The 10 rules for trading success

Want to protect your capital while maximising your potential profits? There are some basic principles and rules that will help you achieve success in trading, irrespective of the market you’re in. Here’s a set of essential rules to improve your trading success.

1. Have a trading plan

Crafting a well-thought-out trading plan is essential for successful trading. This plan should clearly outline your entry and exit points, as well as your money management criteria for each trade. It should also include rules for buying and selling investments, maintaining a certain level of cash reserves, and managing exposure to different industries and asset classes. Moreover, a good trading plan must be underpinned by both short-term tactical objectives and long-term strategic goals to guide your decision-making process.

After you create a plan, don’t jump right in. Instead, use MetaTrader 4’s Strategy Tester or ProRealTime’s ProBacktest on platforms like IG to backtest your trading ideas using historical data so you can get insights into the viability of your strategy before risking actual money. Carefully evaluating ideas through this process before investing actual money helps reduce losses caused by uninformed choices. Once you identify a successful strategy through backtesting, be sure to stick to it to avoid unnecessary risks that could harm your overall performance.

2. Don’t treat trading as a hobby

Many traders treat trading as a side job or a casual pastime, but this limits their potential for success. To be successful at it, you need to shift your mindset and view it as a serious business that demands dedication and commitment. By approaching it with a business mindset, you acknowledge the inherent risks and uncertainties involved. Remember, trading is not just about making profits; it involves managing losses, taxes, and potential setbacks.

3. Know how much risk you can handle

The next rule to achieve success in trading is to know your risk tolerance. This involves carefully assessing your risk tolerance before making any trades. Knowing your risk tolerance can help you tailor your trading strategies to align with your comfort level and avoid potential financial distress. A general rule of thumb is to never risk more than 1% of your total investment on a single trade, safeguarding your capital and preventing significant losses from impacting your portfolio negatively.

4. Only use disposable income

Aside from understanding your risk tolerance, it’s also important to make sure that the funds in your trading account are disposable income, separate from essential expenses like college tuition or mortgage payments. It’s important to view this capital as expendable for trading purposes to prevent emotional stress and maintain financial stability. Avoid borrowing money from critical obligations like mortgage payments or savings meant for education expenses.

5. Start small, start smart

If you’re a beginner, it’s crucial to start with a small amount of capital. IG recognises this and allows for low minimum deposits, so beginners can learn and adapt to the movements of the market without exposing themselves to unnecessary risks. You can then gradually increase it as you gain more experience.

6. Select a provider that delivers exceptional trade execution

The next rule is to choose a provider that delivers high-quality trade execution. Poor execution can lead to hidden costs that eat into your profits, even if the provider offers low transaction fees. If your current provider struggles with executing trades efficiently, it might be wise to switch to one with better liquidity and a strong execution system. IG Group offers high liquidity levels and strives to give clients better prices whenever possible, making them a trustworthy choice for traders.

7. Learn as you go

Education is your best ally when it comes to trading. Don’t stop educating yourself, and always stay open to learning new strategies and techniques. IG, among other platforms, offers trading courses and webinars for all levels on their very own IG Academy. Their courses include videos, interactive exercises, and quizzes to help you check your knowledge. This way, you can make well-informed trading decisions leading to successful outcomes.

8. It’s okay to take a step back

Knowing when to stop trading is crucial for success. There are two main reasons to consider halting your trading activities. The first one is an ineffective trading plan that fails to deliver the expected results. Holding onto a losing trade in the hopes of a turnaround often leads to greater losses. It’s important to stay objective and adjust your plan accordingly if it’s not performing as anticipated.

However, sometimes the issue may lie not in the plan but in the trader themselves. An ineffective trader may need to take a break from trading. This could be due to external stress, poor habits, or lack of physical activity affecting their trading performance. Recognising the need for a break and addressing any challenges can help the trader come back stronger and more focused on their goals.

9. Always review your strategy

If you want to be a successful trader, don’t forget to regularly review your trading strategy. This includes assessing past trades, seeking feedback from experienced traders, and being open to learning from both successes and failures. It’s crucial to monitor market conditions closely and be adaptable when necessary.

It might be easier to review your strategy by focusing on mastering one trading style and strategy before branching out. Understanding every aspect, risk, reward, and abnormality of a specific approach can really help you build a strong foundation for success.

10. Manage your emotions

Managing your emotions is crucial in trading. While it’s impossible to become a stone-cold robot when trading, you need to keep your feelings under control. One way to do this is by having a solid trading plan in place, as mentioned in the first point.

Sticking to a trading plan may help you avoid making impulsive decisions based on emotions. It acts as a guide to keep you focused on your goals and strategy. Successful traders know when to stick with the plan and when to adjust based on new information. They also play the long game and focus on the bigger picture rather than daily fluctuations. It can be tough to see your portfolio decrease rapidly, but making impulsive decisions based on emotions can lead to losses. Remember, it’s normal for markets to go up and down, so stay rational during changes.

If you see losses, take a break instead of making impulsive trades to recover quickly. Walking away from your account for a bit can help you regroup and make better decisions in the long run.

So are you ready to plan with success? Access more than 17,000 global markets at IG. With their award-winning trading app, you can trade whenever and wherever you are.

For more information, visit IG’s website.

Sponsored by IG. CFDs are complex, high risk and losses can be substantial. 70% of retail client accounts lose money when trading CFDs with this investment provider.’