The Most Important Basic Trading Rules

It is by now well known that success in trading is all about discipline rather than about getting your calls right. Trading in stocks is not rocket science, most people lose money in trading because they take decisions in a random manner. In fact, traders can be a lot more successful in the equity markets by following some basic trading rules. Here are four rules that I abide by:

Stick to your discipline

Discipline can’t be taught in a seminar or bought around the corner.

Once a trader has confidence in their trading plan, they must have the discipline to stay the course, even when there are the inevitable losing streaks.

Don’t commit all your cash at once

In a fast-moving market opportunities come up all the time, try to keep some cash on hand to take advantage of those opportunities. Never put all of your eggs in one basket!

Risk only what you can afford to lose

Money in a trading account should not be allocated for the kid's college tuition or paying the mortgage. Traders must never allow themselves to think they are simply borrowing money from these other important obligations.

Keep trading in perspective

Stay focused on the big picture when trading. Once a trader accepts wins and losses as part of the business, emotions will have less of an effect on trading performance.

These 4 rules have kept me going. Add these to your plan, and you'll be good to go. Just make sure not to break them.