From mentality to strategy trading philosophy, these 52 blood and tears lessons you have to know

Author: kel xyz

Compiled by: Tim, PANews

Trading is lonely, painful, and a practice of constant self-doubt. The author of this article has summarized 52 "trading taboos" from mentality to strategy through reading books, learning from smart traders, and countless trial and error in the market. These rules reveal the core of successful trading - discipline, patience and risk management.

1) Never over-invest. That’s when you start to lose your rationality. Even if you are right, over-investment is still the fastest way to bankruptcy.

2) Never trade when you are tired or sleep deprived. Decision fatigue will end your trading career more than forced liquidation.

3) Never trade without a clear edge. Entering a trade without an edge is nothing more than an unnecessary gamble. If you can’t explain your edge in one sentence, then you probably don’t have one.

4) Never open a position just because you are bored. Frequent trading will lead to poor returns. In many cases, it is best to wait and see. If you find yourself forcing a position just because you "don't want to be idle" or "haven't traded for too long", please reflect on yourself in time. Trading for the sake of trading will lead to hasty decisions and losses. The market will not reward those who trade the most, but only those who make the most profits. Sometimes, not trading is the best trade.

5) Do not continue trading after experiencing a significant loss. Emotions can easily get out of control at this time, and you will try to make up for your losses through an irrational bet. This mentality of rushing to make up for your losses is bound to make you lose more.

6) Never enter a trade without a clear plan for liquidation. Whether it is a time-based stop, price stop, expiration condition or catalyst-driven liquidation strategy, it should be determined before entering a position. Remember, the last time a trader can remain objective is before placing an order. Once a position is held, it becomes extremely difficult to admit mistakes, so be sure to set the conditions for stop loss and exit in advance.

7) Don’t hold on to your position. The market doesn’t care about your beliefs. Either stop loss or get cut.

8) Never trade based on profit or loss, trade based on the market itself. Being anxious to recover losses or dwelling on past profits will cloud your judgment and interfere with your execution.

9) Not all ideas are worth trading. The best trade is often not trading. It is more important to preserve your money and energy and wait until the situation is favorable than to force action.

10) Don’t fight the trend. The wave is stronger than you are. Adapt to it, or you will be washed out.

11) Never try to catch a flying knife. "Cheap" can always be cheaper.

12) Never break your trading rules or deviate from your plan when the mood strikes. Your rules are there for a reason, usually learned the hard way. The minute you try to convince yourself that you can disregard a rule "just this once" (e.g., move your stop, double down, or trade too big), you're headed for chaos. Discipline is doing the right thing even when times get tough. As the old trading motto goes, "Plan your trades, and execute them exactly as planned."

13) Never use up all your bullets at once.

14) Never trade when you feel uneasy. If you hold too large a position, you will fall into a vortex of panic decision-making, always imagining that the market or some force is trying to force you to close your position, and you will fall into a state of nervous tension. The really smart thing to do is to let every night of good sleep become a natural yardstick for measuring the size of your trades.

15) Never let your ego keep you stuck in a bad trade. Admit when you make a mistake: cut your losses, adjust your strategy, and move on.

16) Never underestimate the reflexivity of the market. Strong stocks can always reach new highs, and weak stocks can always reach new lows.

17) Never expect liquidity to appear in time when you need it. The exit channel is always narrower than you think. Liquidity is not controlled by you, but determined by the market.

18) Do not use random market fluctuations as a trading strategy. Buying simply because the price is rising, or shorting simply because you "feel the price is too high", is not real trading, but blind gambler behavior. Even if you set up a perfect risk control mechanism, if your entry decision lacks fundamental support, you will eventually lose money.

19) Never make the same mistake twice. Trading mistakes are inevitable, but repeating them is unacceptable. Never lose money in the same way twice.

20) Never forget to defend yourself. Making mistakes is acceptable, but being wrong is not. Protecting your capital is always your top priority. Don’t just think about making money, but focus on protecting what you already have.

21) Never focus on attacking, staying alive is the most important thing. If you don't bet, you can't win. If you lose all your chips, you can't continue to bet.

22) Don’t fall into the trap of upgrading your lifestyle after a big win. Problems arise when you start estimating your entire year’s income based on a single lucky win.

23) Never forget to switch to a defensive strategy after a winning streak. Big losses often come after a winning streak, when overconfidence kicks in. Stay humble, your last big trade means nothing to the market.

24) Never let pride or arrogance get the better of you, always stay humble.

25) Never trade situations that are beyond your control, such as FOMC meetings.

26) Never be complacent. A strategy that works in one market environment may not work in another. Trading is a craft that requires continuous improvement, and the comfort zone is often the enemy of profit and loss. Never assume that you can predict the direction of the market.

