22 Rules of Trading
Author: Rujul Kamble
About the Author
Rujul Kamble is a passionate trader, national chess player, cricketer, and a student of market psychology. Despite being young, Rujul brings years of experience observing market behavior, testing strategies, and building a deep understanding of what separates successful traders from impulsive gamblers. His unique insights reflect a rare maturity for his age, and this book is a culmination of his 5+ years of trading study, mentorship, and real-world application.
With a keen eye for patterns and discipline honed through chess and sports, Rujul believes trading is not just about money — it's a mind game, a lifestyle, and a science. This book is for every aspiring trader who wants to develop a clear, disciplined, and successful approach to markets.
Table of Contents
Plan Your Trade, Trade Your Plan
Risk Only What You Can Afford to Lose
Never Let a Profit Turn into a Loss
Cut Your Losses Quickly
Let Your Profits Run
Avoid Overtrading
Use Stop Losses Always
Be Emotionless: Trade Logic, Not Feelings
Trade with the Trend
Keep a Trading Journal
Never Average Down
Understand Risk-Reward Ratio
Do Not Chase the Market
Stay Updated with Market News
Avoid the Fear of Missing Out (FOMO)
Don’t Trade Based on Tips
Master One Strategy First
Review Your Trades Weekly
Don’t Overleverage
Use Technical and Fundamental Analysis
Take Breaks to Reset
Always Keep Learning
Rule 1: Plan Your Trade, Trade Your Plan
Explanation:
A good trader does not jump into trades blindly. Every successful trade starts with a strategy — your entry point, stop-loss, target, and trade rationale must be clearly defined before entering the market. Once you’ve created a plan, stick to it no matter what emotions arise.
Why It Matters:
Markets are chaotic. Without a plan, emotions like fear, greed, and FOMO will take control. A written plan acts as your personal guide through uncertainty.
Real Example:
Suppose you're trading Reliance shares. You identify a breakout pattern at ₹2,500 and plan to buy at ₹2,505 with a stop-loss at ₹2,470 and target at ₹2,580. If the price hits ₹2,530 and starts falling, emotional traders might panic and exit. But a disciplined trader waits — because the stop-loss hasn’t been hit. And maybe later that day, it hits ₹2,580 — your profit target.
Action Tip:
Write down your plan before placing a trade. Set alerts for your stop-loss and targets. Never alter it during the trade unless a new plan is made.
Rule 2: Risk Only What You Can Afford to Lose
Explanation:
The golden rule in trading: Never risk your rent, EMI, or emergency fund in the market. Trading is a probability game, not a guarantee. Even the best traders lose sometimes.
Why It Matters:
If you’re emotionally attached to the money you're trading, you’ll make poor decisions. Fear of loss increases stress and clouds your thinking. When you can afford the loss, you trade calmly and smartly.
Real Example:
A trader named Aditya took a ₹1,00,000 loan to trade options. Within two weeks, he lost ₹80,000 and couldn’t sleep at night. Compare this to Riya, who traded only with ₹10,000 from her savings. She lost ₹2,000 but learned a lesson and stayed emotionally stable.
Action Tip:
Decide a trading capital that won’t disturb your life if lost. Usually, 2–5% of your monthly income or pocket money is a safe start.
Rule 3: Never Let a Profit Turn into a Loss
Explanation:
The market often gives you profit — then takes it back. It’s your job to protect your gains. If a trade is in profit, trail your stop-loss or book partial profits to secure some earnings.
Why It Matters:
Most new traders wait for ‘more profit’ and end up with losses. Greed causes delays in exiting, and reversals wipe out gains. Discipline means locking in profit smartly.
Real Example:
Suppose your intraday trade in TCS hits ₹3,700 after you entered at ₹3,650. You’re in ₹50 profit. But instead of trailing your stop to ₹3,680 or booking 50% profit, you wait. Then suddenly, market reverses due to US inflation news — and the stock drops to ₹3,600. You exit in loss. Lesson: profit vanished because of greed.
Action Tip:
Set a trailing stop-loss once your trade is 1:1 risk-reward positive. Or book 50% at target 1, then hold the rest with stop at entry.
📘 Rule 4: Cut Your Losses Quickly
🔹 “Hope is not a strategy. When a trade goes wrong, exit fast.”
📖 Deep Explanation:
One of the biggest mistakes traders make is holding on to losing positions, hoping they’ll recover. The market doesn’t care about your hopes — it moves based on supply, demand, and news. A small loss is a bruise. A big one can be fatal to your account.
📊 Example:
Suppose you bought TATA Steel at ₹110 and your stop loss was ₹105. But it falls to ₹102 and you still hold, thinking it’ll bounce. Later, it drops to ₹95. You’ve now lost ₹15 per share. Had you respected the stop loss, the damage would be limited.
💡 Pro Tip:
Set your stop loss before entering a trade, and never move it hoping for a recovery. Respect it like a seatbelt—it’s there to save your capital.
