25 basic Rules to become a successful & consistent Trader

A trader's success in the markets is closely tied to their level of discipline. Having a strong sense of discipline in trading is crucial, as it accounts for 90% of the factors that determine success.

The success that a trader achieves in the stock market is directly correlated to one’s trading discipline or lack thereof. Trading discipline is a crucial part of the game.
The formula is very simple: Trade with discipline and you will succeed; trade without discipline and you will fail.
I have been a stock trader for 7 years. During my career as a day traders & Swing trader, I traded in different stock markets such as S&P 500, NASDAQ and NYSE.
Although my formal academic education consists of a bachelor’s degree in business Economics , I never considered myself to be an extremely gifted student.
I have no formal training in market technical analysis, and I don’t understand the economic causal relationship between different factors and stock prices.
How, then, have I been able to succeed, day after day, ? The answer is simple: I trade with discipline, and I respect the market.
When I’m wrong I get out immediately, and when I’m right, I don’t get too greedy. I’m content with small winners and I’m accepting of small losers.

Here are what i consider 25 Rules that every trader should implement into their own strategy

Rule #1
Sticking to a well-planned trading approach will lead to higher profits and less loss. Consistently following a disciplined strategy is essential for achieving financial gains in the markets.

Rule #2

Discipline is essential to success in trading, but it is not something that can be practiced occasionally. In trading, discipline must be applied consistently, in every trade. Failure to do so can result in significant losses. It is important to remember that it is not the occasional winning trade that will make you a successful trader, but the discipline to cut your losses and exit losing trades quickly that will ultimately determine your success in the markets. In fact, the market rewards traders who are disciplined and willing to admit their mistakes by minimizing the losses on bad trades. This can be seen as the difference between taking a small loss and a much larger one due to lack of discipline.

Rule #3

An effective trading strategy includes adjusting the trade size based on performance. When a trader is experiencing a losing streak, it is wise to reduce the number of trades, to limit potential losses. A common approach is to decrease the trade size to a single trade after two consecutive losing trades and then to slowly increase it again if the next two trades are profitable. This is similar to a baseball player who changes their swing to make contact with the ball after striking out. By reducing the trade size, traders aim to make small gains or break even, before increasing the trade size again.

Rule #4

We have all been guilty of succumbing to greed in trading, but it is important to strive to avoid this behavior in the future. When the market moves in our favor and we have a small profit, it is natural to want to hold on to the trade in hopes of a larger gain. However, this often leads to hesitation and ultimately, a bigger loss. It is essential to remember that every trade is just one opportunity and there will be many more in the future. Don't let one trade define your performance for the day and avoid being greedy, as it will only lead to bigger losses in the long run.

Rule #5

It is important to keep a record of all trades made during a session. By noting down the details of each trade, such as the biggest gain and loss, traders can set limits for themselves to prevent losses from exceeding the biggest gain. For example, if a trader's biggest gain on a day is five points on the E-Mini S&P, they should not allow a losing trade to exceed that amount. By not letting losses exceed the biggest gain, traders can ensure that they will have a net gain for the day.

Rule #6

I insist that my students document the specific market conditions that must be met before they make a trade. It's not important what their strategy is, but they should have a set of rules, market set-ups, or price action that they need to see before they execute the trade. It's vital to have a plan of action, a methodology that you have confidence in, and you should stick with it even if it's not working during a specific session. If the methodology has been proven to work more than half of the time, it's best to stick with it, rather than trying to come up with a new one.

Rule #7

Throughout my years as a trader, I have never traded more than 50 shares on any single stock. While it would be desirable to trade larger sizes like my colleagues, who regularly trade hundreds of shares per trade, I recognized that I did not possess the emotional and psychological skill set required to trade at that level. It's important to understand your comfort zone when it comes to trade size, as trading more than what you can handle emotionally can lead to poor performance and losses. It's better to stick with a trade size that you are comfortable with and trade with the same level of skill and talent, rather than attempting to trade beyond your abilities.

Rule #8

It's crucial to never put yourself in a position where you can lose more money than you can afford. One of the worst feelings is wanting to trade but not being able to do so because your account equity is too low. To prevent this, it's important to set daily loss limits for yourself. For example, if your limit is $500, once you reach that point, you must stop trading for the day, and come back the next day. This will ensure that you never risk more than you can afford to lose.

Rule #9

Many new traders believe that because they have a large amount of equity in their trading account, they can trade large positions in stocks. However, this is not the case. If you are not able to trade a single stock profitably, it is unlikely that you will be able to trade many stocks successfully. As a teacher, I insist that my students demonstrate a trading profit over a period of ten consecutive trading days while trading only one stock. Once they have achieved this, they have earned the right to trade two stocks for the next ten trading sessions. Remember that if you are not performing well with two stocks, it's best to reduce your trade size to one stock.

Rule #10

Having a losing trade does not define you as a trader, but failing to exit a losing trade when it's not working out, does. It is remarkable how accurate one's gut feeling can be when it comes to evaluating the market. If you have a sense that a trade is not working, it's probably best to exit. Every trader will have losing trades throughout their sessions, it's a normal part of trading. A typical trading day for me consist of 33% losing trades, 33% break-even trades and 33% winning trades. I quickly exit my losing trades, as they do not cost me much. This way, even though I lost or broke even on over two-thirds of my trades for the day, I still end up with a profit overall.

