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Money Management Tips

The Importance of Having Trading Rules and Tips

Trading rules are a necessity for every trader. It helps to keep their minds focused before the emotional or psychological rush kicks in. Traders should draw up rules with their risk-reward tolerance in mind, and should know when to enter and exit a trade. This will help them take the emotion out of trading.

It is also smart for traders to consider setting limits on the sum they will win or lose in a day. If the profit target is hit, they take the money and run. Alternatively, if a losing trade hits a foreordained limit they stop trading for the day, giving them no room for further losses.

Traders should also learn as much as they can about the markets they are interested in. That means studying graphs, relevant websites, reading trade journals or doing other foundation work. For example, researching macroeconomic investigation or industry assessments so they are up to speed when the trading session begins. Information can enable a trader to beat fear, so it's a helpful tool.

It’s also imperative traders stay adaptable, consider trying different things and experimenting every once in a while. For instance, they may think about developing options to relieve risks or setting stop losses at better places. One of the most effective and efficient ways a trader can learn is by examining how they trade and observe how to improve their strategies. Knowing the facts helps traders trade without emotion.

Traders should also occasionally examine and evaluate their execution of trades to notice the predominant patterns and make any necessary changes. Good traders should also examine how they prepare for a trading session, how informed they are on the markets and how they're advancing as far as their trading education is concerned. This occasional evaluation can enable traders to fix mistakes, which can help improve their general returns.

Treat Trading Like a Business

It is best to treat trading like you would treat your own business. Draft a business plan or strategy, have particular achievable objectives and practice day by day exercises to keep your emotions in check. This assists you in distancing yourself from the conventional fear and greed cycle.

The traders who can expel themselves from this cycle and treat trading like a business are considerably less liable to take trade positions out of boredom.

Starting with a small account size

Here are a few things to consider if you are dealing with less than five thousand dollars to start your trading account.

1. Consider a Market like E-Mini Nasdaq 100 to start trading. It has a small tick size ($5.00) and has plenty of volume. Speak with your Bulls Edge Mentor to help you consider which market to trade.

2. Keep your trading costs low through low commissions and low margins. You can open your futures account with only $1000 thru NinjaTrader. They have simple low rates, low margins ($500 margins for ES) and a large number of popular markets.

3. Stay away from markets that are volatile. Crude Oil and Gold are just a few to stay away from as a beginner. They are some of our favorites to trade, but they tend to be harder to trade for the beginner and those trading with a smaller account.

4. Look into investing in a Semi-Automated system to help you adhere to your strict trading rules and plan. We recommend Charging Bull 2.0 – not only is it simple enough for a beginner to use it is the choice of many professional day traders.

The odds are not in your favor unless…

1. You're confident in your trading program. Do NOT stray from your plan once you’ve made it! Consistency is key when starting a new trading business.

2. Use the tools and knowledge you’ve learned through these courses and stick to them.

3. Don't ever think for a second that you can “beat” the market movers. As a speculator, find your edge in the market and make sure you are trading in the direction the market movers are moving the market.

4. Find the right mentor and trading system. Bulls Edge is committed to making sure you are ready to start your new business. So take advantage of talking to a professional trader. With any business, the key to success is investing in knowledge, the right team (Mentor) that leads you to a successful career path. (Check out the Bonus area in your member's area and sign up for your free mentoring session)

The 5% rule

It is essential for any retail trader to practice smart money management. Win or lose, the way to use "risk money" securely is to ensure it includes an amount the trader can live without. With that being said, it is best that traders risk no more than 2-5% of their portfolio on an individual trade. More than likely, risking more than 5% each time they take a trade will drain their account and put a quick end to their trading career. The urge to continue trading until they succeed is common, but smart traders know when to take a loss. Those that stake more than 5% of their portfolio and encounter a loss should ignore the temptation to continue trading, because it can lead to a high risk of depleting funds from your portfolio.

Every trade matters

The long-term perspective is of greater importance than short-term wants for quick wealth. Traders shouldn’t stake more than 5% of their portfolio per unit trade. Small wins may not seem like much when starting out, but it makes a huge difference over time. Traders should look for regular, small consistent wins.

One bad trade is all it takes

Traders can spend their entire year getting little wins and losses, then boom! Maybe they have an off day, defy their trading rules or take a market position with a large portion of portfolio that hits a loss. It only takes one bad trade and they may wake up to an empty account the following morning.

The reverse is just as likely. They make a great trade judgment, adhere to their rules and make a big win that accounts for a large percentage of their annual earning in one single trade. Trading like this, especially for smaller account traders, is like playing with fire. If they win, great! What happens if they lose? They will be spending the next week or month desperately trying to get back to where they were.

Trading is 90% mental and 10% skill.

The traders who succeed figure out how to handle risks and trade without emotion. If their attitude going in is “get rich quick”, they are already treading the path to failure. Successful traders start their trading path with a business mindset. They learn the market they decide to trade, listen to mentors and follow their trading plans. The most important is to work smart; not hard, by investing in Charging Bulls Automated Trading Strategy.

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