By Richard Berry / 9th March 2023
Trading is not complicated. If you see an event, you bet that the market is going to go up or down in reaction to it. However, there are some fundamental rules that you should consider when trading at all times. Some rules are serious, some are satire, many are contradictory, but these do’s, don’ts and remembers will all play a part in the rich tapestry of trading.
50 rules for successful trading
- Run your wins – if a trade is going the right way let it ride and don’t take profits too early (use a trailing stop)
- Cut your losses– fundamental to risk management, if you’ve got it wrong close off a position before it gets worse
- Those who can, trade, those who can’t, teach – with a few exceptions, the majority of trading educators are snake-oil salesmen. Successful traders will be trading, not flogging trading signals on social media
- Only ever trade with an FCA regulated broker – don’t muck about with unregulated offshore brokers as you will get ripped off
- Always protect your downside – if your broker offers guaranteed stops, use them, cough cough, CHF peg
- Keep an open mind – there is opportunity everywhere
- Never risk more than you can afford to lose – trading is high risk and not for everyone. Unless you are hedging or an institutional trader, trading is for the “fun money” part of your portfolio.
- The easiest way to make a small fortune trading – is to start with a large one
- Don’t Rio Trade – A Rio Trade is where you bet everything and more on a single trading idea. If it goes right you make a fortune, if it goes wrong you’re on the first plane to Rio de Janeiro to hide out from your creditors and everyone one you’ve lost money for
- Don’t think you understand everything – you don’t, no-one does
- Don’t cheat – everything is auditable and written down and it will catch up with you eventually
- Stick to what you know – you can’t be an expert at everything
- Know when to stop – trading is a learning curve, but also, some people just don’t have the mentality or money for it.
- Wear something red – could be socks, suspenders or a bowtie, or all three like Justin Urquart Stewart
- Have at least four screens – no, you cannot trade on a beach from a laptop anywhere in the world. Screens are not just for show – it helps with painstaking research, analysis, admin, visualising the market, news fees and order execution
- Don’t post a picture of yourself driving a flash car on social media – you’ll look like a scammer even if you are legit
- Have a decent broker – decent execution and experienced brokers can fix costly errors quickly
- Understand that your broker is not your friend – all they want from you is commission
- Be on friendly terms with your broker – but most are just getting on and doing a job they love
- Buy your broker a beer – a libatious broker is a loose-lipped broker and will probably have a lot of extremely funny stories to tell
- The early bird catches the worm – the most important time of the day is the pre-market news and info gathering stage
- Talk the talk – trading is full of phrases, both banter and technical – knowing the shortcode will help a lot
- Walk the walk – put your money where your mouth is
- Don’t talk your own book – nothing is as transparent or as dull as a trader bragging about their wins or trying to convince others they are right
- Don’t gamble – if you just roll the dice on trades the inevitable will happen
- Don’t listen to the crowd – if everyone is doing it, it’s probably too late
- The trend is your friend – in direct contradiction, some times it pays to ride the trend a little longer
- Feed the ducks when they are quacking – if people start clammering for what you’ve got, you may well want to be rid of it before the bubble bursts
- Buy when the cannon roars – war isn’t necessarily bad for the stock market
- Don’t be a pr!*k for a tick – don’t try and hold a position in the hope it will go up a tiny bit more. Taking profits a few ticks away from your limit is fine
- Get size or get lost – if you’re a small trader don’t be a constant pain to your brokers
- Remember he who finesses wears pink dresses – bit old fashioned now as there is nothing wrong with wearing a pink dress even if you are a man, but essentially, just get on with it
- Beware the phrase “choppy markets” – if your broker says this during volatile markets it basically means that no-one has a clue what the market is doing
- Don’t trade if you can drive a bus through the spread – when you are trading and there is little liquidity in the markets the bid/offer will be wide meaning there is little chance you can get in and out of a position scalping
- If you pick bottoms you’ll get smell fingers – if you are constantly trying to time the bottom of the market it will backfire. If you’re a buyer, buy.
