📜 12 BASIC RULES FOR EQUITY TRADERS

These are some essential rules that every stock trader and investor should know.

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1st Stock-Market Rule: “The Market is Uncertain and Unpredictable”

You can’t predict the future—and if you could, there’d be no point in wasting time investing in stocks.

• Don’t try to outsmart the market. Instead, prepare for different possible outcomes and base your strategy on probabilities.

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2nd Stock-Market Rule: "Portfolio Diversification is Mathematically-Proven"

Always keep your portfolio diversified. Portfolio diversification has consistently been proven right through math and works across all asset classes.

• Spread your investments across asset types, different securities, countries, and currencies. 🔗 More: Risk-Adjusted Portfolio Performance Ratios

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3rd Stock-Market Rule: "Don't Compete with Smart Money in the Short-Term"

If you're trading intraday, you're going up against expert traders and institutions like hedge funds and dealing desks. These are the professionals known as ‘Smart Money,’ and they have clear advantages over individual traders. Avoid day trading —It is better to develop as a swing or long-term investor. 🔗 More: Dumb Money vs Smart Money (Key Indicators)

• Smart money operates quietly and can't be outplayed by retail traders in short periods.

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4th Stock-Market Rule: “Buy the Rumor, Sell the Fact”

Selling the news is a common tactic among professional traders.

• Rumors are usually reflected in stock prices early on. Once the news becomes official, the opportunity is often gone.

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5th Stock-Market Rule: “Don't Trade the Stocks of Scammers”

Never trust a company unless you're confident in the quality and consistency of its management.

• Never trade stocks of companies led by dishonest or untrustworthy management.

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6th Stock-Market Rule: “News is Already Incorporated in Prices”

Don’t make investment decisions based on something you just read online.

• Most news—about 90%—is already priced into the stock.

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7th Stock-Market Rule: “Instinct Misleads”

Avoid making decisions based on gut feeling. The stock market is a game of knowledge, data, and logic.

• Your emotions are your worst enemy—keep them out of your trades.

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8th Stock-Market Rule: “Trade Contrarian to the Crowd”

When everyone is talking about the stock market, it’s usually a strong signal to sell. Conversely, when no one believes in the market, it’s often a good time to buy.

• Always act opposite to the crowd.

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9th Stock-Market Rule: "Managing Your Overall Portfolio Risk Matters"

Make investment decisions based on the total risk of your portfolio—not just the individual risk of a single trade.

• Understand how different assets and asset classes move together (Intermarket Analysis). 🔗 More: Trading Practices to Reduce Costs and Manage Risk

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10th Stock-Market Rule: "Don't Fight the Trend"

The trend is your friend—follow it. 🔗 More: Chart Patterns & Probabilities

• Focus on following the trend, not betting on reversals.

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11th Stock-Market Rule: "Don't Trade Long When Cash is King"

When interest rates are high or liquidity is tight, cash rules.

• Avoid trading long equities when "Cash is King".

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12th Stock-Market Rule: "Keep an Eye on the Dow Jones Industrial"

No matter which market you’re trading, always monitor the Dow Jones Industrial Average—it’s the most important index in the world.

• If a trading strategy doesn’t work on the Dow, it likely won’t work on any other index. 🔗 More: The Dow Jones Industrial Average

 

■ Stock Trading Tips

Giorgos Protonotarios, financial analyst

 

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