10 Rules for Successful Stock Trading

No penny stock blog would be complete without an article on trading rules.

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Nobody really likes rules – especially not stock traders!

However, all the millionaire traders that I have learned from (including this one) got to where they are today because they stick to their stock trading rules. Period.

In the stock market, Rules = Money. Break your trading rules and you will most likely lose a lot of money (I’ve found this out the hard way!).

It is all about discipline. You should work hard and run experiments to find the stock trading rules that work for YOU.

Then you are financially rewarded for keeping to those rules on a daily basis.  One trick to keep you on the right path is to read through your trading rules pre-market or have them as your screen saver.

So here are some of my rules that have contributed to my success and helped me maintain profitability as a swing trader over the last 5 years.

 

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Penny Stock Blog: My Trading Rules

 

Rule 1: ALWAYS ALWAYS ALWAYS follow the rules.

Obvious? Maybe.  Rules are to be followed, but breaking rules for entrepreneurs is part of the game!  You need massive amounts of self-discipline to follow the rules. Work on being a robot – you are programmed to follow the rules even if it is not intuitive. ROBOTS follow rules.

 

Rule 2: I Never risk more than 20% of my total trading account in a single trade.

This might be too aggressive for some new penny stock traders. I am comfortable with it though and you should set this number within you comfort limits.

For some people this might be 3% and some it might be 50% or higher. It is the most important aspect of investing and stock trading – always protect your capital so it survives to work for you and make you more money.

 

Rule 3: Cut losses fast at 10% loss or less when a trade goes against me – no exceptions.

10% loss is actually considered quite a tolerant stop loss limit, with many stock traders keeping a tighter stop of 5% or so.

Day traders tend to have tight stops while swing traders like myself are often more patient with a stock. This is probably in proportion to the percentage gains when you win – swing traders often make 50% or more per winning trade while day traders are doing well if they make 10% on a trade.

 

Rule 4: Avoid price targets for selling your shares.

Experienced traders know that it is impossible to predict ‘the top’. This rule allows me to make the most money from momentum stocks that are running up in price. 

I let the the profits run and usually end up selling after the top. By being willing to wait this long I have made some of my biggest profits.

I learned over the years of selling too early that the BIG moves are made when patience is used and the majority of my profits have come from this rule.

 

Rule 5: Become an expert in ONE trading style

Bruce Lee once said “I fear not the man who has practiced 10,000 kicks once, but I fear the man who had practiced one kick a thousand times”.

This focus applies to trading. I only have 3 chart patterns that I trade over and over again. If you focus on one style you will likely be much more successful.

 

Rule 6: The only thing that matters is Price and Volume

This rule is in place to stop me listening to all the people who talk up or bash a stock.

The internet is a wonderful place but people on Twitter or Stocktwits need to be taken with a huge pinch of salt. The only thing you need to worry about is the stock price and volume.

 

Rule 7: Act on all valid signals that arise within your own rules

No excuses. If  a buy or sell signal appears I always act on it.

 

Rule 8: Ignore price action during the day if you are a momentum swing trader. Only look at the closing price – otherwise you will be shaken out by weak hands and market makers. Intra-day price action is not important for swing traders.

 

Rule 9: Physical and mental health is important – don’t neglect these if trading success is important to you.

It is important to keep your brain and body in good health and reduce stress. If you are healthy you will more likely be successful in the long term as a stock trader because you will make better trading decisions.

 

Rule 10: Be better than average.

You should ask yourself if you followed your own rules. That is really the only thing you need to do if you want to be an above average stock trader!

Be patient, disciplined and follow your own rules. That is it! The majority of stock traders (Even a certain penny stock blog owner….) end up breaking rules leading to inconsistent trading and sometimes huge losses.

Failing this you can always start a penny stock blog and tell people to follow rules :).

Like most Penny stock blog authors I hope that you gain something useful from this article. Please comment or share these simple rules on social media if you found them helpful!

 

Wesley.

P.S Checkout on of my favorite videos below about Timothy Sykes and his trading rules. Enjoy. My review of Timothy Sykes Stock Alerts can be found HERE.

 

Timothy Sykes also runs a very popular Penny Stock Blog and trading education website. Have a look at my review for more details on his work.

 

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