Stock Market Trading Rules – Revealed

There are two basic rules that people are most familiar with when buying or selling shares on the stock market, and they work. One of the cardinal stock market trading rules that everyone applies to is to cut your losses short which is usually used in the business world. The other stock market trading rule that is most commonly used is to let your profits run. Now let’s take it a step further by fine tuning the trailing stop losses, and when your stock is profiting become more risk seeking. If you are able to increase your risks at the right time you can get all the profits that you can possibly get out from your system. There is no need to rush in following these trading rules, if you are wary you can test the effects of these tips by having a wider trailing stop loss than your previous stop, and examine how this particular stop is reflected in your system.

Take this as an example, you have already set your previous loss at two ATR however, you set your trailing stop loss at three ATR. Once the stock is in profit, it allows the stock a little bit more room to move. Using this method you are still reducing the risk at the beginning of the trade by maintaining a tight stop loss. Either way you have to be willing to risk more once you are already in profit.

Another method is the trend following system which can be highly effective. This is where you find the lowest of the low within the last 40 days. Then you position your stop one cent below this low as if, it was consulting the price action itself by identifying where the lowest of the low is.

You should consider using this method and try testing it out as it can be extremely valuable. The way it works is on each day a new trading day replaces the one of the old days. Find the lowest of the low within the last 40 days, and position your stop at that point. If the point needs to be repositioned then do so.

But please take note that there is no guarantee for using these methods and they are not the perfect trailing stop loss. What works for you should be the one that you can apply in your own way which should be similar to your own initial stop.

It will have its ups and downs, sometimes it works and other times it won’t. Sometimes the best stop loss and an initial stop is not how you calculate it but just having them in place to prevent further losses. And that is the real secret and key to using this method.


Like everything in life, you will need to feel comfortable and able to understand the methods before it can be of actual use to you. So find a trailing stop loss and initial stop that you know and feel most at ease with.
So in essence, these methods can be fully understood if you can see them in action. And to do so is to test them, you can do so by choosing a whole lot of the charts that you consider to trade. When you receive an entry signal, mark where it is and set the initial stops and trailing stop losses from there. Track the progress of the trade and revaluate the methods you have chosen. If they are successful, by all means continue to use them, if they are not, switch methods until you find the one that best suits you and is successful.