Trading Rules

13 Insights From Paul Tudor Jones

Via Market Wisdom 

 PTJ is not only a successful hedge fund manager and philanthropist, but also very original and clear thinker. Here are some of his best market-related insights:
1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.
2. I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.
3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?
4. These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates an illusion that there is an explanation for everything and that the primary tast is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.
5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.
6. Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.
7. That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’
8. If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.
9. Losers average down losers
10. The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?
11. The normal progression of most traders that I’ve seen is that the older they get something happens. Sometimes they get more successful and therefore they take less risk. That’s something that as a company we literally sit and work with. That’s certainly something that I’ve had to come to grips with in particular over the past 12 to 18 months. You have to actively manage against your natural tendency to become more conservative. You do that because all of a sudden you become successful and don’t want to lose what you have and/or in my case you get married and have children and naturally, consciously or subconsciously, you become more conservative.
12. I look for opportunities with tremendously skewed reward-risk opportunities. Don’t ever let them get into your pocket – that means there’s no reason to leverage substantially. There’s no reason to take substantial amounts of financial risk ever, because you should always be able to find something where you can skew the reward risk relationship so greatly in your favor that you can take a variety of small investments with great reward risk opportunities that should give you minimum draw down pain and maximum upside opportunities.
13. I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.

The Eight Rules of Carney

1. Never get into something you can't get out of by the closing bell. Every trade you make, you're looking for the exit point. Always keep your eye on the exit point

2. Don't ever take anything at face value. Because face value is the biggest lie of any market. Nothing is ever prices at its true worth. The key is to figure out the real, intrinsic value - and get it for much, much less.

3. One minute, you have your feet on the ground and you're moving forward. The next minute, the ground is gone and you're falling. The key is to never land. Keep it in the air as long as you fucking can.

4. You walk into a room with a grenade, and your best-case scenario is walking back out of the room still holding that grenade. Your worst-case scenario is that the grenade explodes, blowing you into bloody little pieces. The moral of the story: don't make bets with no upside.

5. Don't over think. If it looks like a duck and quacks like a duck - it's a duck.

6. Fear is the greatest motivator. Motivation is what it takes to find a profit.

7. The ends justify the means, but there is only one end that really matters. Ending up on a beach with a bottle of champagne.



Winners Make Their Own Good Luck




To reap the gains and windfalls of a successful business, entrepreneurs must look to a set of attitudes they will find only within themselves

We once heard a mathematics professor state, "The parameters of luck are unknown to us." In other words, luck can't be explained by any specific factor, it's a matter of chance. We thought the statement made a lot of sense, but we were intrigued by the notion that what we call "luck" could be explained by a set of variables or elements that had not yet been studied. So we decided to carry out our

What we did was relatively easy: We spoke at length with people who thought their lives had been blessed by good fortune, our goal being to try and figure out what factors they had in common. After four years of interviews and research, we could clearly identify a list of shared traits, ones we will shortly examine in greater depth.

WHOM FORTUNE FAVORS.  But first, an additional word of explanation: When undertaking our project, we decided to study of biographies of "prosperous" personalities ("prosperous" understood in its broadest sense). We studied not only individuals enjoying good marriages or financial wealth, but also those who have made valuable contributions to society and who see their own lives as being filled with creativity, self-fulfillment, and meaning. By taking this tack, we were able to include artists, scientists, and athletes in our sample.

What our research revealed can be summarized in a single simple sentence: We make our own good luck.

What these creators of good luck have in common can be summarized in the following five main principles:

• Responsibility
If there is a common factor that is evident among all the creators of good luck, it is that they know themselves to be responsible for their own actions. In other words, when things go wrong or the outcome of any given situation is other than intended, they never point the finger of blame at external factors or other individuals. Instead, they look to themselves and ask, "What have I done for this to occur?"

Free of any kind of "victimism," when they run into personal or professional difficulties, they ask themselves how and to what extent they are responsible for the situation in which they find themselves? Then they act accordingly to solve whatever adverse circumstance they have encountered. This is where the second principle comes in.

• Learning from Mistakes
Creators of good luck don't see a mistake as a failure. Instead, a mistake is an opportunity for learning. Thomas Edison is the classic example. History tells us that the inventor made more than 1,000 attempts before inventing the first long-lasting electric light bulb. Until then, all his trials and experiments led to durations of no more than a few minutes before air would filter into the glass bulb, supplying the oxygen that led to the combustion of the various filaments he tried.

The story goes that one of Edison's colleagues asked him, "Mr. Edison, don't you feel you are a failure?" Lacking any sense of vanity, the great man answered, "Not at all. Now, I definitely know more than a thousand ways how NOT to make a light bulb."

Sure enough, just a few days later, the man whose brainstorms would remake the world finally turned his inspiration into a practical concept. By the way, the very first light bulb was invented by Sir Joseph Wilson Swan, who demonstrated the theoretical concept but gave up trying to develop a practical application after only three attempts. By contrast, Edison made his own good luck and designed a working light bulb. This takes us to our third principle.

• Perseverance
Creators of good luck don't give up. They don't postpone. They don't "leave it for another day." The formula is quite simple: When a problem or situation arises that requires attention, they act immediately. And what they do is one of the following three things: they either solve it without delay, delegate, or forget about it.

In other words, they don't carry a list of "things to do" in their brain. Instead, they resolve problems and situations as quickly as possible. This enables their energy to be fully focused on their work and avoid conscious or unconscious distractions, which only generate inefficiency.
• Confidence
This is one of the most overlooked principles, yet one of the most powerful. Confidence is divided into two parts: confidence in yourself and confidence in the others
Confidence in yourself is essential, and those who create their own good luck are remarkable for their high degrees of assertiveness and self-esteem. These qualities allow them to keep to their purpose, to persevere, and to work to create the conditions that ultimately do so much to achieve objectives. Also, they are great visualizers. They use their imaginations -- specifically, their visualizing techniques -- to form mental images of their goals. Without the confidence to pursue this vision, visualizing would make no sense.

Furthermore, and closely linked to assertiveness and self-esteem, the people we studied exhibit both trust in others and respect for them, seeing people they know, people they work with, those who surround them as major sources of opportunity. This doesn't mean that one must be naive and trust anybody and everybody who makes a proposal. Instead, it speaks to the trait of seeing others as sources of opportunity for achievement.

