Investors and traders rely on various rules to guide their decisions. Most rules emanate from the school of hard knocks or lessons learned. Investing is a long-term approach to owning equities, whereas trading is more short-term. We have assembled the top 10 rules for trading stocks.

No. 10: Eliminate Surprises

When you take a position in the market, you don't want to be blindsided. You can prevent that from happening by being mindful of major announcements or events that can impact stock prices. Things such as jobs numbers, Fed meetings, and earnings reports. Make it standard practice to investigate such matters before making a trade.

No. 9: Manage your Emotions

Number nine in our list of the top 10 rules for trading stocks is to manage your emotions. If you are prone to anxiety, limit the amount of stimuli you receive when trading. The trading platforms offered by online brokers provide so much information that it can be overwhelming. You don’t need to fill your screen with every available tool. Consider minimizing your screen so the only thing you see is the stock price. It's also helpful to take breaks. Put in a stop order and go for a walk.

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Another way to help control your emotions is to watch the stock price, not your account balance. Seeing the effect on your account in terms of real time dollars can lead to emotional trading.

No. 8: Be Consistent

You need to be consistent when you trade. Don’t take wild chances when you’re up or become unwilling to take any risk when you’re down. Going to extremes will impact your outcome in a negative way. Have a plan for ideal entry and exit points and stick to it.

No. 7: Just say No to Options

Nothing will drain your account faster than trading options. While it’s true that you can turn a relatively small investment into a huge win with options, you can lose huge amounts just as easily. In addition to the risk that results from the leverage involved, there is a huge spread between the bid and ask. The underlying stock has to move considerably in your favor just to break even.

No. 6: Study the Fundamentals

Take a few minutes to review the fundamentals of any stock you’re thinking about trading. If you get caught in a situation where you have to hold the stock for a few days, it's good to know that you’ve made a sound investment.

The first thing to look for is average daily volume. If the volume is low you should look elsewhere to trade. It's difficult to unload a stock when there is no volume. Your sell order stays open seemingly forever while the stock tanks further and further.

When going long, be sure the P/E ratio is reasonable and the price target is above the current price. Knowing the short percent of float is also helpful. When it's high you stand to benefit from any short squeeze.

No. 5: Time it Right

Whoever said you can’t time the market was not a trader. Timing is everything in trading. The first thing to remember in terms of timing is don’t trade the open. There are numerous market orders from the night before that have to work their way through the system. Conditions may have changed since then. The effect can be a market that whipsaws back and forth. Stay out of the market for the first hour and give it a chance to establish a direction.

Speaking of direction, don’t trade on listless days where the market can’t seem to make up its mind. Regardless of whether you go long or short, trading on days like that will lead to frustrating losses. Finally, don’t trade after hours. If you’re that hooked on trading, seek help. Wait until the next morning. There’s very little volume after hours and unless a stock is moving strongly playing the aftermarket is a good way to lose money.

No. 4: The Trend is your Friend

This rule is so important it rhymes. The easiest way to make money in the stock market is to chase momentum. If you’ve got an up day in a market that’s been trending up and you go long on an upward-trending stock that’s up for the day, you almost can’t lose. You will have much better luck in the market if you go with the flow instead of fighting it. Contrarians become librarians.

No. 3: Don’t Pick Tops and Bottoms

Top and bottom pickers make the mistake of thinking they know the exact moment things are going to change. A stock has been going one way for a while and they decide right this minute it’s going to change course and head back the other way. That’s a risky strategy, one that loses more often than it wins.

No. 2: Let your Winners Run & Cut your Losers

When things start going bad, it's better to take a loss than to decimate your account. Take your lumps and live to trade another day.

On the other hand, when things are going well, let your winners run. Even average players hit a homerun every now and then.

No. 1: Be Accountable

Which brings us to number one in our countdown of the top 10 rules for trading stocks: be accountable. Trading stocks in a vacuum with no one around is not an ideal scenario. It’s better to have someone who will hold you to account for your trading decisions.

It can be as simple as showing your significant other your account once a month. Rather than creating a report of your own, log on to your online broker and show that so there's no temptation to hide the truth.

It’s like when your manager tells everyone that something is due by this time next week, then schedules a follow-up meeting. The purpose of the follow-up meeting is to go around the table and ask each person if they completed the assignment. Everyone knows it’s coming so it works as an incentive. No one wants to admit they dropped the ball in front of the entire group. Similarly, knowing that your trading account is going to be reviewed helps keep you in line.

If you don’t have a spouse or partner who can play that role, perhaps a friend or family member would be willing to do it. You can also join an investment club, either in-person or online. Investment clubs provide information and accountability.

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