Five Rules to Take Your Trading to the Next Level

If you break your trading rules – you will fail.

Hate to be so blunt. Actually I don’t. But it’s true – sloppy, undisciplined trading will cost you money – and maybe a lot of it. Sure, you might get lucky now and again…but you’ll never achieve consistent success shooting from the hip or “trusting your gut.”

If you want to increase your profits and just as importantly – limit your losses – listen up!

Today I’m revealing five more critical rules you must master if you want to become a winning trader. So if you’re just starting out—or even if you’re a seasoned pro – get ready to take notes.

Yesterday, we dove into the nine rules of legendary market researcher Ned Davis, the founder of Ned Davis Research Group. Ned’s been in the business for 35 years. He knows more about the markets than almost anyone. So sharpen that pencil…

Because right now, we’re going to dissect Ned Davis Research Group’s final five trading rules. (You can see the first four here).

Here we go…

  1. Be Disciplined

“Our mandate is to follow our models, forcing us to be disciplined,” Davis says. “Our benchmark or anchor composite model determines core invested position.”

Amen brother.

There’s a lot of noise out there. Do you have the discipline to ignore it? Many folks don’t. They get caught up in rumors, guesses and hot tips. Don’t make that mistake. It never ends well. Filter out the noise and follow your plan to the letter.

  1. Practice Risk Management

Here’s a common scenario. You make four trades. Three of them are winners, and you book $250 each for a total of $750. But you broke your rules on your fourth trade. And you ended up losing big. It cost you $1,000. Despite the fact that you profited from 3 out of your 4 trades you ended up booking total losses of $250.

And you wonder why so many traders go gray early? Bad risk management leads to bad returns. Don’t do it.

  1. Remain Flexible

Markets change. The Fed changes interest rates. Disruptive technologies get introduced. A bad drought drives up the price of grain…who knows? And what worked last year might not work today. If you notice your trading system isn’t producing as many winners as it used to, maybe it’s time to check market conditions and possibly revisit your strategies…

  1. Money Management Rules

“We are more interested in making money than being right,” Davis says. “Be humble and flexible.”

Right on, Ned. Don’t tell my wife but I’m wrong a lot. Every trader is, even the best. And those who can’t admit they’re wrong end up losing their shirts. As I’ve said many times, if we’re wrong, we move on to the next trade. Period. No matter if it looks like the greatest thing since sliced bread. No whining, no looking back. Nope, it’s adios, amigo. Don’t let the door hit ya where the good Lord split ya.

  1. Those Who Do Not Study History Are Condemned to Repeat Its Mistakes

What else needs to be said? Study bull markets. Study bear markets. It’s no coincidence many of these longer-term trends play out in similar fashion. It’s never exactly the same but as Mark Twain said, even if history doesn’t repeat itself, it does rhyme.

OK, there you have it – nine trading rules to live by. Look at yesterday’s issue again for the first four. If you want to become a winning trader read ‘em all. Then read ‘em again. Own them.

If they’re good enough for a market wizard like Ned Davis, I promise they’re good enough for you.

Now get crackin’…


Greg Guenthner
for The Daily Reckoning

P.S. If you want to become a winning trader you need to know these rules. If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakeninge-letter, for FREE, right here. Stop missing out. Click here now to sign up for FREE.

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