What are the golden rules of trading?


Trading can be very rewarding if you’re skilled at it, regardless of the type of market. But some traders also suffer great losses, so it’s only natural to be scared of failing, especially if you’re new to this. 

Regardless, don’t let the fear stop you from thriving. Everyone struggles a bit in the beginning, even the biggest brokerage companies, such as Triad Securities Brokerage. The important thing is that you’re willing to learn, which is one of the most important assets in the trading business. 

So, without further ado, let’s explore the 7 golden rules of trading you can apply regardless of what you trade.

.Create a trading plan and follow it to a T.

Three hundred years ago, Benjamin Franklin said: “Failing to plan is planning to fail”. It was a while ago, but boy was he right.

So, the first thing you should do is write down a trading plan. This document should outline how you’ll find and execute trades, under what conditions you’ll buy and sell securities, how much money you’ll invest in trading, as well as rules for when not to trade.

Now, there are no rules as to what a trading plan should look like. It can be long or short, depending on how often you plan on making trades. Here are some common elements most trading plans have:

  • Timeframe. How many hours are you going to spend trading? Be realistic here. If you have a full-time job, you certainly won’t spend over 3-4 hours a day trading.
  • Trading goals and targets. Start by setting a goal and then break it down into targets. This will help you come up with actionable steps.
  • Risk management rules. Risk management might just be the most important part of the trading plan. It’s important to set rules to protect the capital and stop you from taking on too much risk.
  • Available capital. This one is closely related to risk management and tolerance. How much money are you going to spend on trading?
  • Specific markets. Try to be as specific as possible because you can’t follow trends in all markets.
  • Trading strategies. Trading strategies represent actual ways you’ll be making money from trading. Everything above was a preparation for this step. Some of the most popular ones are trend trading, range trading, and breakout trading, but there are many more you can use to maximize your revenue.
  • Motivation. Trading has ups and downs. For that reason, you should write and memorize your motivations. This will prove to be useful when you’re having a hard time.
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Of course, simply having a trading plan isn’t going to cut it. You need to stick to it if you want to make this work.

.Never stop learning.

The pace of life is picking up. The markets are constantly evolving and new trends emerge much faster than before. You should make peace with this and accept you’ll just have to keep up with the news from now on.

Also, don’t rely solely on books. Look for online courses, blogs, and webinars to educate yourself. You can even look for a mentor. They’ll be able to share their knowledge and fundamental and technical understanding of the stock market.

Invest time in learning one trading strategy before you jump to another. You just can’t be a jack of all trades, especially when you’re at the beginning of your trading career. It’s better to have high-quality knowledge in one field than to be average in multiple fields.

So, get used to your new morning routine – reading business news while drinking your morning coffee.

.Don’t trade before major news releases.

When you’re inexperienced, you’re more likely to make a wrong assumption and lose if you trade before major news releases. This is because breaking news can cause unpredictable fluctuations in the market and a beginner is likely to get it wrong. World politics, economic trends, and even the weather may impact the market. 

Sure, once you’ve got more knowledge, you can use these moments to your advantage. For now, just sit and observe how things go or you’ll end up wasting your money.

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.Be careful how much you risk.

Many beginners in trading think that winning is about profiting, regardless of how much risk it carries. But that’s actually one of the most common mistakes and misconceptions. And here’s why.

First, trading is not gambling. There’s no winning or losing here. You should work towards a long-term goal and pay attention to the changes in the market. Sure, you may profit now despite the risk you’ve taken, but who can guarantee you won’t lose the next time you do the same?

Nobody can. You’re losing each time you take on too much or fail to follow your trading plan and don’t let anyone convince you otherwise.

Our best advice is to never risk more than a small percentage of your total capital on a single trade. Even if you lose some money, it won’t be too much. You’ll gain more in the long run.

.Use a stop-loss.

A stop-loss is actually related to the previous rule. It’s a predetermined and calculated risk that a trader is willing to accept with each trade. It can be a percentage or expressed in dollars, whatever you like more. 

The whole point of stop-loss is to protect the trader from losing too much when the price of a security drops. Basically, when the stock price reaches a stop price, the stock is bought or sold. 

For instance, imagine buying 100 shares for $100 and setting a stop-loss order at $90. Once the stock declines and falls below $90, the stop-loss order will be executed and the position will be sold at $89.95.

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The only downside is that if a stock suddenly gaps lower below the stop price, it would be sold at the next available price, even when it’s well below your stop loss. 

.Know when to take a break.

There are a couple of common situations when a trader should take a break and not trade.

.The risk is too big.

If your risk to reward ratio is too small and you can’t decide where to put your stop-loss order, skip it. It’s just not worth it. Don’t fiddle with your stop-loss just to maximize the potential profit. Setting a reasonable stop-loss should be your priority.

.You want to catch up.

If you’ve just lost some money, you’re likely to take uncalculated risks and act out of fear. Take a breather before you make a mistake and lose even more.

.A trade isn’t in your plan.

There’s a reason following a trading plan is key to success. When you make unplanned trades, you haven’t had the time to think it through and perform the analysis. This is a recipe for failure.

.You have personal issues.

Trading is just like any job. You need to be focused because there’s a lot at stake, even when your stop-loss is on point. It’s completely unnecessary to reach a point of damage control if taking a day or two off is what you need.

.Don’t get too emotional.

It’s natural for beginners to get excited when they get it right and get sad or mad when they lose. It will take time for you to get used to this and not take it personally. But it’s important that you take time to calm down, especially when you’re feeling unpleasant emotions.

Beware of excitement too, especially if you’re not following your trade plan. 

Actually, scratch that and remember to always follow your trade plan.


Trading can become a profitable business if you give it time. Don’t give up right away, especially if you’re not earning right away. Everyone makes mistakes, especially in the beginning, remember?

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