Without confidence there is no way to "give yourself" to the situation. If there is no intimacy -- if it is ruled out by paranoia or rampant suspicion, for example -- there can be no opening up to others. Hence, there can be no room for dialogue or for the genuine and sincere exchange of opinions. Without this, any initiative proceeds more slowly until, eventually, it simply withers and dies. Confidence is a fundamental variable, and this takes us to the last principle.

• Cooperation
The term "synergy" is one we heard often when interviewing those who create their own good luck. Trust in others leads to solid a network of work colleagues and friends, which, in turn, brings into play substantially more resources to carry out projects than if they were managed alone. The logic is based on cooperation rather than competitiveness. Such people are aware of the fact that, at the most basic level, any project or undertaking takes place in the context of the broader group, and that all parties must have a realistic prospect of emerging as winners if all concerned are to produce their best efforts.

As we have seen, whether or not one can create good luck basically depends on an attitude towards oneself, towards others, and towards life. It is also tied to the perception that the individual is much more of a cause than an effect. And above all, to the realization that one must make oneself the creator of the conditions that foster success and the achievement of specific, visualized goals.

LUCK OR GOOD LUCK?  Think of luck -- the sort that wins lotteries -- as the end result of a random game of chance: It can be favorable or not, but whatever shape it takes, its presence will always be occasional, brief, and impermanent. We have found that of the people who have won big sweepstakes prizes, many lose everything they gained, typically within four years to seven years of hitting the jackpot. Furthermore, their personal relationships with family, friends, and colleagues often have been seriously affected because of problems stemming from avarice, jealousy, and greed.

On the other hand, since those who create their own good luck owe success only to themselves and their own initiatives, not just to a random roll of the dice, they are acutely aware of the origins of their good fortune. Moreover, having seen it work before, they know and understand the process that produces it, and know the same principles can be put to work again and again.

The problem is that we often seem to forget old principles based on common sense, which basically say that we must work, be aware of our actions, and take responsibility for correcting them when the need arises. The person who grasps that wisdom is lucky indeed.

Note: Had this saved in a trading folder and don't have the original article.

Wise words from Colin Powell

“The less you associate with some people, the more your life will improve. Any time you tolerate mediocrity in others, it increases your mediocrity. An important attribute in successful people is their impatience with negative thinking and negative acting people. As you grow, your associates will change. Some of your friends will not want you to go on. They will want you to stay where they are. Friends that don't help you climb will want you to crawl. Your friends will stretch your vision or choke your dream. Those that don't increase you will eventually decrease you.

Consider this:
Never receive counsel from unproductive people. Never discuss your problems with someone incapable of contributing to the solution, because those who never succeed themselves are always first to tell you how. Not everyone has a right to speak into your life. You are certain to get the worst of the bargain when you exchange ideas with the wrong person. Don't follow anyone who's not going anywhere.

With some people you spend an evening: with others you invest it. Be careful where you stop to inquire for directions along the road of life. Wise is the person who fortifies his life with the right friendships. If you run with wolves, you will learn how to howl. But, if you associate with eagles, you will learn how to soar to great heights. "A mirror reflects a man's face, but what he is really like is shown by the kind of friends he chooses."

The simple but true fact of life is that you become like those with whom you closely associate - for the good and the bad.

Note: Be not mistaken. This is applicable to family as well as friends. Yes...do love, appreciate and be thankful for your family, for they will always be your family no matter what. Just know that they are human first
and though they are family to you, they may be a friend to someone else and will fit somewhere in the criteria above.

"In Prosperity Our Friends Know Us. In Adversity We Know Our friends."

"Never make someone a priority when you are only an option for them."
"If you are going to achieve excellence in big things, you develop the habit in little matters. Excellence is not an exception, it is a prevailing attitude....”

Text Taken from GoodRead.Com

Are You Frustrated Yet?

            I've noticed a lot of frustration on the stream as of lately. The gaps whether they fade or trend seem to be difficult to trade and trust. I just wanted to mention a couple of things that have lead to a decrease in my frustration levels.
          Once I noticed that many of my trades were being stopped out at a loss or trail stops hit in fairly short amount of time, I decrease the amount of trades I enter. This is also considering I feel my entry and stop placements are correct, following my strategy and rules for risk management.
           I pass on a lot and become much more picky...Volume being the number one indicator I watch.
           Depending on the size of the move I think the trade may make, I either drop my share size and widen my stop a bit, or tighten the stop all together. I prefer the dropping share size and widening stops.
          Were not in a trending market yet. So to flip flop back and forth from bearish to bullish makes no sense IMO. Having unrealistic expectations of follow thru on either the long or short side doesn't make much sense to me either. While having potential trade set ups is just part of doing the homework like @ChessNWine mentioned in his video the other day.

Here are a couple of links for Day and Swing traders that may or may not help.



The @Stocktwits Edge Notes by @Zlucido

The @StockTwits Edge $$
Lindzon, Pearlman, Ivanhoff


@Zlucido 's Blog Zlucido.tumblr.com




@HowardLindzon
Find Trends, Ride Them, and Get Off
After 20+ years I can't believe how much time you can spend away from the screens and still be successful as a trader.
Less is More
Stock trading at all time highs, the odds are the underlying company is growing very fast, and under accumulation from institutions. Every holder is in a winning position.

@TrendRida
Dont Quit
General rule is that mkts trend 15-30 percent of the time and they are range bound the remainder.
The market will be favorable for trend trading only 2-3 times a year.

@ChrisPeruna
Know Thyself
Looking for gains of 25%+ and losses no larger than 7-10% (or smaller)
Risk 1-3% of total capital
Scan for base formations on quiet volume
Weekly first to establish acc/dist along w/ volume confirmation.
You don't have to be right all the time to be profitable.
Focus on market leaders and manage risk accordingly.

@STT2318
every time a stock makes a high volume breakout from a multi-year range, you should pay attention.
Something significant has happened, and it has changed the supply/demand dynamics.
High volume is an indicator of institutional involvement, and most institutional investors don't start accumulating positions without doing their homework.

