Most Important Trading Rules

Trading is buying and selling of securities, commodities or services on a short term basis in a view to make quick profit. As we know that trading can be done intraday or delivery basis. But while doing trading we must be very careful as it is very risky to put your hard earned money into something that we are not sure about. There are some very important rules one must follow before trading. These are:

1. Be aware of market scenario:
Get as much as information as you can about the current market condition by reading newspapers, watching television or from internet. Keep yourself well informed about the share market. It can help you in stock picking decision and the losers and gainers of the market.

2. Follow the trend:
Always trade in the direction of trend. Don’t try to trade against the trend direction. After a continuous rise or fall for a few days a reversal pattern appears. That gives the trader an opportunity to trade.

3. Listen to you:
Always remember that it is your money so you should be careful about that. Do not follow others. You should take the decision your own. Don’t be biased while analysing as someone else has taken a position.

4. Greediness is not good:
Do not be greedy as it can never help you. Even though you can earn more profits on the trend, book your profits at the predecided levels. It is the right way otherwise you can lose more than the earnings.

5. Always make a stop loss:
Stop loss is a price level below our buying price which we decide to stop our losses. If the price of the share comes to that level due to any reason we will sell the stock instead of waiting for the prices to move upward. That is called stopping the losses.

6. Don’t make trading a habit:
It is not necessary that you trade every day. Trade only when you see an opportunity otherwise you can lead to heavy losses.

7. Use all the trading tools:
One should always use as much trading tools as he can. Never take any big position depending on one tool as sometimes it can give wrong results. No one technique is more important or less important. All are equally important. So make the most of it. Like trend analysis, candlestick patterns, 3-8-13 exponential moving average, oscillators, support and resistance levels, etc. are some of the tools. Take a decision only when most of them give you a favourable indication.

8. Book profits and cut losses:
If your decision is right then partly book profit and can wait for more gains depending on the phase of settlement. If you are caught in the wrong side then it is better to square off the position rather than waiting for the positive trends.

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