5 Rules Followed by Professional Traders

5 Rules Followed by Professional Traders 

Booking reliable profits in the financial markets is harder than it looks at first glance. In fact it’s estimated that more than 80 percent of all participants eventually wash out and take up safer hobbies. But the brokerage industry rarely publishes client failure rates, since they're concerned the truth might scare off new accounts, so the washout rate could be much higher.

Long-term profitability requires two interrelated skill sets. First, we need strategies that make more money than they lose. Second, those strategies must perform well while the market shape shifts through bull and bear impulses, with plenty of choppy periods in between. While many traders know how to make money in specific market conditions, like a strong uptrend, they fail in the long run because their strategies don't adapt to inevitable changes. (To learn more, see: Tips For Investing In Volatile Markets).

So can you break away from the pack and join the professional minority with an approach that raises your odds for long term prosperity? Start with a clear and concise plan (Read: What It Takes To Become An Elite Trader).

Now, internalize these 20 rules that long-time pros use to stay in the winner’s circle.

1. Follow Your Discipline – Discipline can’t be taught in a seminar or found in expensive trading software. (But you can learn more by reading: The Importance Of Trading Psychology And Discipline). Traders spend thousands of dollars trying to compensate for their lack of self-control but few realize that a long look in the mirror accomplishes the same task at a much cheaper price!

2. Lose the crowd – Long term profitability requires positioning ahead of or behind the crowd, but never in the crowd because that’s where predatory strategies target. Stay away from stock boards and chat rooms. This is serious business and everyone in those places has an ulterior motive. (Check out How The Power Of The Masses Drives The Market to learn more).

3. Engage your trading plan - Update your trading plan weekly or monthly to include new ideas and eliminate bad ones. Go back and read the plan whenever you fall in a hole and are looking for a way to get out.

4. Don’t cut corners - Your competition spends hundreds of hours perfecting strategies and you’re in for a rude awakening if you expect to throw a few darts and walk away with a profit. It’s even worse if you cut corners in the rest of your life because that bad habit is much tougher to break.

5. Avoid the obvious – Profit rarely follows the majority. When you see a perfect trade setup, it’s likely that everyone else sees it as well, planting you in the crowd and setting you up for failure.