Friday, August 8, 2014

Trading Rules - A

Don'ts
  • First Rule is DO NOTHING!
  • Look for high-probability SETUPs, not for trades!
  • Slow Down (I am slown down already:)
  • Be aware of THE crowd.
  • Don't keep it simple stupid, keep it real (which is complicated) because there are many factors that influence the stock.
  • No Diving! 
  • Don't think linearly about the price movement (cyclic, or sine waves).
  • Don't have a pre-conceived idea where the market should go (up or down). 
  • Don't treat market as a driving range! 
    • Don't jump on every blip and create bastard blipsilons out of wed-locks. 
    • Don't over trade! 
  • Don't be a "buzz-kill" or "party pooper": 
    • If stocks are going your way early in the day, don't abort them too early!
    • Give the trend, your friend, a chance to help you. Have some fun! 
  • Don't climb a steep rock and don't jump over a cliff. 
Do's
  • Make sure that you are emotionally calm!  
  • Screen your ideas harshly: 
    • Make sure your "sensible trade/investment ideas" have solid ground.
    • It is repeatable. 
    • It has plenty of empirical evidence, just because it should does not mean it will. 
  • Do simulations:
    • Paper trades are FREE! 
  • Research: Fundamentals matter: A clearly thought-out theme
    • Future projection of growth. Here you can project linearly. 
    • Future events/catalysts.
  • Observe the market:
    • What sectors/stocks are doing well or poorly. 
    • How are the market reactions to earnings before and after.
  • Think like a contrarian:
    • Think about buying when the market is tanking, especially at the open. 
    • Think about selling when the market is rallying, especially when it is going parabolic.
  • Determine the trends: 
    • Bullish (Bearish) long term trends - it means that the stock is trading above (below) 80 day SMA (also after the 15-80 day SMA cross-over point). 
    • Bullish (Bearish) short term trends - using intra-day (15 min bar?) chart to make the determination. 
  • Study the charts:
    • Determine where the key technical points are, including key resistance, support levels, round number levels, etc. Exit points have to be adjusted to give room these key points. 
  • Determine the exit points before any entry because this is the last time when you have objectivity. 
Be prepared
  • Be physically ready - you need to be well-rested, feel energized. 
  • Be mentally ready - you need to be mentally sharp, not feeling down, stressed over things. Solve them before the battle. 
  • Fully armed - 
    • done the homework, 
    • understand what is going on in the market, 
    • on top of the stocks in you portfolio
    • on top of the stocks you follow
    • gone thru the charts and know where the key technical points are



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