LS Trader: How To Be A Successful Trader - Rule 1

Over the next few days I am going to be talking about the 7 rules of any successful trading strategy. These rules if followed correctly are priceless and will always work irrespective of the state of the economy or any market conditions. These rules must be followed if you want to be successful at trading.

Rule 1: Trade With The Trend

By this I mean you should always trend with the trend and never against the trend. You should never look at a bargain price to enter a trade when you think it has reached its lowest level, because how do you know it will not continue to keep falling? Price is the only measure that takes into consideration the news about a specific trade and the price reflects the state of that trade.  So if a trade is falling in value, we should assume that it will continue to fall, and in this case we would sell the trade and look to buy it back at a lowest price. Likewise if a trade is going up in value, we should assume that it will continue to increase, and we will buy the trade and look to sell it at a higher price in the future.

Although markets do not trend follow all the time, they do tend to trend 40% of the time. That means when following trends, typically you can expect to be right 40% of the time. Now that you have this big advantage, you need to know how to use it to your advantage, and you have to make sure that the winners trade always exceed the losing trades, so that you do make a profitable income from trading.

It is hard to know when a trend is at its peak level, or even when it is likely to end, and thats why any good trend following system will have specific rules which have been back tested over a period of time that show profitable returns.

If you follow the trends, and you have a set of robust rules, you can make significant returns from this form of trading. You have to be rational and patient, and wait for the system to give a signal to enter the trade. Once in the trade, you need to ride it out. The human nature is that everybody is looking for a bargain price and when you see something undervalued, you tend to buy it because it is a "bargain". This is where we go wrong! In trading there is no such thing, and you need to follow the trend if you want to make a profitable income on a long term basis.

The next rule to successful trading will be published soon.

Good luck with your trading

Kind Regards,

Robert Stewart