@AlphaTrends
Only Price Pays
Stocks are either advancing, declining, or in a neutral period
Accumulation, markup, distribution, decline
Trend traders want to be long in stage 2, short in 4 and avoid 1 & 3
Observe location of stock in relation to 50 sma & slope of the ma
Look for pattern of expanding volume in the direction of the trend followed by lighter volume as volatility contracts and short term corrections ensue.
Intermediate time frame swing trader will consider 65 or 30 min candles. Observe 20-30 day time frame
More accurate to observe 6 periods of 65 minute bars or 13 periods of 13 minute bars
5 day ma: each day mkt open for 13 30 min periods. Over 5 days there are 65 30 min periods, so a 65 period ma on a 30 min chart gives us a dynamic 5 day ma.
Longs should be entered as the stock is above a 5 day ma that is starting to slope upward and is acting as support.

@UpsideTrader
Flags & Wedges
My market philosophy couldn't be any simpler. Following the money flow is key for me.
Experience and skill = SCREEN HOURS
Took me five years to play the game intelligently enough to make big money when I was right.
It's commonsense part of trading that many people still have difficulty implementing.
Never let a gain turn into a loss.

@ChessNWine
Breakout from a tight base
My edge comes from rigorous daily analysis of the price action and trading volumes of individual issues, sectors and indexes.
Looking to allocate my capital only when I notice a chart pattern that gives me a discernible edge.
Without it, I just sit on my hands.
Individual trader, I use my ability to be nimble and selective to my advantage.
3 ?'s: Broad mkt healthy? S&P 220 ma rising? Above 50 ma?
Clear group of stocks leading us higher? Identify and participate in strongest of leadership stocks.
Breakout from a tight base, quiet period is bullish, traders have accepted price level with ease
Always consider potential stop-loss zone before I hit the bid.
When the broad mkt is not healthy, discipline will be your saving grace.
Take profits just as quickly as you cut losing positions, and you will keep your head above water in choppy mkts.
PTJ: Losers average down losers; Winners add to winners.
If you personalize losses, you can't trade.

@HCPG
The Base is Everything
Buying close to the base gives us protection.
Biggest mistake novice traders make is to buy after an extended vertical move away from any base or 20 ma.
When price reverses, it has no base to fall into and enters a price vacuum.
The base provides a logical place to put a stop. Its your safety net.

@Downtown Trader
Trading People, Not Stocks
stocks near end of consolidation range show narrowing of daily range.
Stocks will have large swings as mkt participants attempt to find a fair price after a trend move.
As mkt participantds reach equilibrium, stocks price will narrow in range, typically on contracting volume.
Begins to emerge from this range offers great R:R setup.
Waiting for narrow range candles minimizes risk by placing stop closer to the price action.
Waiting for stock to emerge from consolidation, trader can increase odds by letting mkt confirm strength rather than attempting to guess the next direction right.
My method focuses on initial breakout from narrow consolidation range, i set stops just under the range.
Setup conditions: stock near end of consolidation in uptrend. trading above 20 & 50 sma
patterns revealing participants sentiment.
volume patterns to gauge market participants urgency.
Stops keep risk manageable.
Reasonable target is at least 3 R's away.

@DerekHernquist
Identifying Trend Shifts
Sell your losers & never average down.
Many factors determine what a stock is worth when we make a sell decision, but the price paid should not be one of them. It is a sunk cost that unfortunately bears an outsized psychological trap for many.
Reality is that human emotion drives the trending and correcting processes, which occur over and over again.

@SunriseTrader
A Chart will Never Lie to You
Journal: ticker, date, #, price, date sold, sale price, net P/L, % made/lost, hold duration
why bought, why sold, chart pattern, mkt condition, supp/res levels.
notes: stock is making new highs, higher highs
No longer hold into earnings
Price is what pays and should always be your first indicator.
Volume should be used as away to confirm the price action and urgency of buyers and sellers
Price trumps all
Trade stocks that are leaders in their sector and sectors that are leading the mkt
There is only one side to the stock mkt: not the bull side or the bear side, just the right side, the side yet to be determined.

@1nvestor
The Price tells the Story, Plain and Simple
Patience is key but I also must be disciplined in my exit strategy. I do not trade on hope. I lay out my R/R before the trade and execute those that meet my criteria.
Mkt must be cooperating with direction of the trade, you must know the trend, and not fight it.

@Ivanhoff
The Birth of a New Trend
Reaction to the news is more important than the news itself
Probably I even invented some ways to lose money but i realize this would not be true
Human beings are involved and our nature hasn't changed for thousands of years.
emotional creatures who believe everything should be symmetrical and balanced as it is in nature.
Financial mkts are very different than the linear world.
A place where mean reversion is often delayed long enough to bankruptt the rational thinkers
A place where "once in 100 yrs" events happen every 5 years.
I am wrong about 50% of the time.
Accepting losses is part of the game and cutting them short most important step.
Stock doesn't know that you own it and doesn't care that you cant afford to lose.
Understand and accept your power, you cannot move the market, you cannot tell mr. market where to go and how fast.
You have to establish new connections which takes hard work via repetition and visualization.
Devote effort to studying past winners.
When elephants dance, they leave traces
mkts move in cycles defined by institutional capital allocation.
when institutions buy and sell, they do so in volume and leave clear traces.
Market is healthy a few times a year.
It is fruitless to fight the momentum, as it feeds on itself.
Higher prices boost risk appetite, which attracts fresh capital, which boosts prices even more.
Spot these periods and take advantage of them.
Real money is made at two extremes: value and momentum.
Mkt reflects our collective expectations and perceptions act the future.
Prices change when expectations and perceptions change.
Price changes and trends are fueled by catalysts.
Best performance comes form those that surprise the most often and by the highest margins.
Price trends are born and sustained by catalysts. behind each earnings trend there is a social trend that makes it possible.
Bulk of directional mlt moves tend to happen in just 10-15 % of the trading days.
The rest in nothing more than noise in a range.
high volume ( 3x 20 day avg) & price expansion ( 2x ATR past 20 days & 10 % move) guarantee institutional involvement
When institutions buy they leave traces.
They are heavy, slow buyers, therefore I have enough time to enter and exit as they build positions.
I look for stops breaking out of long sideways range, longer the better for the potential of the upside move.
Everyone who owns is a winner and this will naturally decrease the supply, making acc difficult and allowing slightest demand to sustain new highs in price.
Price is often the leading indicator, volume and risk appetite follow price.
No setup works all the time, success rate of any setup is a derivative of the current mkt environment.
Liquidity runs in cycles.
Event that changes perception of value usually leads to tremendous price appreciation in a short period.
Volume often follows price.
Initiate a position with a pilot buy and add after my thesis is confirmed by price action of the stock
Lock in partial gains on day I enter. Puts me in a position of strength, helping me remain in the trade.
Psychology is very difficult to buy stock that appreciated 20% in 2 days. Mean reversion is the normal state of mind.
Momentum traders are true contrarians, as willing to engage in as tock at price levels that are mentally uncomfortable for the average human being.
Nothing magical about moving averages. Just look like a natural zone of support for simple reason they have played this role so much in the past.
When enough pppl act on their beliefs, their expectations turn into a self-fulfilling prophecy and the stock bounces again.
When a stock closes below relevant moving avg is a clear sign the easy money has been made.
Stock is probably entering into a consolidation period and only a new catalyst can help defeat the gravity of the range.
Only constants are the change and the uncertainty.
Markets are always evolving and if you don't evolve you will be left behind.
Past successes mean next to nothing. Everyday is a new battle.
Successful trading is 90% psychology & 10% knowledge about the underlying forces that drive price. Most people defeat themselves. Cut your losses short, let your winners run and review your trades.
There are no perfect setups, it is about how you manage your position.