📘 Rule 5: Let Your Profits Run
🔹 “Don't exit a winning trade too early. Ride the trend until the market tells you to exit.”
📖 Deep Explanation:
While traders panic in losses, they also rush to book small profits due to fear of reversal. This mindset limits growth. A good trade should be allowed to reach its full potential.
📊 Example:
You bought Infosys at ₹1,400, and it quickly moves to ₹1,430. You book profits. But by the day’s end, it's at ₹1,480. Why? Because the trend was strong. You exited too early because you didn’t trust your setup.
💡 Pro Tip:
Use trailing stop-losses to lock in profit as the stock moves in your favor. This allows you to maximize gains without being greedy.
📘 Rule 6: Trade With the Trend
🔹 “Trend is your friend—until it bends.”
📖 Deep Explanation:
Most losses happen when traders go against the prevailing trend. Whether it’s intraday or swing trading, you must first identify the trend and then trade in that direction.
📊 Example:
The Nifty is in a clear uptrend, forming higher highs and higher lows. But you try to short it, expecting a correction. Instead, it surges another 150 points and hits your stop loss. Fighting trends is like swimming against a river.
💡 Pro Tip:
Use tools like moving averages, RSI, and trendlines to identify trends. If in doubt, stay out. Don’t fight the flow.
📘 Rule 7: Keep Emotions Out of Trading
🔹 “The market is a battlefield — emotions are your biggest enemy.”
📖 Deep Explanation:
Greed leads to overtrading. Fear leads to hesitation. Anger leads to revenge trading. Hope leads to holding losing trades. Emotions distort your logic. That’s why the best traders operate like robots — focused, calm, and consistent.
📊 Example:
A trader loses ₹5,000 in a trade. In frustration, he takes another impulsive trade to recover. He loses ₹10,000 more. This is revenge trading caused by emotion.
💡 Pro Tip:
Set rules and follow them regardless of how you feel. Keep a trading journal to track emotional decisions and improve discipline.
📘 Rule 8: Don’t Overtrade
🔹 “More trades don’t mean more profits.”
📖 Deep Explanation:
Overtrading leads to poor decisions, stress, and unnecessary losses. Trading should be like sniping — wait patiently for the right shot, then act. Don’t trade just because the market is open.
📊 Example:
A trader takes 10 trades in one day, chasing every little move. Only 2 trades are good setups. The rest are based on noise. By the end, he's exhausted and in loss.
💡 Pro Tip:
Quality over quantity. Define how many trades you’ll take in a day and stick to it. Take only high-probability trades based on your strategy.
📘 Rule 9: Know Your Risk-Reward Ratio
🔹 “Always risk ₹1 to make at least ₹2 or ₹3.”
📖 Deep Explanation:
Trading without a proper risk-reward ratio is gambling. A good trader ensures the reward is at least twice the risk. This way, even if only half the trades are correct, the account grows.
📊 Example:
If your stop loss is ₹10 below entry, your target should be ₹20-30 above. That way, 5 losses (₹-50) and 5 wins (₹+150) still give you a net profit of ₹100.
💡 Pro Tip:
Use a position size calculator before every trade. Stick to setups with at least a 1:2 risk-reward ratio. Avoid low R:R trades — they drain accounts over time.
📘 Rule 10: Avoid Revenge Trading
Explanation:
Revenge trading happens when a trader suffers a loss and immediately jumps into another trade to “win back” the lost money. This behavior is driven by emotion, not strategy. It's like a gambler doubling their bet after a loss — often leading to disaster.
Example:
Say you lost ₹5,000 on a trade. You feel angry and quickly enter another trade without analysis, just to recover. You ignore stop-losses or proper entry points — and now you’ve lost even more.
This creates a loss spiral.
Deep Insight:
The market doesn’t owe you anything. You must trade with a calm mind, not emotions. Accept the loss, step away, and review your mistake objectively. Revenge trading turns logical minds into emotional wrecks.
📘 Rule 11: Risk Only What You Can Afford to Lose
Explanation:
Never trade money you need for rent, school fees, or essentials. Trading is inherently risky. Only use disposable income that, if lost, won’t ruin your life.
Example:
If you have ₹10,000 saved for your school fees, and you use it in trading hoping to double it — that’s gambling. If you lose, it creates real-life stress. Instead, trade with money meant for learning or investing.
Deep Insight:
Successful traders know that capital protection > profit. Peace of mind is more powerful than chasing unrealistic gains.
📘 Rule 12: Master One Strategy Before Trying Many
Explanation:
New traders often jump between strategies (price action, indicators, swing trading, etc.) without mastering any. This creates confusion and inconsistency.
Example:
Imagine trying to play cricket, football, and chess all at once. You’ll be average at everything, master of none. Similarly, pick one trading strategy — like RSI + EMA crossover — and test it thoroughly.
Deep Insight:
Deep mastery in one area beats shallow knowledge in many. Confidence comes from consistency, not variety.
