Important Rules of Trading
Trading profitably is difficult, but it can be done.
As there are successful traders in all markets then we will focus on the common important rules they all follow (even if subconsciously).
Psychology plays a massive role through greed and fear. Both of which are the primary reason for invested money being lost. There are so many ways in which greed and fear work in the market and these are just a few:
- Greed is felt when making a profit and wanting to hold on for a bit more. The price crashes and you sell for much less.
- Greed makes you buy something that you didn't want to wait to do due diligence on so you don't miss out on profit. You lose on a bad investment.
- Fear prevents you from buying value because no-one else is doing so. You miss a fantastic investment opportunity.
- Fear prevents you from selling a losing position because you think the price might bounce back so you won't lose as much. You wind up losing even more.
Successful traders never get emotionally involved in their investments.
Don't Change Your Strategy Part-Way
Basically, as the title says, don't change your pre-planned strategy part way through a trading cycle. Successful traders stick to the rules created before starting the trade as changes are usually done due to emotion.
Those strategies were created objectively, analytically and without emotion! Remember they were based on how much you want to save and are prepared to lose.
These rules dictate when you buy, sell or walk away from an opportunity without investing at all and what actions you take if it goes wrong or right (hopefully the latter).
If a strategy is changed then it'll most likely be due to emotion (like getting a sure-thing stock tip - see greed).
For more information on strategies for buying gold see our fundamental gold investment advice.
Basic Market Knowledge
Don't rely on luck, throwing darts, or someone else's tips. You might get lucky once or twice, but you will certainly lose more!
Having even a little core knowledge about the market you want to trade in and the best way to do so will give you an edge over the average person and help you to successfully build-up you wealth.
Build your knowledge to the point that you can comfortably pencil out a trading plan, with rules, and what are the real drivers behind the market.
For this (contrary to what you may think) it's usually best to ignore the 'mainstream media' as the various financial channels have interests and motives that don't necessarily align with what's best for you.
Their misinformation is especially high for gold bullion as it directly challenges synthetic fiat paper money such as US Dollars and Euros - which the financial industry don't want as they make amazing profits from all things paper based.
The more you read and learn on goldvu the more you will understand this.