@TodayTrader
Change is the only Constant
No matter what we learned in the past, nothing lasts forever.
Pitching coaches take pitchers out of the game when they do not have their normal stuff working.
A good trader needs to know to pull himself out of the game, as there is no coach to do it for you.
The policy of being too cautious is the greatest risk of all.

@TheKirkReport
Art of Trading
People learn in different ways, key toward greater success and fast relearning curve is to have well documented learning plan.
Plan your work and work your plan.
Accurate records and close evaluation of performance for multiple time periods.
those who perform the best, learn methods to separate opinions and beliefs form trading decisions.
No longer seek to trade their opinions but to exploit opportunities.
trade consistently well must go against all natural instincts you have.
Undertsnading and having strong working knowledge of both human nature and emotion combined with own natural tendoncies must not be underestimated.
Once you learn to really los money in the market, you learn how to improve and succeed even more.
Traders who have learned to turn off and tune out all media input outperform significantly.
If you saw difference you would radically change how you spend your own research time.
If your goal is to make money, stop trying to make yourself look smart and turn off and tune out all noise.
Proper position sizing remains one of the least respected, underutilized and misunderstood concepts for most traders.
Proper risk mgmt will determine your success as a trader more than anything else.
Those who focus on one strategy fair better than those who work on multiple systems.
Those who tweak and adjust strategy all day underperform on multiple time frames.
too many traders know a lot of things but are not experts in any.
if you don't know your strategies weakness, its not b/c they do not exist, but rather you simply haven't discovered them yet.
making the simple complicate dis easy. making the complicated simple is brilliant.
simply strategies that can be explained to a10 yr old work far better than complex and difficult to explain ones.
Make your system simple, straightforward and match it to your personality
Avoid temptation to add layers of complexity and indicators to your approach.
Path to success resides within you and cannot be purchased from another human being.
Learn all you can from those around you, but ultimately you must carve your own approach and go your own way in the market.

Great Notes taken by @ZLucido - Nicholas Darvas: How I Made $2,000,000 in the Stock Market

