- If the stock market is in an up trend trade primarily on the long side and in a down trend short rallies primarily. The best way to lose money in the stock market is to fight the prevailing trend.
- Do not trade without a detailed trading plan covering entries, exits, position sizing, maximum positions at one time, risk management, and rules that will apply to your own trading psychology.
- Do not make trades based on your own emotions of fear and greed instead seek to capitalize on trading the fear and greed of other traders.
- Find ways to quantify and back test price support and resistance levels and then trade in the direction of the trend in your time frame.
- Enter trades where your potential for upside profit is much greater than your risk of loss. Be prepared to exit a losing trade if the price goes to a level that shows you that you are probably wrong. Be prepared to let a winner run as far as it will go with a trailing stop.
- Position size and set stop losses so if you are wrong you will lose no more than 1% of your total trading capital. This will change a string of losses from a blow up to a small draw down and your wins can be as big as the trend allows.
- Limit your total risk exposure so that you can never lose more than 3% at one time if all your open trades go against you at the same time.
- Focus your trading on a small watch list of trading vehicles that you are very knowledgeable about and understand their historical price history in detail.
- Master a few entries and once you have proven their robustness in live trading add new entry signals. Be very picky about your entries and take your time developing your trading plan entries and exits before trading real money.
- Quick trying to predict and learn how to react to present price action.
- Stop trading based on your egos need to be proven right and trade only to make money.
- All the work for trading should be completed before the market opens, when the market is open we should only be executing trade signals.