20 Golden Rules of Trading
(Devadvo)Twenty Golden Rules Of Trading.
Want to trade successfully? Just choose the good positions and avoid the bad ones. Poor
trade selection takes a heavy toll as it bleeds your confidence and wallet.
You face many crossroads during each market day. Without a system of discipline
for your decision-making, impulse and emotion will undermine skills as
you chase the wrong stocks at the worst times.
Many short-term
players view trading as a form of gambling. Without planning or discipline,
they throw money at the market. The occasional big score reinforces this
easy money attitude but sets them up for ultimate failure. Without defensive
rules, insiders easily feed off these losers and send them off to other
hobbies.
Technical
Analysis teaches traders to execute positions based on numbers, time and
volume.This discipline forces traders to distance themselves from reckless
gambling behavior. Through detached execution and solid risk management,
short-term trading finally “works”.
Markets echo
similar patterns over and over again. The science of trend allows you
to build your systematic rules to play these repeating formations and
avoid the chase:
1. Forget
the news, remember the chart. You’re not smart enough to know how news
will affect price. The chart already knows the news is coming.
2. Buy the
first pullback from a new high. Sell the first pullback from a new low.
There’s always a crowd that missed the first boat.
3. Buy at
support, sell at resistance. Everyone sees the same thing and they’re
all just waiting to jump in the pool.
4. Short rallies
not selloffs. When markets drop, shorts finally turn a profit and get
ready to cover.
5. Don’t buy
up into a major moving average or sell down into one. See #3.
6. Don’t chase
momentum if you can’t find the exit. Assume the market will reverse the
minute you get in. If it’s a long way to the door, you’re in big trouble.
7. Exhaustion
gaps get filled. Breakaway and continuation gaps don’t. The old traders’
wisdom is a lie. Trade in the direction of gap support whenever you can.
8. Trends
test the point of last support/resistance. Enter here even if it hurts.
9. Trade with
the TICK not against it. Don’t be a hero. Go with the money flow.
10. If you
have to look, it isn’t there. Forget your college degree and trust your
instincts.
11. Sell the
second high, buy the second low. After sharp pull backs, the first test
of any high or low always runs into resistance. Look for the break on
the third or fourth try.
12. The trend
is your friend in the last hour. As volume cranks up at 3:00pm don’t expect
anyone to change the channel.
13. Avoid
the open. They see YOU coming sucker
14. 1-2-3-Drop-Up.
Look for downtrends to reverse after a top, two lower highs and a double
bottom.
15. Bulls
live above the 200 day, bears live below. Sellers eat up rallies below
this key moving average line and buyers to come to the rescue above it.
16. Price
has memory. What did price do the last time it hit a certain level? Chances
are it will do it again.
17. Big volume
kills moves. Climax blow-offs take both buyers and sellers out of the
market and lead to sideways action.
18. Trends
never turn on a dime. Reversals build slowly. The first sharp dip always
finds buyers and the first sharp rise always finds sellers.
19. Bottoms
take longer to form than tops. Greed acts more quickly than fear and causes
stocks to drop from their own weight.
20. Beat the
crowd in and out the door. You have to take their money before they take
yours, period.