Gems of trading

C

cpo

Guest
Dear brethren:

I would like to start an ongoing thread where traders can post "gems" of trading, which they feel better describe the technical aspects of trading with the markets.

With good wishes in your quest for knowledge.

cpo

"A Trend Remains Intact Until It Gives a Definite Reversal Signal

An up-trend is defined by a series of higher-highs and higher-lows. In order for an up-trend to reverse, prices must have at least one lower high and one lower low (the reverse is true of a downtrend)."

(Dow Theory by)
Steve B. Achelis


"Trade with the TICK not against it. Don't be a hero. Go with the money flow.

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.

Trade with the TICK not against it. Don't be a hero. Go with the money flow.

Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.

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.

Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again."

Alan S. Farley
 
[I've seen this list on a few sites. I do not know the original source.]

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 pullbacks, 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. Fear acts more quickly than greed 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.
 
Not sure - where this advice was originally posted

1. Don't try to catch the falling knife. In a big downtrend, do not try to pick a bottom. Sell every rally until it won't go down anymore. The market will tell you when by making higher lows and higher highs. There is plenty of time to get aboard on the long side.

2. Don't try to pick tops. The market will tell you the same. Buy every dip until it no longer makes higher highs and higher lows. There is plenty of time to get short.

3. Stay out of the chop. Every method you use will go toward finding periods of chop to stay out of - that's why they call it CHOP - and also finding emerging trends, cause that's where all the money is.

4. Do not stand in the way of the speeding train. This one is self evident, and relates to points 1 and 2.
 
GOLDEN RULES FOR DAY TRADERS - (Print and keep somewhere where you can see this before, during, and ending the day of trading)

1. Never get emotionally involved with your trades as emotions often work against you.

2. Patience, perseverance, determination and a rational trading plan are the key attributes of a successful day trader.

3. Learn when you can rely on instinct as opposed to analysis.

4. Remember that standing aside is a position and often the best one to take if you cannot form an opinion as to where the market is heading on a given day.

5. Eliminate the fear of losing because "scared" money rarely profits.

6. Always limit your losses - use stop orders.

7. Learn from your losses - take advantage of each loss to improve your knowledge of the market.

8. Never allow large profits to turn into losses. Consider selling if the market moves against you by about 25% or so from your peak profit point.

9. If the markets on a given day are not performing or reacting the way you expected, it is best to simply get out.

10. Never add to a losing position. It is a prescription for disaster.

11. Try to predict the general direction of a stock price but do not try to pick tops and bottoms. You will rarely succeed in accomplishing this.

12. The key difference between winning and losing day traders is the ability to exercise discipline to avoid mistakes or bad trading tactics.

13. You must subordinate your will to the will of the market. The market is always right.

14. Always keep records of your trading results and analyse the results.

15. Good day traders generally sell into good news and buy on bad news.

16. Do not try to profit on every trade. It is the total profit you make that matters not the number of individual wins.

17. Don't chase momentum if you are unsure as to the exit point. Assume the market will reverse itself as soon as you open a position.

18. Be flexible. Remember that different strategies suit different days and different stocks.

19. Decide each day how much risk you are willing to take and stick to your decision.

20. Do not try to focus on too many stocks at once. Limit your focus to a manageable number or you may miss the boat.

21.Always think positive no matter how much you lose or what you could have gained.

22. Accept your losses gracefully, try to learn from them and move on.

23. If you do not find day trading fun or find it too stressful you will not likely be successful. Try some other activity or take a breather for awhile.

REMEMBER THE GOLDEN RULES...I probably didn't cover them all but...it's a start......BUT REMEMBER.......THEIR WILL ALWAYS BE TIMES TO MAKE $$$$$$$ DON'T JUMP IN JUST BECAUSE YOU FEEL LIKE YOU SHOULD BE BECAUSE EVERYONE KEEPS TAKING ABOUT IT....WAIT UNTIL IT FEELS RIGHT TO YOU AND YOU WILL SUCCEED
 
The problem with these "gems" is they dont mean a thing until you understand what they mean and you dont understand what they mean until youve done the opposite so many times that they become ingrained in your brain.
 
Originally posted by easyrider
The problem with these "gems" is they dont mean a thing until you understand what they mean and you dont understand what they mean until youve done the opposite so many times that they become ingrained in your brain.
More...

:p Trading is democracy!
 
Originally posted by doher
Not sure - where this advice was originally posted...
More...

So, thanks for posting, doher! Your contribution is much appreciated.

With good wishes in your quest for (self) knowledge.

cpo
 
Now hopefully after 2.5 years of steady losses - I can turn the ship around before I get a margin call.

Linda Raschke -offers some good advice:

"Start off learning how to do one thing well and don't try to look at too many things at once. Have a lot of patience and do your homework every night.

Have realistic expectations:recognize that you are gaining experience every day,even if it was a losing day. Take some time to pat yourself on the back for just pulling the trigger in the first place".

regards
doher
 
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