I recently read this article: https://www.investopedia.com/articles/trading/10/top-ten-rules-for-trading.asp showing the top ten rules of a successful trader. Let us explain why the so-called Top 10 Rules For Successful Trading, are extremely challenging to follow and mostly wont hold.
In the world of trading, advice abounds, promising the keys to success with ten simple rules. But the reality? These rules are often far from simple to apply in practice. Let’s dive into why, excluding the always crucial “Keep Learning.”
- Planning Trades is Complex: Markets are unpredictable. Even with a solid plan, external factors can derail the best strategies.
- Risk Management is Easier Said Than Done: Emotions can cloud judgment, leading traders to risk more than they should, despite knowing the rules.
- Discipline is Hard to Maintain: Sticking to a plan without deviation is challenging, especially in volatile markets where fear and greed can take over.
- Understanding Markets is Vast: Grasping the complexities of multiple markets and their interconnectedness requires more than just surface-level knowledge.
- Using Technology Wisely Requires Expertise: The plethora of tools available can be overwhelming and misused without a deep understanding of how they work.
- Protecting Trading Capital: It’s one thing to know you should protect your capital, and another to do it when every trade feels like an opportunity.
- Knowing When to Stop: Recognizing the right time to exit, whether in profit or loss, is often obscured by our hopes and fears.
- Staying Realistic is Challenging: Setting realistic expectations goes against human nature’s optimism bias, especially in the face of others’ success stories.
- Keeping a Trading Journal: Consistently documenting trades for self-review requires a level of discipline and honesty that many find hard to muster.
- Accepting Losses: Understanding and accepting that losses are part of trading is psychologically challenging, leading many to chase losses instead of moving forward.
While the rules for successful trading offer a framework for disciplined, informed trading, applying them consistently in the face of market realities and our own psychological biases is a significant challenge. The journey to trading success is personal, nuanced, and requires a continuous commitment to learning and self-discipline beyond what any list of rules can prescribe.