20 Golden Rules for Traders

[setravis]

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 systematic rules to play these repeating formations and avoid the chase.

20 Golden Rules for Traders :

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 trader's 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 pullsbacks, 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.

[somebody041]

Copied and saved.  Thank you very much.

[peterwangos]

Do the same.

If having chart the rule could apply, it would be excellent.

[usedcasting]

Thanks Setravis, great stuff. You must be back from your holiday. Hope it was good.

Thanks again, always look forward to your insights.


uc.

[spal568]

Very good set of rules, thanks a lot.

[setravis]

For your benefit,    get this thread with the other 2.

[hotdog]

Hi All - Newcomer to the site, and first post - This is great information. I am also relatively new to any type of trading - I say relatively because I opened an account earlier in the year just to try on - with most of my positions I have not faired very well - good news is I don't have a lot tied up  Anyway, I appreciate any help I might get from you good folks - I figure I need to start my education with a very fundamental question for anyone kind enough - When one of you are looking to buy, what is the first thing you look for?

Wish I had the benefit of Setravis' suggestion not to buy on news - duh. Got a little lucky this week with SIGA, but I know it takes a lot more than luck - Thank you in advance, and please try not to laugh at my questions.

[rickjust]

hi and welcome,
the first thing i look for in a stock is volume . is the price moving on volume?
i like volume . easy to get in and out.  is the volume going with the trend?
that is the first thing i look for. then if i miss a big day like lmra had a few days ago i wait until it retraces because it will come back down before it moves up again . (unless it doesn't then i move on , i hate chasing a stock. i have lost most of my trades chasing )
spend a lot of time watching the market . look at a lot of charts until you can recognize the patterns that everyone talks about. oh , stick around here and don't read yahoo message boards i don't know who writes on those things but it seems it is just one person with a split personality that writes all the posts for all stocks.
good luck with your trading.
just a word for begginers with paper trading. i feel it is better to buy a very small amount of shares . say 100, this limits your loss but allows you to feel the emotion of trading even though you may only lose a few bucks . and  find a percentage rule that you will sell for a gain or a loss. say , 10 percent either way. 10 percent on a 4 dollar stock on 100 shares is only 40 bucks. .not as painful as losing 400 or 4000. not as exciting as making 400 or 4000 but the object is to become a good trader and the gains will follow. 
open an account with sogoinvest they only charge 1 dollar per trade for the first 3 months so commisions aren't an issue
hope this helps a little,
maxi

[setravis]

Fundamental Analysis:
( The Books )

Look for a trend from one quarter to the next, going back as far as three years. Also, look at management comments and future expectations to get an estimate of where the company could be going. (Management often make guidance comments in their financial releases).

Cash per share
Earnings per share
Long term debt
Revenues
Revenues per share
Book value
Competitive advantages
Share buy-back plans
News and press releases
Financial ratios
Competition analysis
Market share (current and realistic growth potential)

Technical Analysis:
( The Charts )

Not all  stocks, present technical patterns. It is in some that a pattern appears. Do not 'force' yourself to find one if it is not obviously evident. Also, do not incorporate TA into your research if you do not understand it.

Look for buying opportunities with the TA patterns , as opposed to learning whether or not the stock is a good investment. Rank the shares in order of which you feel is in a good buying opportunity, and make a note of the price or range you think would be best to acquire the shares at.

Try to identify the following TA patterns. If a pattern is not present, or you are unable to identify one, make a note to yourself.

Dip
Collapse
Temporary spike
Permanent spike
Support level
Resistance level
General range
Current trend
Trend reversal
Topping out
Bottoming out
Consolidation
Volume

[hotdog]

Thanks to both Setravis again and rickjust - good advice. Let's see if I can do better than I started out. I'm certain it will, at a minimum, require spending a lot more time on it than I have given thus far. Practice -

[pureformofcash]

Hi All,

I'm new to the board here and wondering if someone can answer a quick question....

I watch Time and Sales during the trading day, and today i saw a (T) symbol marked before a trade that occurred at around 4:01 PM

My guess is, it has something to do with after hours, however, i've seen plenty of other after hours trades on T & S without it.

Anyone know? Thanks in advance.

[rosiebrown0]

i don't have much knowledge about trading ...but i want to gather this information...