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Trading Guidelines
a. Trade int he direciton of the itnermediate trend.
b. In uptrends, buy the dips; in downtrends, sell bounces.
c. Let profits run, cut losses short.
d. Always use protective stops to limit losses.
e. Don't trade impulsively, always have a plan.
f. Plan your work and work your plan.
g. Diversify, but don't overdo it.
h. Employ at least a 1:3 risk:reward ratio.
i. When adding positions follow these guidelines:
- Each successive layer should be smaller than before.
- Add only to winning positions.
- Never add to a losing position.
- Adjust protective stops to the breakeven point.
j. Close out losing positions before the winning ones.
k. Except for very short-term trading, make decisions away from the market, preferable when the markets are closed.
l. Work from the long-term to the short-term.
m. Use intraday charts to fine tune entry and exit points.
n. Master interday trading before trying intraday trading.
o. Try to ignore conventional wisdom; don't take anything said in the printed media too seriously.
p. Learn to be comfortable being in the minority. If you're right ont he market, most people will disagree with you.
q. Technical analysis is a skill that improves with experience adn study. Always be a student adn keep learning.
r. Keep it simple; more complicated isn't always better.
Technical Checklist
a. What is the direction of the index?
b. What are the weekly and monthly charts showing?
c. Are the major, intermediate, adn minor trends up, down or sideways?
d. Where are the important support and resistance levels?
e. Where are the important trendlines or channels?
f. Is volume confirming the price action?
g. Where are the 33%, 50%, and 66% retracements?
h. Are there any price gaps and what type are they?
i. Are there any major reversal patterns visibile?
j. Are there any continuation patterns visible?
k. What are the targets from those patterns?
l. Which way are the moving averages pointing?
m. Are the oscillators overbought or oversold?
n. Are any divergences apparent on the oscillators?
o. After you've arrived at a bullish or bearish conclusion, ask yourself the following:
* Which way will this market trend over the next one to three months?
* Am I going to buy or sell this market?
* How much am I prepared to risk if I'm wrong?
* What is my profit objective?
* Where will I enter the market?
* Where will I place my protective stop?
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