Chapter 3: List of rules not to be broken in any case by a trader/investor in order to be Profitable
(i) Never listen to News, Social Media, Friends, Call/Tip Advisors, Gut feeling, Mood etc., before taking any trading/investment decision.
(ii) Events like -
Quarterly results of a company,
Yearly results of a company,
Election results,
Budget announcements,
RBI Policy announcements,
Pendamics(Covid-19),
Wars or War like situations etc.,
affect share prices but never try to analyse these events and never try to take trading/investment decisions based on your analysis. All the trading/investment decisions must be taken based on the chart only as the chart itself includes everything.
Note-
Correct analysis of above events/news is not possible for a retail trader/investor. It needs a big team of research analysts.
Most of the time, the News is delayed for a retail trader/investor.
Sometimes the news is wrong also.
(iii) Effects of important events/News/Smart Money Actions etc., are reflected on the chart automatically hence the chart is the only supreme thing in the share market for a retail trader/investor.
(iv) Having a profitable strategy with crystal clear execution rules is a must for any trader/investor. Never trade/invest without a profitable strategy.
(v) Profitability of a strategy must be judged after looking at both Accuracy & Reward to Risk ratio(RR) together.
(vi) A strategy is profitable if it has performed well in the last 100 trades i.e. kept you in Net Profit.
(vii) Each strategy has got certain rules, breaking these rules means commiting suicide in the share market. If someone is not able to follow the rules of a strategy due to any reason (greed, impatience, mood swings or psychological issues) then he/she must avoid trading /investment in the share market.
(viii) No one can make money without following rules with discipline in the share market.
(ix) Perfect Physical and Mental Health is a must for a Trader/Investor.
(x) A trader must do daily physical exercise, pranaya, meditation etc.
(xi) During the live market, never deviate from the rules of a trading /investment strategy.
(xii) Always diversify the capital i.e. don't keep all eggs in a single basket.
(xiii) Risk management is a must i.e. keep fixed stop loss in each trade by changing position sizing.
(xiv) Remember that you are the only custodian of your hard earned money.
(xv) Never trade without stop loss/hedging.
(xvi) Trail SL for big profits.
(xvii) Do not use too much leverage.
(xviii) Never trade/invest without formation of a setup of an adopted strategy on the chart.
(xix) Do not be emotional while taking trading/investment decisions.
(xx) 100 number of trades, in live market with the real money (use minimum possible capital as you are only testing the overall profitability of the strategy) are must to gain confidence over any setup.
(xxi) Write a journal of each trade/investment done after 3:30 PM as under -
Was that trading/investment decision as per the setup?
What was the outcome of that trade?
Write down the thoughts that arose during the trade
Date of Entry, SL/Target
Time of Entry, SL/Target
Instrument name in that trade/investment was done
(xxii) Do not take the market to home.
(xxiii) Gradually set higher trading/investment goals i.e. initially must go slow with less capital. Using big capital at early stage is again suicidal.
(xxiv) Smart investors buy during bad news and sell during good news.
(xxv) Trading at Lower time frame is highly rewarding but at the same time it is highly stressful as well.
(xxvi) There exists no trading/investing strategy with 100% accuracy.
(xxvii) A strategy can be adopted for trading/investment if it has performed well as per its rules during the last 6 Months(Intraday) or during the last 5 Years (Swing/Investment).
(xxviii) After adopting any trading/investment strategy, take at least 100 number of trades in live market before-
Leaving that strategy
Decreasing Capital Size
Increasing Capital Size
Or making any comments on it
(xxix) If setup is not formed on the chart as per adopted trading or/investment strategy then do not trade/invest on that day. Just return home without any trade/investment from the office.
(xxx) Position size must be constant for a cycle of 100 trades.
(xxxi) Risk(SL) also must be constant for a cycle of 100 trades.
(xxxii) ‘Good news at High and bad news at Low’ is a NEWS TRAP.