Check Out @Zlucdio 's Blog at Zlucido.tumblr.com

Nicholas Darvas: How I Made $2,000,000 in the Stock Market


• Be cautious with brokers’ advice.
• Ignore Wall St sayings, no matter how ancient and revered
• Avoid over the counter, only buy in listed stocks where there is always a buyer when I want to sell
• Avoid rumors, no matter how well-founded they may appear
• Buy only in strongest industry groups & the best within those groups.
• There is no sure thing in the market, i was bound to be wrong half the time
• I must accept this fact and readjust accordingly, pride and ego subdued
• Become an impartial diagnostician
• Cannot merely take chance. first i must reduce my risks as far as humanly possible.
• Automatic stop loss = quick loss weapon
• I knew many times i would be stopped out for the sake of a pt just to see my stock climb up immediately after but i realized that the was not so important as stopping the big losses.
• Besides i could always buy back the stock by paying a higher price.
• My profits had to be bigger than my losses
• Most difficult problem was to discipline myself a rising stock too quickly.
• Hold on to a rising stock but at the same time keep raising my stop loss parallel with its rise.
• Keep it at a distance that a meaningless swing in price would not touch it off.
• If the stock really turned around and began to drop i would be sold out immediately.
• I would not be able to sell at the top
• Producer would be a fool to close the show when the theater is full every night
• It is only when he starts to notice empty seats that he considers closing the show
• I would be a fool to sell a stock as long as it keeps advancing
• Sell when the boxes start to go in reverse, when the pyramids started to tumble downwards, my trailing stock should take care of this.
• Objectives in the mkt: right stock, right time, small loss, big profit
• Weapons in the market: price and volume, box theory/tech analysis/patterns, automatic buy order, automatic stop loss and trailing stop
• As the trend continued i would buy more, as the trend reversed i would run like a thief.
• I knew i had to adopt a col, unemotional attitude toward stocks, that i must not fall in love with them when they rose and i must not get angry when they fell
• There are no such animals as good or bad stocks, there are only rising and falling stocks and i should hold the rising ones and sell those that fall.
• I had to bring my emotions, fear, greed and hope under complete control.
• I had no doubt that this would require a great amount of self-discipline, but i felt like a man who knew a room could be lit up and was fumbling for the switches.
• I only handled 5-8 stocks at a time, i automatically separated them from the confusing, jungle-like movement of the hundreds of stocks which surrounded them.
• I was influenced by nothing but the price of my stocks.
• I could not hear what people said, but i could see what they did. it was like a poker game in which i could not hear the betting, but i could see all the cards.
• Poker plays will constantly try to mislead me with their words but if i did not listen to their words, and constantly watched their cards, i could guess what they were doing
• Disregarding the influence of the general mkt is no better than trying to direct a battle by only looking at one section of the battle field
• I could not apply mechanical standards to the relationship between the average and individual stocks
• Judging this relationship was more like an art, in some ways it was like painting
• In the same way i found that the relationship between the average and my individual stocks were confined within certain principles, but they could not be measured exactly
• Watched the averages only to determine whether i was in a strong or a weak market because general mkt cycle influences almost every stock.
• They became like x rays for me. to the uninitiated x rays are meaningless. to physician it obtains all he needs.
• I could absorb the page at a glance and draw rapid conclusions from it, instead of painfully putting the letters together like a child
• Whenever i bought i wrote down my reason for doing so. i did the same when i sold it.
• When it ended in a loss i wrote the reason i thought caused it. then i tried not to repeat the same mistake.
• Started to see stocks have characters just like people. this is not so illogical, because they faithfully reflect the character of the people who buy and sell them
• Like human beings, stocks behave differently. some are calm, slow conservative, others are jumpy, nervous, tense.
• Some easy to predict, consistent in their moves, logical in their behavior. they were dependable like friends.
• I slowly came to see that i was becoming a diagnostician i could not be a prophet.
• When i found a stock strong all i can say is it is healthy now, today at this hour. i could not guarantee it would not catch a cold tomorrow.
• My educated guesses, no matter how cautious, many times turned out to be wrong.
• Did not upset me anymore. who was i to say what a stock should or should not do anyway?
• My mistakes did not make me unhappy
• If i was right so much better. if i was wrong i was sold out.
• This happened automatically, separate from me
• I was no longer proud when a stock went up, nor did i feel wounded if it fell
• I knew now that the word value cannot be used in relation to stocks. the value of the stock is the quoted price. this is in turn entirely dependent on supply and demand
• No such thing as a $50 stock. if it trades to $49 it was now a $49 stock.
• I succeeded in disassociating myself emotionally from every stock i held.
• I decided i would trade in the market by doing the right thing first, follow what a stocks behavior commands and care about taxes later
• In the same way i realized it was impossible for me to assess great historical turning points in the market when they began to happen. Whats fascinated me as wall st prices continued to fall was the gradual
• Realization that my system of ducking out quickly with my automatic trailing stop losses made such an assessment unnecessary
• I had simply gotten out on the basis of the behavior of my stocks.
• Buy and hold or put them away investors who consider themselves conservative investors , i now regarded as pure gamblers. a non gambler use get out when his stocks fall.
• I could remember how i almost felt myself willing and pushing that stock upwards. it was a very human feeling, but it had no effect upon the mkt an more than spectators have on a horse race
• I tried to detect those stocks that resisted the decline. reasoned that if they could swim against the stream, they were the ones that would advance most rapidly when the current changed.
• Majority were companies whose earnings trends pointed sharply upwards
• Capital was flowing into these stocks even in a bad market. the capital was following earnings improvements as a dog follows a scent.
• Stocks are slaves of earning power, i would select stocks based on their technical action and then only buy them when i could give improving eps power as my fundamental reason for doing so.
• Looked for stocks tied up with the future and where i could expect that revolutionary products would sharply increase earnings.
• All a balance sheet can tell you is the past and present. they cannot tell you the future
• Enter high territory trading: stocks on launchpad to make new highs, more expensive then ever before and would look too dear to the uninitiated.
• But they could become dearer. i made up my mind to buy high and sell higher
• Expensive-but-cheap high velocity stocks. closely observed their price action, i was on the alert for any unusual activity as well. i had not forgotten the importance of volume
• Bear mkts always followed by bull mkts. i felt calm and confident waiting for the mkt tide to turn.
• I did suspect that leaders in previous mkt would not lead again. they had fulfilled their place in history.
• I had to find new ones. they war sonly sleeping the promising sleep of the unborn. one day soon they were destined to wake up.
• Steady rise in price and the high volume indicated to me that there was tremendous interest.
• Although i felt secure win my judgement w/ merged technical and fundamental viewpoints i did not for one moment con side abandoning my chief defensive weapon the stop loss order
• No matter how well built your house is, you would not think of forgetting to insure it against fire.
• The truth was that as my pockets had strengthened, my head had weakened. i became overconfident and that is the most dangerous state of mind anyone can develop in the stock market.
• Now i know that it was caused by egotism leading to vanity leading to over confidence which in turn led to disaster. it was not the mkt that beat me but my own unreasoning instincts and uncontrolled emotions
• My ears were my enemy, i had operated simply on my daily telegram which gave me perspective. it showed me the way my stocks were behaving. there were no other influences.
• In this way everything happens in wall st while i am in bed. i am sleeping while they are working and they cannot reach nor worry me. my delegate, the stop loss order represents me in case something unforeseen happens
• I settle down to work when wall st sleeps.
• Let a stocks strength in the market be your guide
• It began to be a strange life, i sat in th plaza every evening reading my telegram and filing it. there was nothing further i could do. i felt elated and restless, but powerless.
• I did not have any reason to sell a rising stock. i would continue to jog along with the trend, trailing my stop loss behind me.
• As the trend increased, i would buy more. if the trend reversed? i would, as ever, flee like a disturbed burglar.

Monster Stock Hunting Rules

1. You must be patient and wait for Mother Market to give you the green light. Historically, your best odds of success is in the confirmation of a follow-though day when the market begins to pick up and start a new uptrend after a correction (That is, 10% fall from its recent peak) or a bear market (that is, 20% or more fall from its recent peak), The best confirmations usually occur between the forth and twelfth day of the upturn. It takes time for the big money funds to start piling into stocks.

2. Once you have the confirmation from the market, begin seeking out strong fundamental stocks, mostly new names and younger companies that have built sounds bases during the prior down trend. The more confined and flatter the base building period, the better. You want to see strong prior quarters financial  performance of rising sales and profits numbers. Acceleration in numbers is key.

3. When the most resilient fundamentally solid stocks during the prior down trend break out of their basing periods on strong volume and make either new 52 week highs or even better all time highs, those are the next potential monster stocks. When you see a number of them breaking out you can be certain that a new up trend has begun and has the potential to sustain. If the rally fails, cut your positions and let go.

4. If the market up trend persists and continues to drive higher, the new market leaders will be right there with it making new highs. It is critical that you have the patience and see that the best performers are acting right and continue to do so. Rising in higher volume and pull backs in lighter volume.

