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Golden Rules of Trading
Golden Rules of Trading
txt
GOLDEN RULES OF TRADING (http://www.alberdon.demon.co.uk/)
A) Trading runs in cycles; some good; most bad. Trade large and aggressively when
trading well, trade small and modestly when trading poorly. In good times, even
errors are profitable; in bad times even the most well researched trades go awry.
This is the nature of trading, accept it.
B) Be patient with winning trades; be enormously impatient with losing trades.
C) Understand that the market is the sum total of the knowledge and wisdom of all of
those that deal in it; we dare not argue with the market's wisdom. If we learn
nothing more than that, we have learned very much indead.
D) Resist the urge to trade against the consensus too early. The consensus may be
wrong at major turning points, but it is right and can remain right for long periods
of time in the midst of a great move. Patience, rather than impatience, is far
better when considering any trade
E) When you have a successful trade, fight the natural tendency to give some of it
back.
F) Take windfall profits (profits that have no sound reasons for occurring).
G) Always use stop orders,(Limit losses) always...always...always.
H) Don't sell when price nears a major MA when the price action has been all above
the MA, same goes for not buying when price nears MA in a down-trend. This rule
should be applied when the MA is angled either upward or downward (trending market).
Nearing the MA presents an oppotunity to enter the market. (essentially: wait to
enter for a pull-back)
----------------------------------------------------------------------------1) The most important rule is this: In a bull market, one can only be bullish, or on
the sidelines. The correlative rule is that in a bear market the opposite applies.
2) Buy that which is showing strength, sell that which is showing weakness.
Metaphorically, when bearish we need to throw our rocks into the wettest paper
sacks, for they break most readily. In bull markets, we need to ride upon the
strongest winds...they shall carry us higher than lesser ones.
3) After a period of unprofitable trading, take a break. Stop, cease and desist!
Give yourself some time to let the mental damage done by poor trading abate.
4) Avoid trading on emotion. Trade when and only when a trade has been well planned,
including exit points as well as profits. (I believe that profit targets are
sometimes not applicable in long bull or bear runs)
5) Add to trades on minor corrections against the major trend. 50-62% retracements
are very common in bull runs, whilst retracements in bear markets are much swifter,
usually smaller, and of shorter duration. Use those corrections to add to positions.
After sharp break-outs to either the upside or the downside, wait for a small
correction to add.
6) Be patient. If a trade is missed, wait for a correction to put trade on. The
market will trade tomorrow.
7) Be Patient. Once a trade is put on, give it time to work; give it time to
insulate itself from random noise; give it time for others to see the merit of what
you saw earlier than they.
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19) More often than not, extreme volatility at the end of a long bull run marks the
highs. More often than not, extremely low volatitliy at the end of a long bear run
marks the lows.
20) Bear markets are more violent than bull markets and usually retrace less.
21) It is normal for markets to correct very sharply for one or two days after the
first leg of a bull run. Those corrections are often the best buying opportunities,
for the market has already proven its willingness to rise. The correction is often
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