Rules of the Game

1. See the obvious… do the obvious

I commented on what I thought was an inverse head and shoulders forming on my chart. My colleague said ‘Go stand on the other side of the room and look at your screen, if its still looks like an inverse head and shoulders then it probably is. If you have to squint your eyes to see it, then it isn’t there.’

2. Embrace risk

Embracing risk doesn’t mean being a crazy ass donkey with your equity. It means you know what you’re putting on the line and where. It’s like PTJ said ‘the difference between a successful trader and a loser is that the successful trader knows how much he is risking in the trade’. Ok. They might not be his exact words, but I’m sure it’s what I wanted to hear when he said it.

3. Get a solid entry

A good entry is the difference between heart burn and heart attack. It’s about placing a trade at a time and price point where the outcomes are limited; where shades of grey become black and white; where determining right and wrong is immediately apparent and no longer discretionary or arbitrary.

Bottom line, if you have to rely on money management techniques to earn a buck, your system sucks. Foreign exchange and equity markets are not the same.

4. Define Technical Analysis: If it happened before it will happen again.

It is rational and empirical. It’s about having positive expectation. Rely on your experience. Trading market behaviour is about knowing what’s going to happen next because it happened before.

5. Grow up

Be prepared to take responsibility for your decisions. Don’t chuck the dummy out when it doesn’t work out. Find out why. There’s always a reason and for every rule there’s an exception. Knowing that is what separates the great from the good.

6. Think continuation

If it’s going up it can go a lot higher. If it’s going down it can go a lot lower. When it comes to price you have to choose to fight or follow. Followers have an easier ride.

7. Time reversals.

That doesn’t mean don’t fight. It means pick your battles wisely. Every trending wave started off as a counter trend trade.

8. Targets

If it’s moving away from somewhere then it’s moving toward something. No target no trade.

July 13th, 2014 2:00 pm|