Here are some sets of rules that traders should follow in and through their lives as traders. It is of course much easier said than done. But we can never do unless we know. It is with that perspective that we are presenting these trading rules here so that it may jolt some memory, some earlier action that has led to losses. Once these situations are recalled, we are better positioned not to repeat those mistakes.
Read this rules everyday until you can remember them by rote. They will save your (trading) life someday!!
1. When a stock moves to a new high, buy the first reaction after
that high. Vice versa, sell the first rise from a decline to a new low.
2. 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.
3. 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.
4. Trade with the market not against it. Go with the money flow.
Don’t be a hero. You are not big enough to create trends by yourself.
5. If you have to look, it isn’t there. Forget your college degree and
trust your instincts. It is a fact that most qualified people lose in the markets!!
6 . The trend is your friend in the last hour. All rationality gets abandoned here and everyone is trading from pure emotion. Just go with the flow.
7. Avoid the open. It is very volatile period where people are
sucked in many times.
8. Price has memory. What did price do the last time it hit a certain
level? Chances are it will do it again.
9. The first sharp dip always finds buyers and the first sharp rise
always finds sellers. Use this to your advantage.
10. Bottoms take longer to form than tops. Greed acts more quickly
than fear and causes stocks to drop from their own weight.
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