5. When it's time to sell it is time to sell. Typically, they will either slow down and/or end in a parabolic fast move....The Climax run. When the 50 day moving average is sliced in heavy volume, you know the big money is leaving in a hurry. If the big fund money is selling, so should you.

Small excerpts from:
-Monster Stocks: By John Boik (pgs. 174-179)

Trading

Do not sit down and enter a position right away- see what is going on first

Do not fight the trend- wait for indicators of a reversal such as increase in volume, technical indicators- double top or bottom,

After a successful trade and the stock settles down- wait for it to show you something before entering into the same position as before because you think you are going to miss the “real move”

Do not initiate a position at the resistance or support- instead wait for it to break the level then get involved ( do not buy hole numbers or other such levels unless you are adding to a position)

If the market is quiet be more selective about trades to enter because you will get jigged out and end up paying spreads and not being confident enough to hold the position even if you are right

Make each trade count- do not enter a position without knowing why you are involved- have a reason: market movement, tops, bottoms, increase in volume, levels

Do not chase a stock as it is moving unless you are adding to an established position; instead, wait for the pullback and when the stock settles down and it looks like a promising trade then get in

Do not get frustrated and try to fight a trend and keep shorting into an up move or vise versa and then decide to flip especially when nothing is going on- be selective, keep your cool

Try to choose one way and stick with it instead of going back and forth, but if you are wrong do not hesitate to rethink your strategy

If you are playing a stock based on hidden buying and selling- not in the book then be more patient. Take one long position from a good entry point and hold onto it rather than constantly getting in and out- churning

Do not trade if you are in the wrong frame of mind

If you start off the month on a bad note do not try to make it back in one day…have one solid day and build off that

Identify a trend in the market and the sector and stick with it until you see a real reversal- use the pullback as entry points of following the trend instead of thinking every small move up or down is the beginning of a reversal

When choosing tops or bottoms, be quicker to hit out when things go against you because the trend is still holding

Use the 50 day EMA to identify trends in the stock- it will act as support or resistance and once it breaks to the other side the stock should start to move

Stock selection is key- do not get hung up on one stock if you are unable to make money in it

After making a nice push in the morning do not be afraid to stop trading- and if you do decide to trade- pick your spots better and have a real plan instead of doing random trades

If you are going to trade a volatile stock like PD, do not protect your PL when you trade or else the risk your taking on is greater than your reward

Do not base your trades on news that you read. If the stock shows you otherwise then trade the stock accordingly instead of sticking with a bias. Use the news as a guide but do not base trades on it unless it is confirmed by the stock itself

Resist the urge to trade stocks that you have not been carefully watching

If you make a good trade in one direction and get out successfully, then try to get back in on the same side and it doesn't work- do not continue to do it- instead, wait for the stock to show you that the trend is continuing and then get involved

Use volume as an indicator of overall market activity

When volume is lower than usual it means that institutions are not active and stock moves will trend less and have little follow through

When volume is lower be quicker to scalp and do not get involved as much because although the futures may be swinging the stocks will not react and it will cause you to write tickets and lose money by paying the spread only causing frustration

Track the volume of the stocks you follow for periods of the day- such as how many shares until 11, until 12, etc.

On slow days, be quicker to switch to another stock/sector. Don't let pride hurt your trading

On slow days, if you get off to a bad start and then make half of it back- take that as a positive and stop trading...However, if the market is active and you get burned early, refocus and carry on trading normally

If you lose on your first few trades take a step back and understand what you are doing wrong instead of repeating the same thing over and over

Do not flip in between stocks- if you are trading poorly in one, then switch- if you succeed in the new stock do not go back to the other one unless you think you have reevaluated it enough to be able to trade it successfully

Do not make trades hoping for a miracle by getting into massive size for no reason

The 10 Commandments of Trading

By Todd Harrison
Former Vice-President f Morgan Stanley


THE 10 TRADING COMMANDMENTS
RULES LEARNED FROM A CAREER OF SUCCESSES AND MISTAKES

I remember why I wanted to be a trader. I figured that the easiest way to make money was to stand near the cash register. Of course, as I discovered through my 16-year career, there's a reason why consistent producers get paid the big bucks. Flashy bets and big swings sometimes connect but, in the end, a disciplined approach pays the bills. I've tripped plenty through the years, the types of missteps that almost cost me my livelihood. But I preserved, climbed the ladder and morphed those mistakes into valuable lessons. My approach wasn't always constant but, in the end, certain rules allowed me to stay in the game.

These are the rules:

1. Respect the price action but never defer to it. The action (or "eyes") is a valuable tool when trading but if you defer to the flickering ticks, stocks would be "better" up and "worse" down and that's a losing proposition. This is a particularly pertinent point as headlines of new highs serve as sexy sirens for those on the sidelines.

2. Discipline trumps conviction. No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you're smarter than the market.

3. Opportunities are made up easier than losses. It's not necessary to play every move, it's only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

4. Emotion is the enemy when trading. Emotional decisions always have a way of coming back to haunt you. If you're personally attached to a position, your decision making process will be flawed. It's that simple.

5. Zig when others zag. Sell hope, buy despair and take the other side of emotional disconnects in the context of controlled risk. If you can't find the sheep in the herd, chances are that you're it.

6. Adapt your style to the market At various junctures, different investment approaches are warranted and applying the right methodology is half the battle. Identify your time horizon and employ a risk profile that allows the market to work for you.

7. Maximize your reward relative to your risk If you're patient and pick your spots, edges will emerge that provide an advantageous risk/reward. Proactive patience is a virtue.

8. Perception is reality in the marketplace. Identifying the prevalent psychology is a necessary process when trading. It's not "what is," it's what's perceived to be that dictates supply and demand.

9. When unsure, trade "in between" Your risk profile should always be an extension of your thought process. If you're unsure, trade smaller, or paper trade, until your identify your comfort zone. Trading "feel" is cyclical and any professional worth his or her salt must endure slumps.

10. Don't let your bad trades turn into investments. Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the risk off win or lose.

There are obviously many more rules, but I've found these to be the common thread through the years. Each of you has a unique risk profile and time horizon, so some of these commandments may not apply. As always, I share these thoughts with the hopes that it adds value to your process. Find a style that works for you and always allow for a margin of error. No approach is failsafe. If there wasn't risk in this profession, it would be called "winning," not trading.

