Nifty Future >> Basic Rules

  • Intraday trading should be done without any ego.
    One should follow the market indicators to make decisions and not anticipate the market to perform as per personal expectations.
  • Flexibility and discipline are key for a successful trader.
  • Do not be afraid to be a sheep.
  • Do not overtrade.
  • Take a position only when you know your profit goal and know when to stop if the market goes against you.
  • Trade with the trends rather than trying to pick tops and bottoms.
  • Do not trade many markets with little capital.
  • Have a combination of contracts while trading.
    Do not trade just the volatile contracts.
  • Calculate the risk/reward ratio before putting a trade on, then guard against holding it too long.
  • Establish your trading plans before the market opens to eliminate emotional reactions.
  • Decide on entry points, exit points and objectives.
  • Subject your decisions to only minor changes during the session.
    Do not change during the session unless you have a very good reason.
    Follow your plan.
  • Profits are for those who act, not react.
  • Once a position is established and stops are selected, do not get out unless the stop is reached or the fundamental reason for taking the position changes.
  • Use technical signals (charts) to maintain discipline - a vast majority of traders are not emotionally equipped to stay disciplined without some technical tools
  • Use discipline to eliminate impulse trading.

    • Have a disciplined and detailed trading plan for each trade such as, entry, objective and exit with no changes unless the hard data changes.
      Disciplined money management indicates intelligent trading allocation and risk management.
      The overall objective is end-of-the-year bottom line, not each individual trade.
    • When you have a successful trade, fight the natural tendency to give some of it back.
    • Use a disciplined trade selection system: an organized, systematic process to eliminate impulse or emotional trading.
    • You need to trade with a plan, not with hope, greed or fear.
      Plan where you will get in the market, how much you will risk on the trade and where you will take your profits.
    • If prices are rising and the volume as well as open interest both are up, the market is decidedly strong.
      If the prices are rising and the volume as well as open interest both are down, the market is weakening.
    • Now, if prices are declining and the volume as well as the open interest are up, the market is weak.
      However, when prices are declining and the volume as well as open interest are down, the market is gaining strength.
  • Cut losses short - let profits run.

    • Do not overstay a good market.
      If you do, you are bound to overstay a bad one too.
    • Take your lumps; just be sure they are little lumps.
    • Very successful traders generally have more losing trades than winning ones.
      They do not have any hang-ups about admitting they are wrong and have the ability to close out losing positions quickly.
    • Trade all positions in futures on a performance basis.
    • The position must give a profit by the end of the third day after the position is taken, or else get out.
    • Program your mind to accept many small losses.
    • Program your mind to "sit still" for a few large gains.
  • Learn to trade from the short side.

    • Most people would rather own something (go long) than owe something (go short).
    • Markets can (and should) also be traded from the short side.
    • Watch for divergences in related markets - “Is one market making a new high and another not following?”
    • Recognize that fear, greed, ignorance, generosity, stupidity, impatience, self-delusion and so on can cost you a lot more money than the market’s going against you, and that there is no fundamental method to recognize these factors.
    • Do not blindly follow computer trading.
      A computer-trading plan is only as good as the program.
      As the old saying goes, "Garbage in, garbage out."
    • Learn the basics of futures trading.
      It is amazing how many people simply do not know what they are doing.
      They are bound to lose, unless they have a strong broker to guide them and keep them out of trouble.
  • Thrill seekers usually lose.

    • If you are in futures simply for the thrill of gambling, you will probably lose, because it is a possibility that the money does not mean as much to you as the excitement.
      Just knowing this about yourself may cause you to become more prudent, which could improve your trading record.
    • Have a business-like approach to the markets.
    • Anyone who is inclined to speculate in futures should look at speculation as a business, and treat it as such.
      Do not regard it as a pure gamble, as many do.
      If speculation is a business, anyone in that business should learn and understand it to the best of his/her ability.
  • Approach the markets with a reasonable time goal.

    • When you open an account with a broker, do not just decide on the amount of money, decide on the length of time for which you should trade.
      This approach enables you to conserve your equity and helps avoid the Las Vegas approach of "Well, I'll trade till my stake runs out."
    • Experience shows that many who have been at it over a long period of time, end up making money.
    • Do not trade on rumors.
      If you have, ask yourself this: "Over the long run, have I made money or lost money trading on rumors?"
    • Beware of all tips and inside information.
    • Wait for the market's action to tell you if the information you have obtained is accurate, then take a position with the developing trend.
    • Do not trade unless you are well-financed, so that the market action and not your financial condition, dictates your entry and exit from the market.
      If you do not start with enough money, you may not be able to hang in there if the market temporarily turns against you.
    • Be careful if you are extra smart.
      Smart people very often put on a position a little too early.
      They see the potential for a price movement before it becomes actual.
      They become worn out or "tapped out" and are not around when a big move finally gets underway.
      They were too busy trading to make money.
  • Never add to a losing position.

    • Stay out of trouble, your first loss is your smallest loss.
    • Analyze your losses.
    • Learn from your losses.
      They are expensive lessons; you paid for them.
      Most traders do not learn from their mistakes because they do not like to think about them.
    • Survive! In futures trading, the ones who stay around long enough to be there when those "Big Moves" come along are often successful.
    • If you are just getting into the markets, be a small trader for at least a year, and then analyze your good trades and your bad ones.
    • You can really learn more from your bad ones.
    • Carry a notebook with you, and NOTE down interesting market information.
      Write down the market openings, price ranges, your fills, stop orders, and your own personal observations.
    • Re-read your notes from time to time; use them to help analyze your performance.
      "Rome was not built in a day” and no real movement of importance takes place in one day.
    • A speculator should have enough excess margins in his account to provide staying power so that he can participate in big moves.
    • Take windfall profits (profits that have no sound reasons for occurring).
    • Periodically redefine the kind of capital you have in the markets.
      If your personal financial situation changes and the risk capital becomes necessary capital, do not wait for "just one more day" or "one more price tick”; get out right away.
      If you don't, you will most likely start trading with your heart instead of your head, and then you will surely lose.
    • Do not use the markets to feed your need for excitement.
      Always use Stop LOSS, Always...Always...Always.