"There are two kinds of forecasters: those who don't know and those who don't know they don't know." Never assume that your advantage will last forever. The market is evolving, advantages will fade, and the methods that worked in the last cycle may be completely ineffective in the next cycle. Keep iterating your strategy, and continue to verify and scrutinize. Stagnation is tantamount to self-destruction.

27) Do not close a losing position after your logic is disproven

28) Don’t trade with certainty of expectation, trade with conviction of outcome.

29) Never assume that the market "must" follow a certain pattern, especially based on recent trends. The market is not obliged to continue the trend or follow logic. Even if the market continues to rise (or fall), it may suddenly reverse. Avoid using absolutes such as "definitely" and "never". Keep your mind flexible and logical, and everything is possible. Remember: never make a "never" conclusion about market behavior.

30) Don’t consider win rate everything. Pursuing a high win rate just to feel good about yourself is a trap. Taking profits too early or avoiding small necessary losses will eventually hurt your profits.

31) Never underestimate the importance of discipline, patience, risk control and execution, which are more important than simply pursuing Alpha returns. Many traders have high-quality Alpha returns, but do not know how to control them. Good execution is not only about choosing trading targets and strategies, but also about knowing when to hold back. When the market environment is unfavorable, the best execution decision is often not to trade. Always ask yourself: "Do I have an advantage here, or am I just betting on the result of a coin toss?" If the latter, save your strength and wait for a better time.

32) Don’t get discouraged after a big loss, and don’t get carried away when you win big. Emotional resilience is a trader’s most valuable asset.

33) Never ignore price action following a news release. If the market reacts in the opposite direction to your expectations, exit immediately. The market is sending you information that you are not aware of yet.

34) Never trade on borrowed faith. If you buy based on someone else's advice, you need them to tell you when to get out, and when they are silent, you are stuck. As Livermore said, "No one ever made a fortune on what he was told." Hone your own skills and build your own system. If you can't trust your own decisions, you are just a pawn in someone else's trade.

35) Never go against your instincts. If something doesn’t feel right, it usually is.

36) Never try to catch every market move

It is always easy to be tempted to catch every ups and downs in the market, but this approach is doomed to be futile. Please always face the market with a mentality of abundance rather than scarcity. It is always there, and there are enough opportunities for you to achieve your goals. You don't need to swing at every pitch like a batter.

37) Never underestimate the power of failure. Just keep doing it, fail early and fail often, and you will keep improving.

38) Never hold on to a losing stock when your rationale for investing no longer holds, especially after a price crash. Thinking “I’ve lost so much that I can’t sell now” will wipe out your money.

39) Don’t let the “get your money back mentality” dominate your decision making. This mindset can lead to overtrading and ultimately, completely liquidating a position.

40) Don’t just focus on when you enter a trade. A trade isn’t over until you leave it. Knowing when to cash out is just as important as knowing when to enter a trade.

41) Don’t ignore the seemingly “boring” parts (position management, stop loss setting, risk-reward ratio), they are the key to your success in the market. Don’t wait until you suffer a catastrophic loss to understand this truth.

42) Don’t trade for the thrill of the moment, play it safe and win

43) Don’t fall into the illusion of power, it is often just a lag behind reality.

44) Never stay or get stuck in a situation because of “hope” and wishful thinking.

45) Never underestimate the importance of risk management. Always prioritize the safety of your capital over profits. Manage your losses and profits will follow.

46) Do not enter or exit a trade rashly. Just as you gradually build a position, you should also gradually reduce your position. An "all-in, all-out" operation is tantamount to self-destruction.

47) Never bet something you cannot afford to lose. No single trade should be so large that you are forced out of the market. The most important advice is to never let your losses get out of control. Even if you make 20 or 30 mistakes in a row, you should still have some capital left. Never let a single position jeopardize your trading career.

48) Never trade outside your advantage range. If you don’t have an edge, just wait and see. Forcing a trade outside your trading system will only lead to a gradual loss of funds in your account.

49) Never assume that your advantages are permanent. Markets evolve, advantages fade, and strategies that worked in one cycle may become useless in the next. Keep improving, keep testing, and stagnation is self-destruction.

50) Never judge a trade by its results alone. Good trades can sometimes lose money, and bad trades can sometimes make a profit. Focus more on execution than results.

51) Never hold a position for fear of appearing foolish or for public opinion. I have seen too many people prematurely ruin their careers for fear of public humiliation. Cutting losses quickly is the way to survive. The market never pays attention to your pride, and you should learn to let go of your ego.

52) Never underestimate the power of a temporary exit. When you are on a losing streak, close your positions and take a break. Psychological capital is as important as financial capital. The key is to break the vicious cycle of negativity. When you return, keep a low profile and keep your scale simple. When you regain confidence, expand your bets.