Dennis Gartman's Trading Rules

1. Never, Ever, Ever, Under Any Circumstance, Add To A Losing Position... not ever, not never! Adding to losing positions is trading's carginogen; It is trading's driving-while intoxicated. It will lead to ruin. Count on it!

2. Trade Like A Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

3. Mental Capital Trumps Real Capital: Capital comes in two types; mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This Is Not A Business Of Buying Low And Selling High; It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.

6. "Markets Can Remain Illogical Far Longer Than You Or I Can Remain Solvent." These are Keynes' words and illogic does often reign, despite what the academics would have us believe.

7. Buy Markets That Show The Greatest Strength; Sell Markets That Show The Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to sail the strongest winds, for they carry the farthest.

8. Think Like A Fundamentalist; Trade Like A Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand, them run in tandem.

9. Trading Runs in Cycles; Some Good; Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In "good times," even errors turn to profits; in "bad times," the most well researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we've known have the simplest methods of trading. There is a correlation here!

11: In Trading/Investing, An Understanding Of Mass Psychology is Often More Important Than An Understanding of Economics: Simply put, "When they are cryin', you should be buyin'! and when they are yellin', you should be sellin'!"

12. Bear Market Corrections Are More Violent And Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.

13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow... usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.

14. Be Patient With Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year... and our profits grow accordingly.

15. Do More Of That Which Is Working and Less Of That Which Is Not: This works in life as well as trading. Do the things that have been proven of merit. Add to winning trades; Cut back, or eliminate losing ones. If there is a "secret" to trading (and of life), this is it.

16. All Rules Are Meant To Be Broken.... but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

What Makes a Pro? $$

There is no secret to trading and no single source for everything you need to know.
• Listen to everybody; you’ll always pick up something.
• Don’t be afraid to ask questions. Great traders were not always great. Most of them remember what it’s like to struggle, and many of them are happy to help someone who is genuinely trying to get better.
• If you learn a little detail, pretty soon the big picture you were looking for starts to take shape right in front of you.
• It’s what you learn after you know it all that counts.
• Being wrong is being human.
• Improvement requires taking a long term approach. Anyone who tells you there’s a quick fix is selling you a bag of goods.
• Nobody can ever perfect his or her trading. The best traders in history have gone through stretches when they couldn’t make a good trade. Champions keep grinding and fight through those times.
• Trading and the markets don’t care who you are or where you’re from. Trading is about posting numbers by your name. And if those numbers aren’t very good, nobody is going to remember your name anyway.
• In trading and life, ego and ignorance are a lethal combination.
• There’s one position in trading that matters most: the ready position. Always be prepared.
• If the trade seems simple that probably because it is. Don’t overcomplicate it.
• You can’t make a racehorse out of a mule but you can become the fastest mule!
• If you believe in what you are doing, say so loudly and proudly. If you don’t, keep your mouth shut because a halfhearted opinion is worse than no opinion at all.
• If you don’t have a target, nothing else matters. If you’re aiming at nothing, in trading as in life, you’re always going to hit it.
• Always be a giver no matter how much you have to give.

Moneyball: The Art of Winning an Unfair Game

1. Know the end result you want
Before anything else, you should know exactly what you want. This requires thought. In Oakland A’s case, their goal was to win as many games as possible, not to retain their stars. This was because they found that the fans would come to games when the team was winning, regardless of whether or not they had their stars with them. They then aligned their strategies with this goal. They often couldn’t afford to retain their stars, but they could find ways to win more games.
2. Ask yourself: What is the Conventional Wisdom?
Now you should ask yourself what the conventional wisdom says about how to achieve your goal. List them. This is what most people think you should do to achieve your goal, and this is what the majority of people are doing.
3. Question the Conventional Wisdom
This is not easy, but this is how you can find opportunities. Your best weapon is why. By asking why you may find that:
  • The conventional wisdom is unreasonable
    There is simply no evidence that it works. Most likely it became conventional wisdom because some people said so. In baseball for example, the way people count things can be traced back to a different game: cricket. Because the man who improved the box score in 1859 was familiar with cricket, he brought the ideas to baseball without thinking about whether or not that was the best way to count things in baseball.
  • The conventional wisdom is not the best way to achieve the goal
    The conventional wisdom might contribute something to achieve the goal, but there could be other more significant factors that are overlooked by other people.
4. Find the real contributing Factors to Achieving Your Goal
The goal of questioning the conventional wisdom is to find the real contributing factors to achieving your goal. The more different they are from the conventional wisdom, the bigger the opportunities you have. To avoid guessing, it will be better if you can find data to support your ideas. If that’s not possible, at least make sure that you use clear logic.
5. Determine the kind of Stats you Need
After you find some ideas in step 4, think about the kind of stats you need to test your assumptions and help you do things correctly. For now, don’t think about how to get the stats; you will worry about that later. Just think about the ideal stats you need.
6. Find the measurement Tools
The next step is to find the tools you need to give the stats in step 5. Sometimes the tools are available, and sometimes they aren’t. If you can’t find the tools that exactly meet your needs, just find the best possible ones.
7. Measure what you Do
The next obvious step is to measure what you do when you apply your ideas. As I said in step 5, measurement is important to make sure that your assumptions are correct and you do things correctly.
8. Adjust Yyourself Accordingly
The measurement gives you the feedback you need to adjust your actions. This way you can do the right things better over time.

The ends justify the means...

Never get into something you can’t get out of by the closing bell. Every trade you make, you’re looking for the exit point. Always keep your eye on the exit point.

Don’t ever take anything at face value. Because face value is the biggest lie of any market. Nothing is ever priced at it’s true worth. The key is to figure out the real, intrinsic value - and get it for much, much less.

One minute you have your feet on the ground and you’re moving forward. The next minute, the ground is gone and you’re falling. The key is to never land. Keep it in the air as long as you fucking can.

You walk into a room with a grenade, and your best-case scenario is walking back out still holding the grenade. You’re worst-case scenario is that the grenade explodes, blowing you into little bloody pieces. The moral of the story: don’t make bets with no upside.

Don’t over think. If it looks like a duck and quacks like a duck - it’s a duck.

Fear is the greatest motivator. Motivation is what it takes to find profit.

