Six rules to follow as a stock trader

If you want to become a successful stock trader, there are some essential guidelines you ought to stick to. This article will outline six of the most important ones. While there is no foolproof way to achieve success in the markets, following these tips should put you on the right track. So, without further ado, let’s get started.

Rule one: do the research

Choosing the right stocks is crucial, and that involves thorough research before making any purchases. This includes examining a company’s financial statements, management team, business goals, business model, and short- and long-term objectives before investing your money. Armed with this information, you can better identify the best growth stocks for the next 10 years or even longer.

Furthermore, while it might be tempting to invest in the latest and hottest stocks, sticking with more established companies is often a wiser move. Established companies typically have a more reliable financial history and are less prone to sudden drops in value. It’s a strategy that emphasizes stability and long-term growth potential.

Rule two: understand market trends

To be a fruitful investor, you need to know which trends are popular in the market. What stocks are rising? What stocks are falling? And more importantly, why? These are all questions that you need to be able to answer before you make any investment decisions, and it goes without saying that you need to be able to read market charts and identify trends and patterns as a trader.


Luckily, there is an abundance of online resources available that can help you keep on top of the latest market trends. Financial news websites, stock analysis tools, and even social media can be used to track the market and better understand where it’s headed. If you are trading with a broker, you can very often also find they will provide educational content of their own, such is the case with Saxo.

Rule three: stay disciplined and patient

To be successful in any field, it is essential to maintain a high level of discipline and patience. This is important because it allows you to focus on your goals and work towards them without being sidetracked.


Staying disciplined and patient in stock trading means not selling your shares immediately whenever you see a tiny drop in the market. It also means sticking to your choices reasonably and not being over-excited and purchasing hot trends as they come.


Maintaining discipline and patience can increase your chances of achieving long-term success in any field, and this does not exclude in stock trading.

Rule four: use stop-loss orders to limit your losses

As we get down to the nitty-gritty of stock trading, stop-loss orders are a vital tool for investors.


By placing a stop-loss order when you trade, you can limit your losses on a security to a predetermined amount. For example, if you purchase a stock for $100 per share and place a stop-loss order at $90 per share, you will sell the stock automatically if it falls to $90. This can be favourable if the stock price falls sharply, and you cannot sell it manually.


Stop-loss orders can also help ease your anxiety about potential losses, as you know your loss will be limited. However, it is essential to remember that stop-loss orders are not guaranteed, as they may not be executed at your desired price in fast-moving markets. Despite this, when used correctly, stop-loss orders can be a helpful way to limit your losses and manage your risk.

Rule five: don’t overtrade

Over-trading is a common mistake made by novice investors. It occurs when an investor trades too frequently, often to seize opportunities in the markets. Over-trading can lead to a trader having too many open positions to properly manage, increased transaction costs and fees, and emotional decision-making. When you are tempted to seize any opportunity that comes your way, you may end up making rash decisions that hurt your portfolio in the long run.


When trading stocks, it is fundamental to remember the rule: don’t over-trade or trade impulsively. By sticking to this rule, investors can help avoid common pitfalls that can lead to poor investment decisions.

Rule six: have a solid investment plan

When it comes to investing, there is no one-size-fits-all approach. Every trader has different goals, risk tolerance, and time horizon. As a result, it is crucial to develop a solid investment plan tailored to your unique needs and objectives before you begin to place any trades.

In summary

Anyone can become a stock trader, but it takes discipline, research, and expertise to be a successful stock trader. If you are dedicated to learning and practising the strategies outlined in this article, you can increase your chances of becoming good at trading stocks.