Managing open positions is the most difficult task the trader faces.
1. Decide in advance how actively you should manage open positions. The pros watch every tick and act on short-term swings. Part-timers read the morning paper and learn everything they need to know. Your own efforts need to fall somewhere in between.
2. Choose your playing field wisely. Track the weekly price bars if you invest; the daily bars if you're a swing trader; and the 60-minute bars if you play hard in the intraday markets.
3. Outline a specific strategy to deal with overnight positions. Learn when to stay put and when to jump ship ahead of key reports and news.
4. Set aside time and capital for unexpected opportunities. Fresh ideas show up all the time and demand your attention. Build a routine that filters these prospects quickly and efficiently.
5. Align your positions to current market conditions. Overall sentiment, external shocks and volatility affect the success or failure of your trades.
6. Trade with the buy- or sell-swing within the market. Most of the time this tracks a three-day cycle for swing traders and a 21-day cycle for position traders. Find your place in the swing and take advantage of those who execute against nature.
7. Have a proactive plan for the first and last hours of the trading day. Newer traders should sit on their hands during this time, but the pros can use it for most of their decisions.
8. Become a student of time-of-day tendencies. Markets tend to trend within narrow time windows, while fake-outs take control for the rest of the day.
9. Choose a set of averages and indicators you're comfortable with, and then leave them alone. Learn to interpret conflicting information rather than searching for the perfect indicator.
10. Track the Tick indicator closely and watch its short-term cycles. The Tick has a life of its own, and it will save your neck if you let it.
11. Keep one eye on your positions and the other on the indices. When a stock moves more sharply than an underlying index, it should continue to do so. This becomes very important when the index starts to move.
12. Follow round numbers on everything in the market. Watch how your positions react to 10, 20 and 30. Round-number support and resistance can be greater than old highs or lows.
13. Look for breakouts and breakdowns of the two-day range. This will tell you if your stock is trending, or running in place.
14. Become a student of price gaps and categorize each one. Then tell yourself what you'll do the next time your trade hits one.
15. Recognize when you're wrong and need to get out. Find the price that ruins the trade, and don't outthink the market when it gets hit. The move could be a fake-out or the start of something big.
16. Don't overanalyze your positions. Let each one speak for itself. If it has little to say, get out and move on to the next trade.
17. Become a tape reader. Look for early warning signs of a move against your position or confirmation you did the right thing.
18. Trade small if you're new at the game. This will teach you important lessons at a very low price when you make a mistake. Neophytes should concentrate on learning how to trade and not worry about making money.
19. Increase position size during winning streaks because your performance suggests reduced risk. Reduce position size during drawdowns and wait for the clouds to pass.
20. Build a contrary relationship with the crowd. Your profit rarely follows the direction of the herd, so stand against it whenever possible.
It's easier to find good stocks than to trade them for a profit.
1. Seek favorable conditions for trade entry, or stay out of the market until they appear. Bad execution ruins a perfect setup.
2. Watch the tape before you trade. Look for evidence to confirm your opinion. Time, crowd and trend must support the reversal, breakout or fade you're expecting to happen.
3. Choose to execute or to stand aside. Staying out of the market is an aggressive way to trade. All opportunities carry risk, and even perfect setups lead to very bad positions.
4. Filter the trade through your personal plan. Ditch it if it doesn't meet your risk tolerance.
5. Stay on the sidelines and wait for the opportunity to develop. There's a perfect moment you're trying to trade.
6. Decide how long you want to be in the market before you execute. Don't daytrade an investment or invest in a swing trade.
7. Take positions with the market flow, not against it. It's more fun to surf the waves than to get eaten by the sharks.
8. Avoid the open. They see you coming, sucker.
9. Stand apart from the crowd. Its emotions often signal opportunity in the opposite direction. Profit rarely follows the herd.
10. Maintain an open mind and let the market show its hand before you trade it.
11. Keep your hands off the keyboard until you're ready to act. Don't trust your fingers until they move faster than your brain, but still hit the right notes.
12. Stand aside when confusion reigns and the crowd lacks direction.
13. Take overnight positions before trading the intraday markets. Longer holding periods reduce the risk of a bad execution.
14. Lower your position size until you show a track record. Work methodically through each analysis, and never be in a hurry.
15. Trade a swing strategy in range-bound markets and a momentum strategy in trending markets.
16. An excellent entry on a mediocre position makes more money than a bad entry on a good position.
17. Step in front of the crowd on pullbacks and stand behind them on breakouts. Be ready to move against them when conditions favor a reversal.
18. Find the breaking point where the crowd will lose control, give up or show exuberance. Then execute the trade just before they do.
19. Use market orders to get in fast when you can watch the market. Place limit orders when you have a life outside of the markets.
20. Focus on execution, not technology. Fast terminals make a good trader better, but they won't help a loser.
To Day Trading rules" that consists of a set of rules and a clearly-defined step-by-step procedure that tells you
a) how and when to enter a trade,
b) how to exit at each target level,
c) what to do if a target level is not reached till closing time and
d) how to exit at stop loss level and
e) how to offset losses with overall profits. Please DO NOT commence trading before you have thoroughly read and understood the rules.Please follow the rules strictly. We do not want you to undergo losses on unprofitable trades which could often be avoided by following the rules.
1. Intra rule : These recommendations are for intra-day trading only - do not carry the positions overnight.
2. 5-minute rule : When the trigger condition is fulfilled, wait for 5 minutes, confirm that the trigger condition continues to be fulfilled and then take the advised action. Do not fear that you will lose the best entry price - more often than not, you will get the price again at the advised entry price.
However, you should not enter the trade if a) in the 5 minutes, the price has already gone near the 1st target or b) the scrip price is too wide apart from the advised entry price.
For "SELL AT HIGHER LEVEL", "BUY AT LOWER LEVEL" type of recommendations, when the trigger condition is fulfilled, take the advised action without waiting for 5 minutes.
3. 1st target rule : When the scrip price is around the 1st target , square off 50% of your position.
4. 2nd target rule : When the scrip price is around the 2nd target , square off the remaining 50% quantity; however, if the scrip price does not get near the 2nd target throughout the day, square off at 3.15 pm .
5. Stoploss rule : When the scrip price breaks the stoploss level, exit whatever quantity you have, without waiting further. Adhere to the stop loss tenaciously. STOP LOSS IS PARAMOUNT .
6. Trade-all rule : [This rule is applicable only to subscribers who have access to all the recommendations]. Since the number of recommendations is small and manageable, trade all the recommendations instead of just one or two. This way, even if one or two scrips hit the stop loss, it is most likely that the profits from the other successful trades will more than offset the losses from the stopped-out trades.
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.