At the outset, there is a small admission. There is nothing like consistently profitable trading. Also, nobody can give you a book on how to trade profitably. The best of traders devised their own books and their own theory on what worked for them best. However, there are some ground rules that you can and you must follow as a trader. These ground rules can go a long way in help you to be substantially and meaningfully profitable even if not always profitable.

Rule 1 is that trading always begins with protecting your capital. There is no escaping capital protection. You need to be clear about how much capital you are willing to lose. Any trade that you take must be monitored based on the risk to your capital. The best way to survive as a trader is to ensure that your capital is protected.

Rule 2 is that you must always trade with a stop loss. Stop loss is your insurance against market volatility. Your stop loss can either be set on technical, events or based on your affordability. It should reflect the loss that you are willing to accept. Irrespective of whether you are trading on the long side or on the short side, ensure that you trade with an in-built stop loss.

Rule 3 is that you must remember that profit is what is booked; all else is book profits. Keep taking your money off the table at regular intervals. As a trader, you are not in the buy-and-hold game. The more you use each opportunity to take profits off the table, the more your money churns and the more funds you have available to buy when there are corrections in the market.

Rule 4 is that you must always stay in sync with the market momentum. When you are a trader, trend is your friend. You are more likely to profit as a trader if you trade in sync with momentum. Trying to short a bull market or buying into a bear market is pointless. Your trading strategy should be aligned to the direction of the momentum. Don’t try to outsmart the market; even the best of guys never succeeded in doing that.

Rule 5 is that you must not look back with regret, ever. This is very important especially if you have had to book losses. Traders tend to look back and overanalyse. Also, when traders book profits and the stock goes further up, they tend to look back at the notional losses. Both tend to detract from your core trading strategy. It is best avoided.

Rule 6 is that as a trader you must always be cautious about leverage in an uncertain market. It is one thing to leverage in a normal and tepid market. But that strategy cannot apply when we are in a volatile market. That is just too much of a risk. If you keep your leverage to the bare minimum then you can avoid burgeoning of losses.

Rule 7, which you must always remember is that in markets there are 3 strategies; buying, selling and doing nothing. This is something most traders tend to miss. Traders believe that trading strategy either means to buy or to sell in the market. At times doing nothing can also be profitable and more often it is. This is relevant when the market is confusing and traders can get hit either ways.

Rule 8 is that trading tips and WhatsApp forwards are best avoided. Remember, trading tips come with the promise of quick money and hence can be quite tempting. You end up being the sucker in such cases. Talk to your broker and rely on your judgement. Free tips are never worthwhile and you will eventually end up losing.

Rule 9 and a very important and often underestimated rule is that costs of trading and statutory costs may look minor but they matter a lot to a trader. Remember, when you trade your cost is not just the brokerage you pay. There are statutory charges like STT, stamp duty, GST, turnover tax, exchange fees etc. When you take delivery of shares, there are expenses related to demat account. All these costs must be factored in when you project your trading profits.

Last but not the least, remember that overnight risk can be the bugbear for traders. A trader typically operates at the short end of the market. Positions are normally intraday or for a few days. One of the biggest risks you need to be conscious of if the overnight risk. When there is uncertainty on the economic or geopolitical risk or there is a major event coming up, it is advisable to be as light in the market as possible. This specifically applies to traders who focus on BTST and STBT trades. What is very important here is that you do not try and become a trader by default or an investor by default. What you are, you must be by design only. That is the crux of smart trading.

Remember that this is just an indicative list of some key trading rules that traders should predicate their trades on. The comprehensive list will perhaps be much longer but that may not be necessary. These rules may not result in fantastic profits for you but it can definitely save the embarrassment of huge losses in your trades. In the process you build the base for healthy returns in trading.