0 Top 10 Trading rules about all types of markets

Starting from our Live Examples, Mom always said to play by the rules, and she was right. Break the rules at home and you get sent to your room. Violate the market's unwritten rules, and they'll bust your piggy bank. Experienced traders say (including me) following these rules is the key to surviving the markets and that the novices who break them will go broke. 

"Violating these [rules] is how people remain amateurs instead of professionals. They remain losers instead of winners," says Bill Dunn, chairman of Dunn Capital Management in Stuart, Fla. 

1. Learn before you leap

A common mistake made by many novice traders is to jump into the markets without knowing what they're doing. They don't take the time to observe how the markets operate before risking their money. Part of this education must include deciding what your motivation and strategy are going to be and how you will execute trades. Consider how often you will be trading and the transaction costs as part of the plan because frequent trading can eat away at profits through commissions. Also consider your own personality in deciding what and how to trade.

2. Cut losses, let gains run

"Cut your losses short and let your gains run" is an old saying repeated by many traders and for good reason. They say a mistake made by many new traders is they hold on to losing positions far too long thinking the market will turn around. They also tend to get out of winning positions too quickly to lock in an immediate profit, yet that eliminates the chance for greater gains. 

3. Discipline is crucial

Disciplined traders who stick with a tested trading plan or system will always profit over those who trade inconsistently. 

4. Focus on the process

Focusing on the process of trading instead of making profits may sound like a contradiction, but traders say this is vital because losses are an inevitable part of trading. Those who focus only on making money are likely to lose because they can't cope with inevitable downturns in their investments. 

5. Know your exit

Traders should know where they intend to exit their position before entering any market, based on whatever system they are following. Figuring this out ahead of time can help a trader stick with a system and eliminate second-guessing. It also can reduce losses by having a stop loss order in place. 

6. Manage your money

Professional traders recommend risking a set percentage of capital and never altering that percentage. Risking 2% to 3% at a time, for example, maintains a constant level of risk to your portfolio. They say those who think they can make a fortune on one or two big trades are only kidding themselves. 

7. The trend is your friend

This often repeated saying from the trading floor is another key to succeeding in the markets. Rather than trying to predict market tops and bottoms, many traders recommend going with the flow. "Never have an opinion about the market. The trend is your friend and you just trade with it. Let the market tell you where it's going." 

8. Don't trade emotions

Keeping a calm state of mind is crucial when playing the markets and it's important to remember the market's actions are nothing personal. 

"That's a very easy thing to say, but it's a very difficult thing to do” and honestly "That's the way losers trade. They trade with their emotions and they forget all the things that they've learned." 

9. Consider who loses

Everyone entering the market obviously thinks he's going to win, but that's simply not going to happen. "Somebody has to be losing to you if you're winning, so we always like to stress that you should know from whom you're going to take profits because if you're buying, the guy that's selling thinks he's going to be right too. 

10. Remain humble

Those who believe they're smarter than the rest of the market and confuse luck with skill won't hold that opinion for long, "Be humble in the face of the markets or the markets will see to it that you're humbled, When you think you have interesting information, chances are everyone else has it too. 

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