Golden
Rules for Traders
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.
The discipline of technical analysis forces traders to
distance themselves from this reckless behavior. Through detached execution and solid risk
management, short-term trading can produce consistent profits. All you have to do is learn
the rules:
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.
