Golden Rules for Traders
Want to trade successfully? Just choose the good positions
and avoid the bad ones. Poor trade selection takes a heavy toll as it bleeds
our confidence and our wallets. We face many crossroads during each market day. Without a
system of discipline for our decision-making, impulse and emotion can undermine skills as
we chase the wrong stocks at the worst times.
Technical analysis teaches traders how to execute
positions based on numbers, time and volume. Markets echo similar patterns over and over
again. The science of trend allows us to build systematic rules to play these repeating
formations and avoid the chase:
1. Sell the second high, buy the second low. The
first test of any high or low always runs into resistance. Look for the break on the third
or fourth try.
2. The trend is your friend in the last hour.
As volume cranks up at 3:00pm dont expect anyone to change the channel.
3. Avoid the open. They see YOU
4. 1-2-3-Drop-Up. Look for downtrends
to reverse after a top, two lower highs and a double bottom.
5. 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.
6. Price has memory. What did price
do the last time it hit a certain level? Chances are it will do it again.
7. Big volume kills moves. Climax
blow-offs take both buyers and sellers out of the market and lead to sideways action.
8. Trends never turn on a dime.
Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise
always finds sellers.
9. Bottoms take longer to form than tops.
Greed acts more quickly than fear and causes stocks to drop from their own weight.
10. Beat the crowd in and out the door.
You have to take their money before they take yours, period.