Jun 212016

Whether you are new to trading or an old pro, you need to know the rules you will follow to be profitable trading. Just as in any other endeavor, you have to plan to be successful, and you must have a set of rules you will follow.

Simple Trading Rules – what does that mean? It means two things:

  1. Your trading rules must be straightforward and simple. They must be Simple Trading Rules, so you can follow them without fail.
  2. You can really kick butt with Simple Trading. Simple Trading Rules! Don’t make it too complex. That old K.I.S.S. (Keep it Simple Stupid) is the way to go.

Here are the rules you should be using to trade:

Simple Trading Rules

  1. Treat your trading as a business
    • Have enough capital
    • Set your hours
    • Understand your expenses
    • Understand the math of risk management
  2. Only risk a small percentage of your assets on a single trade
  3. Only enter a trade if
    • This trade is part of a plan – a trading strategy – you have previously tested
    • You know WHY you are entering
    • You have a stop loss
    • You have a profit target or other plan for exiting with profit
  4. Never “double down” (add to a losing trade) or move your stop loss order
  5. Never enter a trade just because someone else is
  6. Write down your rules and post them where you see them every day
  7. Stick to your rules!


Simple Trading Rules

Keep to Simple Trading Rules

Traders have a common problem: we have too many choices and too much information. The ever increasing speed of technology presents us with more information, ideas, news, advertising, and persuasion than we can absorb and interpret. On top of that, we have hundreds of tools to chose from to help us with our trading decisions.

Some traders try to use too many tools, looking for signals to line up before taking a trade. The more tools they use, the harder it becomes to make a decision. You probably have heard the expression “paralysis by analysis.”

As I said above, K.I.S.S. is king – the simplest solution is often the best. We like to assume that more information must be better, but this is one of the trading fallacies you should avoid. I’ve heard it said – and I believe this -that the discretionary trader who masters one or two methods of organizing market information are the most successful, and the happiest.

How to simplify things in your trading:

  1. You don’t have to be a genius to be a successful trader.
  2. When you start to see better results, it’s not because you are a genius. It is the simplification of your process that is working.
  3. It’s also all the time you are spending doing your analysis, studying the markets, reviewing your trading, learning from mentors.
  4. Be aware of your emotions. Those who can remain calm and cool headed are the most successful.
  5. Define the most basic triggers for your trades and prioritize them according to importance for each perceived market state.
  6. No matter your strategy and trading plan, you will have losses. Everyone does. Don’t keep adding more indicators and conditions to your trades to try to avoid all losses – it can’t be done, and you just complicate your trading unnecessarily.
  7. When you don’t have a trade idea, stay out.
  8. Keep your expectations reasonable.
  9. Use an automated strategy, if not to actually take your trades, then to help you make trading decisions.

I am not urging you to use any specific charts or tools here. You should decide on your tool of choice after you carefully research and test, and it should even match your personality and learning tendencies. For example, if you are very visual, pattern recognition or market profile might be the tool for you. If you lean towards statistics, you might like pivot and support and resistance numbers. The point is that you need to find the right tool for you. I’ll present a number of tools and how to use them on this blog.

What you gain from your Simple Trading Rules

  1. You will save time and energy – you won’t be churning about, trying to find the “right” trade.
  2. You won’t identify a potential trade and forget about it later – then wish you’d taken it.
  3. You will be able to make decisions faster.
  4. Your intuition will increase at a faster pace – this means you will be able to “read the market” easier and faster.
  5. You will not exhaust yourself needlessly.
  6. You will gain confidence which will reduce emotion swings and self-vicitimizing behavior
  7. You will accomplish things you never thought you would.

Use Simple Trading Rules

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