📘 Rule 13: Keep a Trading Journal
Explanation:
A trading journal tracks every trade: why you entered, your emotions, the result, and what you learned. This is your greatest teacher — better than any course.
Example Format:
| Date | Entry | Exit | Reason | Emotion | Mistake | Lesson |
|---|
Deep Insight:
A journal reveals your emotional patterns, your strengths, and weaknesses. It helps you evolve from “guessing” to “strategic decision-making”.
📘 Rule 14: Understand the Power of Compound Growth
Explanation:
Small, consistent gains compounded over time create wealth. Don't focus on daily jackpots. Focus on monthly and yearly performance.
Example:
If you make just 5% per month on ₹10,000, in one year with compounding, it becomes ₹17,958. That’s almost 80% return. Now imagine ₹1,00,000!
Deep Insight:
Trading isn’t a lottery. Think long-term. Like Warren Buffett said: "The stock market is a device for transferring money from the impatient to the patient."
📘 Rule 15: Trade What You Understand
Explanation:
Never trade in stocks, options, or futures you don’t understand. If you don’t know the asset, its volatility, or price behavior — you’re just guessing.
Example:
If you only understand Nifty 50 stocks, but you buy a smallcap stock just because it’s trending, you may get stuck. If it crashes 20%, you won’t know what hit you.
Deep Insight:
Study the instrument before you trade it. Know the risk, average volatility, and how it reacts to news. Understand first. Profit later.
📘 Rule 16: Emotions are Your Biggest Enemy
Explanation:
Fear, greed, overconfidence, anxiety — all destroy logical decision-making. Successful traders are emotionally neutral. They don’t get too happy on wins or too sad on losses.
Example:
You see a sudden market spike and your greed kicks in — “I’ll miss the rally!” You enter late and lose. That’s FOMO — fear of missing out. It clouds your judgment.
Deep Insight:
Meditation, journaling, and discipline can help you master your emotions. Your mindset is more important than your setup.
📘 Rule 17: Don’t Trade Every Day
Explanation:
The market gives opportunities every day — but that doesn’t mean you should trade daily. Forced trades lead to mistakes. Only trade when the setup is perfect.
Example:
If your strategy works best during trending markets, but today’s a choppy sideways market, avoid trading. Wait. Be patient.
Deep Insight:
Sitting on your hands is also a trade. Avoiding a bad trade is as good as taking a winning trade
📘 Rule 18: Understand the News But Don’t Trade the News Blindly
Explanation:
News can shake the markets — earnings reports, Fed meetings, inflation data — all of these can move prices drastically. But trading just based on headlines is like driving by only looking at Instagram stories. You need context, preparation, and technical confirmation.
Example:
A stock's earnings come out positive, but the stock still crashes. Why? Because expectations were already baked in. This happens often — “buy the rumor, sell the news.”
Actionable Tip:
-
Always check the economic calendar.
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Wait for the first 15–30 minutes post-news to let volatility settle.
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Combine news with chart patterns for a more calculated trade.
📘 Rule 19: Avoid Revenge Trading — Emotions Are Expensive
Explanation:
You lost money on a trade, and now you’re out for vengeance. You double your lot size. You stop caring about rules. And you lose even more. That’s revenge trading.
Example:
A trader lost ₹2,000 in the morning, took an unplanned trade with ₹5,000 risk, and wiped out the week's profits. All because they wanted to "get it back."
Actionable Tip:
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After a loss, take a break. Walk away.
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Follow the “2-loser rule” — stop for the day after two back-to-back red trades.
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Journal what triggered your revenge mindset.
📘 Rule 20: Consistency Beats Intensity
Explanation:
Trading is not about a one-time jackpot. It’s about showing up every day with discipline, managing risk, and making small wins add up.
Example:
A trader who targets ₹500/day with strict rules and hits that 15 days a month makes ₹7,500. Compare that to someone who aims for ₹5,000/day but only wins once and loses big five times. Consistency always wins.
Actionable Tip:
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Build a daily routine: analysis → trade → journal.
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Respect your edge, no matter how small.
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Think in probabilities, not perfection.
📘 Rule 21: The Market is Always Right — Respect It
Explanation:
You may believe that a stock should go up. You might argue with indicators, patterns, or even global cues. But the market doesn’t care about your opinion. The chart is the ultimate truth.
Example:
Traders often try to "predict" the market. But smart traders "react" to what the chart says.
Actionable Tip:
-
Accept stop-loss hits without ego.
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Don’t try to prove the market wrong.
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When in doubt, zoom out — let the larger trend guide you.
📘 Rule 22: Keep Learning — Markets Evolve, So Should You
Explanation:
Markets change. New instruments emerge. Trading styles evolve. What worked last year may not work this year. The only way to survive and thrive is to keep learning.
Example:
A trader who only relied on moving averages in 2019 may have struggled in 2022’s volatile market. Those who adapted — by studying price action or options strategies — stayed in the game.
Actionable Tip:
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Read books, attend webinars, follow top traders.
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Revisit your strategies monthly and adapt.
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Never assume you know enough.
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