In this post, we delve into important rules that complement and enhance your trading strategy on Nifty. By adhering to these principles, you can make more informed and disciplined trading decisions, ultimately improving your performance in the markets.
Never Trade with “Scared Money” : Avoid trading with money you can't afford to lose. This will negatively impact your ability to make sound trading decisions.
Always Use Stops : Place your stops on the system to ensure you exit at a small loss if the market suddenly moves against your position. Use "at market" stops, not "at limit," to guarantee an exit even with some slippage. Implement trailing stops to protect your profits.
Re-evaluate After Being Stopped Out : If you are stopped out, re-evaluate the market as it is now a brand new position. Avoid the temptation to re-enter the market quickly in an attempt to "get your money back." This often leads to revenge trading.
Never Add to Losing Positions : Avoid adding to losing positions in the hope of averaging your entry price. This strategy stems from ego or hope and often results in significant losses. Instead, add to your winning positions through careful pyramiding. While pyramiding raises your average price, it adds to a market that has shown you are right.
Stick to a Plan : Always trade from a well-defined plan and strategy. Execute your plan without being swayed by the market's current emotions. Avoid forming opinions and acting on them impulsively or chasing momentum.
Avoid marginal trades : Be like a sniper in a constant state of readiness waiting patiently for the perfect shot. Do not take sub optimal trades that bleed your financial as well as mental capital. Taking such trades will exhaust your focus and energy such that you will not be ready when the big trade presents itself. Successful trading is the art of doing nothing between the big trades.
Do Nothing When You're Right : When your trade is going well, the best action is often no action—except for trailing your stop and adding to your winners.
Take Regular Trading Breaks : Take breaks from trading at regular intervals to maintain a fresh and objective perspective on the markets. Trading daily without a break dulls your judgment and reduces your efficiency.
Trade Opposite the Majority Opinion : Avoid following the crowd. When the majority opinion is overwhelmingly in one direction, look for reasons to take the opposite stance. If 90% of analysts are bullish, consider the market overbought; if 90% are bearish, consider it oversold.
This concludes our series on strategy, the second pillar of our trading system. Click on "Next Post" to explore our method of objectively selecting the best trades - Trade Selection.
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