Rule #11

When you realize that your trade is not working out, it's best to exit promptly. It's important to remember that a trade is not a loss until you get out of it. The phrase "until come back" is often used by traders in a jokingly manner, but it serves as a reminder that the trade is not going to improve and it's time to exit.

Rule #12

When I was new to trading and had yet to develop discipline, I often found myself hoping for a way out of a bad trade. I would wish for some sort of miraculous intervention, but it never occurred. Eventually, I realized that relying on some external force to help me out of a bad trade was a wasted effort. The best course of action is to simply exit the trade.

Rule #13

I have never understood why so many electronic traders spend hours listening or watching news programs like CNBC, MSNBC, Bloomberg News
The people on these programs have little knowledge about market dynamics and price action. They have never traded a single stock and yet they claim to be experts on everything. The person on CNBC reporting from the trading floor might have been a phone clerk before and they are not experts, they are just providing entertainment. The news you hear on these programs is already outdated and has been consumed by professional market participants long before it's reported. Don't base your trading decisions on these reports, as it's already too late by the time it's report

Rule #14

Throughout my years as a trader and working with other traders, I have never encountered a successful speculator. Attempting to speculate and consistently make large profits is impossible. Instead of trying to speculate, focus on being a trader.
Focus on the process

Rule #15

You should accept that you will have losing trades throughout the trading session. Get out of your losing trades as quickly as possible and embrace the fact of exiting them quickly. This will help you save a lot of trading capital and make you a more effective trader.

Rule #16

This rule pertains to the concept of capital flow. It is the flow of trading capital that moves the market in one direction or another. An excess of buy orders will push the market upward, while an excess of sell orders will push it downward. When the market is stagnant, it indicates that traders are satisfied with the current bid and offer prices. It is not a good idea to trade during these times as the market is not showing any significant movement. It is a waste of time, capital, and energy to trade in such conditions. It is better to wait for market activity to pick up before placing a trade.

Rule #17

Please re-examine rules #5, #8, #10, #11 and #15. Adhering to any of these rules will ensure that you never break rule #17. Big losses can prevent you from having a profitable day and they can eliminate the small profits you've worked hard to earn. They also have a negative impact on your psychology and emotions. It takes a long time to regain confidence after a significant loss on a trade.

Rule #18

Just as it is rare to encounter a successful speculator, it is also rare to come across a trader who consistently expects to make a large profit and then actually achieves it. You should never go into a trade with the expectation of making a huge profit.

Rule #19

Imagine starting your day knowing that by following a set of rules, trading with discipline and adhering to your methodology, you have a high chance of success. I have had years where I could count the number of losing days on one hand. This consistency allowed me to be extremely confident in my trading. I knew that I was going to make money on any given day. By consistently making small profits daily (as per Rules #18 and #19), you can trade throughout the session with confidence and control. Remember, if you make a little bit every day, you have earned the right to trade larger and by following the rules of discipline, your small profits can soon turn into much more significant gains.

Rule #20

The strategy of scaling out of your winners will result in an increase in the average profit per trade while still keeping losses within your defined risk parameters. On the other hand, it is not advisable to scale out of your losing trades. If your trade size is more than one lot and the trade is not profitable, you should exit the entire position at once. However, if the trade size is more than one lot and it's a winner, it's best to exit half of the position at your first price target. By using protective stop-loss orders and adjusting the order to reflect the change in trade size, you will be able to raise or lower the stop price, depending on your position, to your original trade entry price. This puts you in a great position where you can't lose on the remaining position, and you can sit back and relax by placing a limit order a few ticks above or below the market.

Rule #21

The key to success as a trader, just like any other profession, is consistency and sticking to a proven methodology. This means showing up every day, and executing your trades using the same approach, day in and day out, just like a bricklayer laying bricks one by one. Reviewing rules #6 and #20, and not deviating from your established strategy, is crucial to achieving consistent success in trading.

Rule #22

The key to success in trading is to take action, not to hesitate. Many traders miss out on profitable opportunities because they are too focused on getting the best possible price, or waiting for the perfect set of indicators to align. The reality is that no trade will ever be executed at the absolute best price, and there will always be some uncertainty about the market's direction. The most important thing is to take the trade and manage it effectively. Don't let over-analysis and hesitation prevent you from making a profit.

Rule #23

It is crucial to have a set of guidelines and strategies in place for trading, and it is also important to follow them consistently. The key to success in trading is not only making the right trades, but also managing them properly. By adhering to a set of rules, traders can maintain control and increase the likelihood of making a profit.

Rule #24

The market is unpredictable and operates independently of individual opinions or biases. It is important to understand and respect its movements, and failure to abide by its rules can result in negative consequences. To succeed in trading, it is crucial to adhere to the 25 Rules of Trading Discipline.

Rule #25

You have to be self-sufficient. The best traders don’t follow others - they pave their own path. Be a trailblazer. Become your own indicator

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Tamir