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Ten overriding principles

  
  Education
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  1. Always live to fight another day
  2. Entries must have a statistical edge
  3. Patience and discipline
  4. Be a jellyfish (swim with the current)
  5. Trade only liquid securities
  6. Focus on trying to capture the middle 80% of a move
  7. Know your exit points when you open a position (and stick to them!)
  8. When in doubt, reduce position size by 50%
  9. Limit losses to 2% of total equity for any single trade
  10. Start each day with a clean financial and emotional slate

The above list is relatively generic, but it helped provide me with a framework for organizing how I would approach trading as a business, what strategies I should adopt, how those strategies should be executed, and ultimately defining what success should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even more important, I believe, is the process that one goes through in order to arrive at these rules and to make sure that as new market situations unfold and new blind spots are revealed, the rules and guidelines are enhanced to maximize the opportunity for the trader to continue to grow and develop.

Traits of a Successful Trader

  
  Education
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We urge you to use this checklist for your own trading and investing preparation.  We truly feel that these traits are very important for you to understand.  These trader traits coupled with the proper psychology can make a huge positive difference in your overall trading performance.     

•  The ability to act on your decisions.

•  The ability to accept responsibility for your actions.

•  You must have emotional detachment from the markets.

•  The ability to accept risk and take losses (you’ll never be right 100% of the time). (more…)

STRATEGIES FOR SUCCESS

  
  Education
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trading-rules

After a year or so of trading, I found that I had standardized on about 15 rules/guidelines that have changed only slightly since then.

As requested, here are ten overriding principles that have survived the past five
years, through bull and bear markets:
Always live to fight another day
Entries must have a statistical edge
Patience and discipline
Be a jellyfish (swim with the current)
Trade only liquid securities
Focus on trying to capture the middle 80% of a move
Know your exit points when you open a position (and stick to them!)
When in doubt, reduce position size by 50%
Limit losses to 2% of total equity for any single trade
Start each day with a clean financial and emotional slate
The above list is relatively generic, but it helped provide me with a framework for
organizing how I would approach trading as a business, what strategies I should
adopt, how those strategies should be executed, and ultimately defining what success
should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even
more important, I believe, is the process that one goes through in order to arrive at
these rules and to make sure that as new market situations unfold and new blind
spots are revealed, the rules and guidelines are enhanced to maximize the
opportunity for the trader to continue to grow and develop.

 

Technical Confirmations Explained

  
  Education
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Confirmation is necessary to validate a break of important support and resistance levels such as price patterns, moving averages and trend lines. Technicians and traders define Confirmation in various ways. While market situations vary, below is a guideline of three forms of Confirmation:

  • Percentage Confirmation: Confirmation is present when there is a 3% or greater break of a support or resistance level. Volume attached to the break, while not necessary, lends confidence to the confirmation. The 3% rule is commonly used by long term traders and investors. Short term traders use a lesser requirement to complement trading objectives, keeping risk/reward in line.
  • Time Confirmation: If there are at least three closes above or below a resistance or support level, then confirmation exists. A close varies based on ones trading time frame. Again, volume attached to the break adds significance to the confirmation. (We always write Three Consecutive close +Weekly close must for major upmove or down move )
  • Heavy Volume Confirmation: Volume confirmation presents when there is a substantial surge in volume relative to recent volume, combined with one close above or below a resistance or support level.
  • Combination: If percentage and time confirmations fall short of the minimum requirement, yet are accompanied by substantial volume (e.g. 1.5% close above resistance with substantial volume), that could be accepted as confirmation.

Traders can use this guideline to develop their own requirements for confirmation as individual investment objectives and time frames vary.

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