20 Rules Followed by Professional Traders

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20 Rules Followed by Professional Traders

Booking consistent gains in financial markets is more difficult than it seems at first sight. Unofficial estimates show that more than 80% of would-be traders fail, wash out, and pursue safer interests. However, the brokerage business seldom releases customer failure rates because they are likely afraid that the reality may deter new clients. In actuality, the washout rate may be far greater than 80%.

Trading success is challenging, and consistently winning traders have several unique features. These 20 guidelines are strategies used by seasoned experts to remain in the winner’s circle.

Key Takeaways

  • Profitable trading is tough, and successful traders have some unique traits.
  • More than 80% of traders fail and leave, according to estimates.
  • Identifying tactics that win more money than they lose is one key to success.
  • Many traders fail because their techniques are incapable of adapting to shifting market circumstances.
  • Classic guidelines from professional traders may assist in maintaining a laser-like concentration on profitability.

The Road to Long-Term Profitability

Long-term profitability necessitates the acquisition of two connected skill sets. The first step is to select a group of tactics that generate more money than they lose and then incorporate those methods into a trading strategy. Second, the techniques must perform effectively under both bull and down market moods. In other words, although many traders understand how to profit in certain markets, such as a strong rise, their techniques fail in the long term because they do not adjust to inevitable changes in market circumstances.

Can you break away from the pack and join the professional minority with a strategy that boosts your chances of long-term success? Can you distinguish yourself from the crowd of aspiring traders and achieve trading success? Begin with a clear and succinct strategy based on tried-and-true tactics, and then use the 20 guidelines that follow.

1. Stick to Your Discipline

Discipline is not something that can be taught at a lecture or discovered in pricey trading software. Traders spend thousands of dollars attempting to compensate for their lack of self-control, but few know that a long glance in the mirror achieves the same result at a far lesser cost. The key takeaway is that once a trader has confidence in their trading strategy, they must have the discipline to stick to it, even when losing streaks occur.

2. Lose the Crowd

Long-term profitability necessitates positioning ahead of or behind the crowd, but never in the throng, since predatory methods target the crowd. Avoid stock exchanges and discussion groups, where individuals are less than serious and many have ulterior objectives.

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3. Engage Your Trading Plan

Weekly or monthly, revise your trading strategy to include fresh ideas and discard negative ones. When you become stuck and can’t figure out how to get out, go back and study the plan.

4. Don’t Cut Corners

Your competitors spend hundreds of hours honing methods, and if you expect to toss a few darts and walk away with a profit, you’re in for an unpleasant revelation. Hard effort and discipline are the only ways to attain long-term success.

5. Avoid the Obvious

Profits are seldom made by simply following the majority or the crowd. When you notice a wonderful trade scenario, chances are that everyone else sees it as well, putting you in the middle of the pack and setting you up for failure.

6. Don’t Break Your Rules

You devise trading rules to keep you out of trouble when trades go wrong. You’ve lost your discipline and opened the door to much larger losses if you don’t let them perform their job.

7. Avoid Market Gurus

It’s your money on the line, not theirs. Keep in mind that the guru may be exaggerating their own holdings in the hopes of increasing their profits rather than yours.

8. Use Your Intuition

Trading requires both the quantitative and aesthetic aspects of your brain, so cultivating both is essential for long-term success. Once you’re comfortable with arithmetic, you may want to attempt meditation, a few yoga poses, or a peaceful stroll in the park to improve your performance.

9. Don’t Fall in Love

When you fall in love with your trading vehicle or investment, you make poor decisions. It’s your duty to profit from inefficiency, generating money when everyone else is doing the opposite.

10. Organize Your Personal Life

Whatever is going wrong in your life will ultimately affect your trading performance. This is particularly problematic if you haven’t reconciled your feelings about money, riches, and the magnetic polarity of plenty and scarcity. Separate your trade demands from your personal needs and take care of both.

11. Don’t Try to Get Even

Drawdowns are an inevitable component of the trading life cycle. Accept them with grace and adhere to the tried-and-true tactics you know will ultimately get your performance back on track. Don’t attempt to compensate for a bad deal by trading more. Trading in vengeance is a prescription for tragedy.

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12. Watch for Warnings

Large losses are uncommon in the absence of several technical warnings. Traders regularly disregard such signs, allowing optimism to take the place of rational discipline, putting themselves in danger. In summary, look for early warning indicators that market circumstances are shifting and posing hazards to your holdings.

13. Tools Don’t Think

Some traders attempt to compensate for a lack of abilities by purchasing pricey software that comes preloaded with a variety of proprietary buy and sell signals. When you believe the program is wiser than you, these technologies may disrupt important experience. Use tools that complement your trading strategy, but keep in mind that you are ultimately in charge.

14. Use Your Head

It’s normal for traders to want to be like their financial idols, but doing so is also a sure way to lose money. Learn as much as you can from others, then take a step back and create your own market brand based on your particular abilities and risk tolerance.

15. Forget the Holy Grail

Losing traders obsess about discovering a secret strategy that would miraculously enhance their outcomes. In truth, there are no secrets since the path to success always involves deliberate decision-making, competent risk management, and expert profit-taking.

16. Ditch the Paycheck Mentality

We’re trained to slog through the work week in order to be paid. This reward-for-effort approach contradicts the natural flow of trading gains and loses over the course of a year. In reality, data show that the majority of yearly earnings are recorded on only a few business days.


Because most markets are closed on holidays and weekends, the number of real trading days in a normal calendar year.

17. Don’t Count Your Chickens

It’s OK to be excited about a winning trade, but the money won’t be yours until you close out or cover the position. Lock in what you can as early as possible, using trailing stops or partial profits, so that the market’s unseen hands don’t pilfer your earnings at the last minute.

18. Embrace Simplicity

Concentrate on price activity, and remember that everything else is secondary. Build complicated technical indicators, but remember that their main role is to confirm or reject what your eye already perceives.

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19. Make Peace With Losses

Trading is one of the rare occupations where losing money every day is the norm. If you’re receptive to the message, every trading loss comes with an essential market lesson. Also, know when to stop trading and take a break. Accept the losses, take some time to recover, and then return to the market with a fresh viewpoint.

20. Beware of Reinforcement

Adrenaline and endorphins are released during active trading. Even if you’re losing money, these hormones might make you feel euphoric. As a result, addictive personalities are encouraged to take risks in order to experience the high. If you trade for the adrenaline and excitement, you are most likely trading for the wrong reasons.

Do Most Novice Traders Fail?

Yes. In truth, the vast majority of day traders and rookies fail within a short period of time.

Can Investors Beat the Market by Picking Stocks?

In general, the answer seems to be no. Over time, active investing methods (such as stock selection) tend to underperform the overall market, particularly when transaction costs and taxes are included. Indeed, most long-term buy-and-hold investors seem to prefer a passive index approach.

What Are Some Behavioral Biases That Harm Traders’ Success?

Behavioral finance has discovered a number of psychological biases and cognitive mistakes that might negatively impact a trader’s performance. Loss aversion is one such bias, in which the fear of locking in a loss encourages traders to take more risks while in the red, prompting them to hold losers for too long and sell winnings too soon. Another is recency bias, which occurs when more recent information or news is given more weight, even though it is not representative of longer-term patterns.

The Bottom Line

Most traders fail to realize their full potential, ultimately selling out and turning to more conventional methods of making money. Follow traditional criteria meant to retain a razor-sharp focus on profitability to become a proud member of the professional minority.

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