The 5 Trading Rules to success that no-one appreciates

There are probably hundreds of posts out there on the internet telling you 3 simple rules to successful trading, or 3 best strategies etc etc.

Theres a reason. The headlines suck people in who feel lost and worried about their trading. People hunting for the answer to why they are not getting the results they want.

Well, here’s something different.

Here’s 5 of my own rules on trading that you absolutely MUST adhere to if you want to succeed. The difference here is that these are the 5 key areas of trading that most people overlook and under-appreciate.

1) CUT LOSSES FAST

Seriously, most of the clients I have who have come to me after losing entire £20,000 plus accounts usually lost it all on one or two trades. Why is that? Simple really. If you have a trade that hits -£500 you won’t want to close it because it seals in that loss. So you keep it open in the hope it goes back up. And it often will go back up. You’ll get into the habit of this. It keeps working out that way so great, yeah?

Only one day, on one trade, it doesn’t. And your £500 loss is now £1000 loss. Now you can’t possibly close it because you don’t want to cement in the £1000 loss. So you keep it open. Only it falls to £2000 loss. And the further and further it falls, the harder it is to close that trade and take the enormous hit. The whole time its open? You have “hope”. Only hope is not a strategy. And it only takes this to happen once or twice before you lose everything.

How do you prevent this ever happening to you? CUT LOSSES FAST. The moment that trade hits your maximum pre-determined loss limit, you kill it swiftly and surely. No hesitation. This way you will never suffer a big loss. You can thank me in a few years.

2) LET YOUR WINNERS RUN

You can cover the losses well and never lose big, but you still will never make good profits if you keep banking those winners too soon. Lets say you have a 30% win rate. Well, then you are going to need a few big wins to cover your many losses.

Banking winners early is shooting yourself in the foot. You only get a handful of winners, and now you’re cutting them off at the stem before they’ve had a chance to flower. It’s insane behaviour driven by the fear of giving profits back.

Stop acting like a chump and grow a pair. It’s time to let your system do the work and wait until the exit signal before you exit. Stop interfering. Most traders have perfectly good setups and systems in place, but they sabotage their own results by allowing fear to take over.

3) SET EXPECTATIONS

How can you possibly know what to expect, if you’ve never looked. How can you possibly stick with a winning trade if you have no confidence in what you’re doing? If you’ve never seen your system capture a 3700% winning trade, then how can you have faith in it to see you through the tough periods.

Knowing what your system and strategy has produced, across different phases of the market, can give you the strength and assurance that it will deliver in the future. Without knowing, you will bottle good trades, and allow the fear to take over your trading decisions. A recipe for disaster.

4) ALWAYS MEASURE

You don’t have a trading record? Really?

Good luck with that then. When you want to know in 6 months how many of your trades closed due to a stop loss being hit, you won’t know. If you want to know of those hit, how many cost you or saved you money, you won’t be able to find out. What, you plan to rely on your memory? Can you remember the exact reason you opened the 14th trade you made last year? Or what the outcome was? Not if you don’t have it written down.

If you want to make results trading, you have to take it seriously. That starts with recording your trades and gathering as much data as you can. You’ll want it later down the line and the crucial numbers will be lost.

5) NEVER EXCEED RISK

You’ve found an awesome trade, only its too expensive for your account. You’re so in love with the idea though that you’re convinced it will work out. So you take the extra risk and go for it. Yet you’re trading a strategy that has a 30% win rate.

Are you nuts?

The odds are stacked against you. You have a 70% chance that this will turn out to be a losing trade. Not only that but you’ve doubled your risk on it. So the loss will be all the more painful.

Want to know the fastrack way to getting nowhere as a trader? Exceed your own personal risk tolerance. Not only will you increase your losses, but you’ll find it harder to hold onto the winners, harder to close the losses and it’ll be harder to pull the trigger on trades eventually too.

….and that’s it. My 5x under-appreciated rules that no one seems to ever follow or care about. 5 rules that if followed however, will set you up to not only survive the next 10 years, but also build a framework for you to improve upon and finally start making profits.

Good luck out there traders.

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About Chris Chillingworth

Self confessed lover of racing, american football and whiskey. Trader and Investor since 2011. Chris has now coached over +1500 traders using his mechanical systematic trading strategies and now also runs a members only watchlist of FTSE stocks.

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