Are these two trading rules non-negotiable? (2024)

Trades don’t always go as you expect…

You can have the best trading plan in the world and sometimes the stock won’t hit your target. Or it will hit your target, then quickly slam through your stop causing you to exit the trade…

Taking that stop can save you from big losses.

But it can also kick you out of a trade that ends up working.

So how can you avoid big losses and still take advantage of trades that work?

It all comes down to one simple concept…

Crucial Trading Rules

My plan for Enveric Biosciences, Inc. (NASDAQ: ENVB) yesterday ended up working out beautifully…

But it wasn’t a perfect trade where you enter a stock at your planned entry and the stock immediately spikes.

That’s not a realistic expectation for every trade.

There’s going to be consolidation. There are going to be times you get stopped out and take losses.

It’s all part of trading.

So what can you do?

Two rules can help you. Here’s how they could’ve worked in my number one trade plan yesterday…

Can These Two Rules Improve Your Trading?

My trade idea for ENVB included an entry at $2.50 with risk at $2.20.

But when ENVB first broke through $2.50 it immediately halted…

If you follow my rule for halts, you would’ve exited the trade as soon as the stock unhalted.

Or you would’ve been out when the stock hit the stop at $2.20.

So now you’re out of the trade … And both scenarios would have resulted in small losses.

Then, a few minutes later ENVB broke through $2.50 again … It consolidated and then dipped…

But this time it held it above the stop level of $2.20, went on to break $2.50 again and the trade idea worked — it hit the profit target of $3.10 and then some.

Are these two trading rules non-negotiable? (1)

ENVB chart: 1-day, 1-minute candle — courtesy of

Now maybe you’re frustrated that you exited. And maybe you can’t re-enter because you’re out of day trades.

Your brain might even be telling you, you should’ve ignored your stop and held it … Next time, just hold it…

But sticking to your stops is the one rule you can’t afford to break.

You have to take that small loss.

If you don’t, next time you could end up holding one of these other stocks that completely failed yesterday morning…

Are these two trading rules non-negotiable? (2)

WLGS chart: 1-day, 1-minute candle — courtesy of

Are these two trading rules non-negotiable? (3)

ALIM chart: 1-day, 1-minute candle — courtesy of

That’s why we have trading rules.

If you get in the habit of ignoring your stops, you’ll eventually take such big losses that you’ll blow up your account. Or you’ll be bag-holding losers and have no capital left to trade with.

So never ignore your stop. Build the discipline to stick to it.

There’s another rule you can follow that can help you avoid choppy moves and potential halts right near the open…

Wait until after 9:45 a.m. to enter a trade.

Waiting for post 9:45 a.m. is a trading rule that I usually impose on stocks that are chat pumps.

But I think every new trader should use it every day — for every trade.

It might mean you miss some trades that spike right at the open. But it can keep you out of the market chop at the open…

And that can prevent you from entering losing trades and save you a ton of frustration.

It also saves your day trades for those higher-odds setups when they do come around…

Get ready for the next potential opportunity and stay up to date on the market with my Market Update videos three times per week.

But if you want a full trading system and mentorship — attend one of our live webinars here.

Have a great day everyone. See you back here tomorrow.

Tim Bohen

Lead Trainer, StocksToTrade

Are these two trading rules non-negotiable? (2024)


What is the 2 rule in trading? ›

One popular method is the 2% Rule, which means you never put more than 2% of your account equity at risk (Table 1). For example, if you are trading a $50,000 account, and you choose a risk management stop loss of 2%, you could risk up to $1,000 on any given trade.

What is the number one rule of trading? ›

Rule 1: Always Use a Trading Plan

Once a plan has been developed and backtesting shows good results, the plan can be used in real trading. Sometimes your trading plan won't work. Bail out of it and start over. The key here is to stick to the plan.

What's the hardest mistake to avoid while trading? ›

Biggest trading mistakes and how to avoid them
  • Over-reliance on software. ...
  • Failing to cut losses. ...
  • Overexposing a position. ...
  • Overdiversifying a portfolio too quickly. ...
  • Not understanding leverage. ...
  • Not understanding the risk-reward ratio. ...
  • Overconfidence after a profit. ...
  • Letting emotions impair decision making.

Is the most important rule of trading is to play great defense not great offense? ›

“The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown.

What is high 2 in trading? ›

in an up or sideways market. If there is then a bar with a Lower High (it can occur one or several bars later), the next bar in this correction whose high is above the prior bar's high is a High 2. Third and fourth occurrences are a High 3 and 4. There are other variations as well.

What is 90% rule in trading? ›

The 90 rule in Forex is a commonly cited statistic that states that 90% of Forex traders lose 90% of their money in the first 90 days. This is a sobering statistic, but it is important to understand why it is true and how to avoid falling into the same trap.

What is the 3% rule in trading? ›

The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal. In order to safeguard themselves against big losses, traders attempt to restrict exposures on a single deal.

What is the 80% rule in trading? ›

If the market can trade back inside value for two consecutive 30 minute periods, then it has an 80% chance of rotating to the other side of value. –Context is extremely important. Do not trade this rule mechanically and expect to have good results.

What is the number one mistake traders make? ›

Studies show that the number one mistake that losing traders make is not getting the balance right between risk and reward. Many let a losing trade continue in the hope that the market will reverse and turn that loss into a profit.

Why do 90% of traders fail? ›

In conclusion, retail trading is challenging and risky, requiring much preparation, discipline, and skill. Most retail traders lose money because they do not have a clear and consistent trading plan and a proper risk-reward ratio.

Why 99% of traders fail? ›

The most common reason for failure in trading is the lack of discipline. Most traders trade without a proper strategic approach to the market. Successful trading depends on three practices.

When should you avoid trading? ›

Making Money By Sitting On Your Hands – 10 Situations When Not To Trade
  1. When you have to think about the trade. ...
  2. When you don't know where your stop goes. ...
  3. If the market does not favor your system. ...
  4. When you want to “catch up” ...
  5. When you think that markets are “too high” or “too low”

What are the biggest mistakes a trader should avoid in stock trading? ›

Common investing mistakes include not doing enough research, reacting emotionally, not diversifying your portfolio, not having investment goals, not understanding your risk tolerance, only looking at short-term returns, and not paying attention to fees.

What is the best defense quote? ›

We have all heard the adage that “The best defense is a good offense”. The thought is that by being proactive rather than passive, you will get a strategic advantage over your opponent by forcing your opponent to be on the defense.

What is the saying the best defense is a good offense? ›

In a sporting or military context, the adage references how proactively attacking your opponents or enemies is the best way to protect yourself as your opposition will be too occupied defending themselves to stage an attack of their own.

How do you calculate the 2% rule? ›

To calculate the 2% rule for a rental property you just need to know the property's price. You could then take that number and multiply it by 0.02. For example, say your budget for purchasing an investment property is $175,000. If you multiply $175,000 by 0.02, you'd get $3,500.

What is the 3 trade rule? ›

Essentially, if you have a $5,000 account, you can only make three-day trades in any rolling five-day period. Once your account value is above $25,000, the restriction no longer applies to you. You usually don't have to worry about violating this rule by mistake because your broker will notify you.

What is the 3 1 rule in trading? ›

If you give yourself a 3:1 reward-to-risk ratio, you have a significantly greater chance of ending up profitable in the long run. In this example, you can see that even if you only won 50% of your trades, you would still make a profit of $10,000.


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