| 4.
Prices
have memory. |
| 5.
Bulls live above 200-day moving
averages, bears live below and
try to eat up all rally attempts. |
| 6.
Big volumes kill substantial
price moves. |
|
7.
Reversals build slowly. The
first sharp dip always finds
buyers and the first sharp
rise always finds sellers.
|
|
8.
Bottoms take longer to shape
than tops. Greed acts more quickly
than fear and pushes stocks
to drop from their own weight. |
9.
Losses are a simple cost of
doing business. Don't try to
justify a bad trade by convincing
yourself that it will sooner
or later turn into a good trade.
Accept losses easily!
Successful traders are able
to ride through downturn periods.
The confidence in their methods
reassures them about their future
success.
The markets offer endless and
plentiful possibilities. Missed
opportunities exist only
in your mind. Prices keep changing
and generate other opportunities.
The goal of trading is make
a net profit after a sequence
of trades. It is, therefore,
necessary to accept some losses
and to look forward without
punishing oneself. |
| 10.
Don't
be a hero. Don't fight the trend.
Follow the money flow. |
| 11.
Forget the news, remember the
chart. The chart already
knows the news is coming. |
|
12. Predetermine maximum losses
in every potential trade.
Do not risk more than 5% of
your capital on any trade. Don't
average your losses. |
| 13.
Do not buy a stock because it
is low priced (or sell because
the price is high). |
14.
Buy on rumors; sell on news.
|
| 15.
Trade active stocks, avoid thinly
traded markets. |
16.
Prepare your action plan before
the market hours and follow
it. Do not formulate a new
opinion during market hours.
Option trader must forecast
for:
- a
price change in the underlying,
- a
change in implied volatility.
Option
traders must understand and
keep an eye on implied volatility.
Implied volatility is the
volatility percentage that
justifies the option price
and reflects the market's
perception of the risk. |
| 17.
Learn to monitor yourself and
draw conclusions from your mistakes. |
| 18.
Take a part of the profit to
reward yourself.
|