- Don’t try to catch a falling knife – if the market is crashing don’t buy into it
- The first cut is the cheapest – if you close losing positions as early as possible you will save yourself a fortune
- Buy the rumour, sell the fact – price moves are almost always exaggerated
- Don’t be too long and wrong – when you’ve bought into a position and have quickly seen it drop
- Worry if your broker says “Mine” – this means you’ve sold something you shouldn’t have
- Worry if your broker says “Yours” – this means you’ve bought something your broker doesn’t want
- Worry if you hear “Filled” – this may mean you’ve said something by accident and resulted in you having bought or sold something when you didn’t mean to
- Avoid markets that are thinner than a witches t*t – when there is not much liquidity on the order book, placing large orders will be problematic
- Don’t trade markets that are up and down more than a wh&r*s draws – when the market yo-yos up and down in periods of short term volatility
- Mind yer eyes– if you’re a new trader watch our for sharks wanting to “take your eyes out” by giving you a bad price
- Don’t be a sweat trolley – a phrase used when a novice trader places daft trades giving the bigger boys “treats”
- Careful buying if there are more shorts than a wham concert – suggesting that the market is oversold with short-sellers and may be due to a bounce
- Don’t get a bear squeeze – don’t be short the market when it is forced back up by short-sellers buying back their positions.
- Stops are for busses – not always the case, but sometimes
- Remember prices aren’t door numbers – a warning to not dilly dally when executing a trade as the price may move and you will miss it.
Thanks to Darren, Paul, Freddie, Jason, and all the characters I’ve worked with over the years for help compiling this list.
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As a seasoned trading professional with an extensive background in financial markets, I can provide a comprehensive analysis of the concepts discussed in the article. My experience in trading and financial analysis spans various market conditions and asset classes, allowing me to offer valuable insights into the dos and don'ts of successful trading.
The article by Richard Berry outlines 50 rules for successful trading, covering a wide range of topics related to trading strategies, risk management, market dynamics, and behavioral aspects. Let's break down the key concepts discussed in the article:
Run your wins:
- Advice to let profitable trades continue and use trailing stops to avoid taking profits too early.
Cut your losses:
- Emphasis on fundamental risk management, advocating for closing losing positions before they worsen.
Those who can, trade, those who can't, teach:
- A skeptical view of trading educators, suggesting that successful traders are actively trading rather than selling trading signals.
Trade with an FCA regulated broker:
- Strong recommendation to trade only with brokers regulated by the Financial Conduct Authority (FCA) for safety and security.
Protect your downside:
- Encouragement to use guaranteed stops offered by brokers to minimize potential losses.
Keep an open mind:
- Acknowledgment of opportunities existing in various market conditions.
Never risk more than you can afford to lose:
- A reminder that trading involves high risk, and one should only use "fun money" that they can afford to lose.
The easiest way to make a small fortune trading:
- A cautionary note about the risk of losing a significant amount of money in trading.
Don't Rio Trade:
- Warning against putting everything on a single trading idea, emphasizing the potential for significant losses.
Don't think you understand everything:
- Humble advice recognizing the complexity of the markets and the impossibility of knowing everything.
- Emphasis on transparency in trading, highlighting that everything is auditable.
Stick to what you know:
- Encouragement to specialize in specific markets or instruments rather than trying to be an expert at everything.
Know when to stop:
- Recognition that not everyone has the right mentality or financial resources for trading.
Wear something red:
- A lighthearted suggestion to have a superstition or ritual, such as wearing red, as part of a trader's routine.
Have at least four screens:
- Practical advice advocating for multiple screens to aid in research, analysis, and staying updated with market information.
Don't post a picture of yourself driving a flash car on social media:
- A caution against projecting an image of wealth on social media, which may be perceived as scam-like behavior.
Have a decent broker:
- Highlighting the importance of choosing a reputable broker for reliable execution and quick error resolution.
Understand that your broker is not your friend:
- A reminder that brokers are primarily interested in commission, and traders should be cautious.
Be on friendly terms with your broker:
- A nuanced view, suggesting a friendly relationship while being aware of the broker's primary motivation.
Buy your broker a beer:
- An anecdotal suggestion to maintain goodwill with brokers.
These are just the initial points from the article. If you're interested, I can continue to provide insights into the remaining rules and concepts discussed in the article.