief outline about each of them. In case, you have any experience to share, you are most welcome to add your experience and comments on the pages related to one or more of these rules.
"Would you tell me, which way I ought to go from here?" said Alice to the rabbit.
"That depends a good deal on where you want to get to," replied the rabbit to Alice.
Alice in Wonderland by Lewis Carroll
Interestingly, the above conversation aptly describes the predicament of a stock trader and an investor in stocks and other financial assets. However, generally, trading in equity stocks has been an intuitive, as also a well acquired and well practiced art and science. Over a time frame running into generations of stock traders, certain Trading Rules have emerged. Some of the time tested Golden Trading Rules are:
- Divide Your Trading Capital
- Don’t Overtrade
- Withdrawing a Portion of Your Profit
- Don't Hurry To Take Profits
- Don't Trade Many Markets Simultaneously
- Trading with the Trend
- Don’t Follow the Crowd
- Look for Reasonable Profits
- Book Big Profits & Take Small Losses
- Preserve Your Capital
- Buy the Rumour and Sell the Fact
- A Time shall Come when the Market Must Reverse
- Big Movement Takes Time to Develop
- Trade Only in Active Stocks and Derivatives
- Don’t Try to Pre-determine your Profits
- About Closing Out Your Trade
- Keep Chart Up-dated
- Tips Mostly Don’t Earn You Any Money
- Speculative Position Should not be Allowed to turn into Investments
- Don’t Be Too Smart – the Smarter You Are, Longer It Takes
- No Wishful Thinking in the Markets
- Respect the Market: Markets are Never Wrong, Opinions May Not be Correct
- Bull Market Has No Resistance & Bear Market Has No Support
- Concentrate on Very Few Markets At a Time
- Selling Short, as often as Going Long
- No Discretionary & Partnership Accounts
- Easy to Enter a Trade, Harder to Get Out
- Money cannot be Made Every Day
- Preserve your profit - Don't Allow ever to Turn a Profit into a Loss
- Controlling & Managing
- Don’t Buy a Stock Only To Obtain a Dividend
- The Smarter You Are, the Longer It Takes
- Not Permitting Speculative Trades to Turn into Investments
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