So if we talk about the stock market or any other market in which you do day trading you have to follow some rules to get success. Below are some rules which you can follow to be a disciplined trader.
1. Always trade in liquid stocks
So the first rule is always to trade in liquid or high-volume stocks. In these stocks, the buyers and sellers are easily available while in the illiquid stocks your positions can be stuck due to the low volume.
2. Be consistent with a single trading plan.
Most of the traders keep on switching from one setup to another. Always remember that no setup is 100% accurate in the world. Even the most successful traders have to book losses. So just stick to a single trading strategy and get perfection in that strategy day by day. So use only one strategy and read everything available about that strategy on the internet or books.
3. Choose Right Brokers.
Choosing the right broker also plays an important role. It should be user-friendly and not too complicated. Always use a broker with a good trading platform. If you are from India you can use ZERODHA and UPSTOX.
4. Always use Stoploss
One of the common mistakes, all the new traders do is not to use stop-loss.
5. Avoid overtrading
Remember one thing there are 365 days in a year. So don't try to be a millionaire in a single trading day. The stock market is the place to grow your money not to gamble it. The money-making process needs patience. In fact PATIENCE = PROFIT. When you get losses in the market don't try to recover it in a single day you will lose more. When you hit stop loss more than two times a day, switch off the system and enjoy. Trade next with a new mindset. When you lose money in the market you lose confidence, not money, and when you make money gain confidence. You can get money back bt, not confidence.
6. Book profit on time.
When the price goes in or direction we start feeling greedy and expect the price to go higher. Bt it suddenly moves to the stop loss and we have to book the loss. So try to book the profit in small parts. you can get book half profit at first target and another half in the second target.
7. Trade with the money you are ready to lose
When new investors lose money in the market they start blaming the market saying it's gambling and lose their hard-earned money They lose their savings in the market. When you are a beginner you should never come up with a big investment.
8. Never Take trading tips
I have one question. Do you guys directly give your newly started business to the people who don't even know you? Do you guys believe in other people more than yourself? Suppose you bought a new car and you dont[t know how to drive a car. Now you have two options
Hire a driver which costs 5000 per month and the second option is to learn driving in rs10000 one time fees or maybe free most of the times. what will you choose?. I think you should choose to learn. because whenever the market goes against you you can save the trade and don't lose money in the market. The benefit of this is you can trade anywhere anyhow in any market condition.
9. Putting stop-loss in mind
Many traders who know technical analysis also make this mistake. They assume a stop-loss that they will exit when the stop loss hit. But the reality you don't even get the time book loss. The price moves very fast after breaking support or resistance. So always use stop loss in the system, not on paper or in your mind. For this always use cover order or bracket order.
10. Don't take a loan for trading.
Never take a loan for investment even if you think you are 100% right. One time you may get success but later you will regret it. So when it comes to the loan, the leverage you get from your broker is also a loan that you have to repay at the end of the day. So don't do margin trading when you are in a learning stage. You can increase your margin after becoming a successful trader.
11. Never Stop Learning
In the stock market problems starts when start thinking you are the god of trading. No matter how successful you are always respect the market. A stock market is a place where you will learn something new every single day. So always learn from your mistakes and never repeat the same mistake again and again. The more you learn the more you earn.
12. Don't get inspired by others Profits
When we are new to the stock market we start getting inspired by others' profit screenshots which are circulated on social media platforms. The reality is we don't know how much capital they sed while trading and e cant' get big profits on small capitals.
13. Always take a position on supports and resistance.
There are two sayings in the stock market. The first is don't catch the falling knife. It means don't take the trade positions when it is already oversold. and the other is don't catch the running train. It means when don't buy the stock when it's already high above the buying price.
14. Don't trade on news basis stocks.
The reason why many professional traders advise not to trade on the news stocks is the stock can be manipulated at any time or news may be dr to the fake rumors. The other reason is you are not the first person to get the news. the already has been circulated in the market and stock has already digested the news de to insider trading or gap p or gap down opening.
15. Don't take more than two positions simultaneously
It is not possible to control more than two trades at a time. If you want to take another let the first one complete.
16. Don't trade
Sometimes not losing any money can be making money. When you think the stock is not giving any by or sell signal don't trade on that particular day.
17. Always trade with the trend
Never expect the market to move according to you. just go with the market. make the trend your friend. Always take trade according to the direction of the market.
18. Always make a journal
When you write something you don't forget it. Every day make journals of your trades like what trades you took and what strategy did you used. When you become an advanced trader you can only write the daily P&L and make an excel sheet for that.
19. Trade like a robot
Always trade like a robot no fear no greed no emotion. Handling emotion is not easy but when you control it you are halfway to the trading journey.
20. Don't watch the market when your day trading is done.
Many times happens that we make very good in the market in the early morning sessions. at that time what y9o have to do is just switch off your systems and enjoy. If you watch the market throughout the day the market will attract you to take more trade and you will end up losing the profits you earned in the morning.
21. Lose less earn more.
One thing is sure that no strategy is 100 % accurate. if your winning rate is 70 -80% you are among the most successful trader or if you are not a successful trader even after having this winning rate then your money management is not good or you don't book profit at right time.
22. Never average the losing side.
23. Money management.
24. Don't do news channel trading
25. Don't Break the rules
Don't break the rules as earlier said in the article that if you break rules you will have to book loss as your punishment.
It is not necessary to follow all these rules for everyone you just have to find your weakness from the above points and write them down in your rulebook. These are some points that I have learned in my 5-year trading journey. I will keep on updating the article as I learn something new in trading.
Thanks for reading the article if you also have something which should be followed in the trading please let me know in the comment section.
If you are new to the stock market you can read these best books to become a successful trader.
Also, get this Free Book on Stock Market Trading Rules
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