The first place to look for the solution is within the problem itself.

The ends justify the means, but there is only one end that really matters, ending up on a beach with a bottle of fucking champagne.

Questions to Ask everyday

Be critical and patient when entering trades
What is my game plan?
Is it a “take your trade” type trade?
Is it a A,B, or C type trade?
Is the stock in play today? (Large opening gap, percentage wise)
Is there open space for the stock to have a move?
Is it trading above average volume?
Is it a leader or laggard of its sector?
What did the stock do after the first hour? Gap fill or not?
Did the stock have a gap open yesterday?
Did it fill the gap?
What does the daily chart look like?
What does the 30 minute chart look like?
What does the 15 minute chart look like?
Timing in on the 1/5 minute ?

20 Rules

1. Create a game plan and stick to it! You should have a reason for entering each trade and always have a stop-loss price and a level to take profits before you enter a position. In the long-run, discipline is the key to consistent success.

2. You must learn to adapt quickly to changes. If a short-term trade isn’t working, don’t hesitate to switch sides. The market and stocks can change very quickly, and you must be able to change with them. Don’t be stubborn!

3. Don’t get married to trades! If a stock isn’t working for you and you are losing money, you don’t have to make it back in that stock. Likewise, don’t force a trade in a stock only because it has made you money before. Always just trade the best set-ups.

4. Do not try to bottom fish or pick tops. The trend is your friend; when you find it, follow it. Don’t trade with a bias because you think something should or shouldn’t happen, let the stock tell you what its next move will be. Trying to identify tops and bottoms is a losing way to trade in the long-run.

5. Accept losses, they are part of the game! Prepare yourself mentally and emotionally for this eventuality. Try to limit losses when you are not on top of your game and take a break if you need one.

6. Keep it simple. If a trade is working for you, stick with it!

7. Stay confident and positive. Don’t hesitate to take a step back or ask for help if you are not feeling good about your trading.

8. Be consistent with your game plan, size and execution. Don’t make a winning trade in 300 shares and a losing one in 1,000! Keep your tiers consistent and stick to your game-planned trades.

9. Stick to your trade, believe in your preparation! If you like a trade set-up, stick with it until it works or is no longer compelling. Even if it doesn’t work the first couple times, be patient and keep it on your radar.

10. In a losing trade, if you have an out, get out! The first stop is the cheapest stop in a losing position. Do not give into the temptation to let a losing stock run, because you will usually end up getting killed. Small losses are part of trading.

11. When you are wrong, admit it and move on. Don’t waste time with a trade that is no longer compelling.

12. Give your trade time. If you believe in the trade, wait for it to play out and stick to your game plan.

13. Never let a winning trade turn into a losing one! Take profits when you can, you can always get back in later.

14. Try to capture the full move of a stock. While it is important not to let winners turn to losers, you will make your good money from capturing larger moves. It is ok to give a little back if you have made a lot on a trade, but know when to let it go.

15. Recognize the type of trade it is. If it is a swing trade, don’t impulsively get out. If it is a quick trade, don’t get greedy. If it is a slower moving stock, be patient. If you are on, push yourself. Always be aware of the type of trade you are in and act accordingly.

16. If you are feeling good and happy about your day, it is ok to relax and enjoy the money. Don’t turn a great morning into a losing day. Catch yourself, it’s not worth it. In addition, if you have a bad morning and make it back to flat or a little green, call it a day and declare victory! If you push it, you are likely to end up back with a losing day.

17. Trade the same way whether you are up or down. Traders tend to press when they are down and get careless when they are up. Stick with what got you there.

18. Trade stocks that are in play. Don’t trade something just to trade it, make sure there is a catalyst. Volume is a trader’s best friend.

19. Stick with winners and don’t add to losers. Make sure you capture big moves in winning trades and get out of losing trades quickly.

20. Trust yourself! You will always make more money trading your own strategy than someone else’s.

One Trader's Rules

1.   Only Trade Stocks That Are In Play.

a.    Volume is a Traders Best Friend
2.   Learn to Adapt Quickly To Changes
3.   Create A Game Plan And Stick To It
4.   Stick To Your Trades And Believe In Your Preparation
a.    Always Add Prices To Alerts
5.   Recognize The Type Of Trade
a.    Scalp
b.   Swing
c.    Momentum
d.   Etc…
6.   Stick With Winners & Don’t Add To Losers
7.   Except That Small Loses Are Part Of The Game
8.   Do Not Try To Bottom Fish or Pick Tops
9.   Stay Confident And Be Positive!
10. On A Good Day, It’s Ok To Relax And Walk Away

Some Common Problems...

Overtrading- be aware of time and volume in a stock- don’t always think a move is about to happen. Sometimes moves will come at random times of the day like 12:30 but you will see volume to help you know the move is real
• NEVER average down
• Pairing out of your position- in either situation of taking profits or hitting out for a loss. If you are in 400, you should set tier size to 100 shares or 200 shares and hit out based on your own judgment. If you know for certain you are wrong hit out all at once, otherwise wait to get more information
• Hitting out too early and missing the move- don’t be as quick to hit out when you are on the right side of a trade- let the stock work for you more. Just because one bid is getting hit or one offer is being paid doesn’t mean you need to exit the trade immediately. No matter the trade, the stock never looks perfect the
whole time- there are always areas of uncertainty- in this case hit out of some but be quick to buy back in
• Stop constantly flipping back and forth between long and short - if you are doing this it means you have no clue what is going on and no conviction in what you are doing. It’s ok to do it once or twice to get a feel for what is going on, but more than that means you are just guessing.
• When a stock is in a range don’t initiate a position in the middle of the range because it can turn any second. Instead get in at the extremes of the range and add more if it breaks out or something significant happens in the stock to make you think it is an actual move
• Get the best price available in the stock by using either ECN or SDOT- don’t be lazy
• Pay attention to getting the best entry- if you are in from a better price you will be more likely to hold the position longer if it is the right way. This is a result of good timing and patience- don’t overreact to every little thing that happens in the stock and think that it is time to get involved- stay disciplined
• Reevaluate what you are doing wrong after a couple trades in a row do not work out instead of doing the same thing over and over
• Do not get emotional with stocks- if you are wrong just get out and stop doing the same thing thinking that you are right and the stock is wrong