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*Rule 7: Develop a Methodology Based on Facts
Taking the time to develop a sound trading methodology is worth the effort. It may be tempting to believe in the "so easy it's like printing money" trading scams that are prevalent on the internet. But facts, not emotions or hope, should develop a trading plan.
Traders who are not in a hurry to learn typically have an easier time sifting through all of the information available on the internet. If you were to start a new career, you would need to study at a college or university for at least a year or two before you qualify to apply for a position in the new field. Learning to trade demands the same amount of time and fact-driven research and study.
*Rule 8: Always Use a Stop Loss
A stop loss is a predetermined amount of risk that a trader is willing to accept with each trade. The stop loss can be a dollar amount or percentage, but it limits the trader's exposure during a trade. Using a stop loss can take some of the stress out of trading since we know we will only lose X amount on any given trade.
Not having a stop loss is bad practice, even if it leads to a winning trade. Exiting with a stop loss, and therefore a losing trade is still good trading if it falls within the trading plan's rules.
The idea is to exit all trades with a profit, but not realistic. Using a protective stop loss helps ensure that losses and risks are limited and that you have preserved enough capital to trade another day.
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Next we will be talking about when to stop a trade , so stay tuned and learn with #echannel as we feed you with more tips on trading.
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