20 Golden Rules for Traders
- 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.
- Buy at support, sell at resistance. Everyone sees the same thing and they're all just
waiting to jump in on the action.
- Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to
- Don't buy up into a major moving average or sell down into one.
- 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.
- 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.
- Trends test the point of last support/resistance. Enter here even if it hurts.
- Trade with the TICK not against it. Don't be a hero. Go with the money flow.
- If you have to look, it isn't there. Forget your college degree and trust your instincts.
- 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.
- The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone
to change the channel.
- Avoid the open. They see YOU coming sucker.
- 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double
- 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.
- Price has memory. What did price do the last time it hit a certain level? Chances are it
will do it again.
- Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and
lead to sideways action.
- Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers
and the first sharp rise always finds sellers.
- Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks
to drop from their own weight.
- Beat the crowd in and out the door. You have to take their money before they take yours,
- 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.