The 22 Rules of Trading

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

Exerpt by Dennis Gartman

http://www.silverbearcafe.com/private/rules.html

Or we trending or consolidating?

Figuring out what kind of direction we are in the market is very important to become a successful trader. In my past years I would trade against the trend. Remember the trend is your friend. If you can follow this simply rule you will have much higher probable winning trades. Now that is much easier said than done. For example the last few weeks on the AUD/USD we have been going sideways. Trying to trade this using trends wouldn't work. In the chart you will find we are bouncing between 1.08167 and 1.06450. After you decide what kinda of market we are in you can beginning applying the best system suited for that market. I have several methods to trade the different types of markets. Remember like a handyman you need to learn what the market is doing and then use the correct tools to decipher the market. You would never use a hammer on glass would you? Most new traders try to fit their tools onto the market to see which one fits and have no idea what they are using. The master trader rather use their knowledge and experience and decides which tool is the best. They have mastered their trading tools.

Short USD/JPY

Looking for a short trade on USD/JPY on the 5 minute chart. Lets see what happens.
Entry: 80.008
Stop loss: 80.04404
Profit target: 79.994
Units: 2890000
Result: $1589.64 profit.

Greece to Avoid Near-Term Default, Maroutsos Says

Long AUD/USD

Looking for a long on the AUD/USD.
Entry: 1.06725
SL: 1.06446
TP: 1.07183
R/R: 1 to 1.64
Units: 100,000
Risk $250
Reward: $450

Markets getting ready to roll over!

We've been on a uptrend since December 15, 2011 on the Aussie. Some pull back is needed to to help alleviate all the market buy pressure. Price could not hover above 1.0841 and now we are cosolidating between 1.0841 and 1.06372. Take note at the MACD histogram. We are finally under the zero line which means a change in trend. I am looking for shorts right now. The sentiment index is showing 40% long, and 60% short which means we are net long still. I am looking for short entry on the 5min. on AUD/USD. Lets see what happens.

Why trade Forex?

If you've ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet. When you do this, you've essentially participated in the forex market! The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial market in the world. Compared to the measly $74 billion a day volume of the New York Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4 TRILLION a day trade volume. Check out the graph of the average daily trading volume for the forex market, New York Stock Exchange, Tokyo Stock Exchange, and London Stock Exchange. The currency market is over 53 times BIGGER! The Forex market is always liquid and trades 24 hours a day unlike the 6.5 hours of the stock market. You are able to set your own hours instead of following stock market hours. Also Forex is unlikely to gap up or down which can cause huge draw downs. Many systems can be implemented into Forex because the price action is very predictable and trends very well. Unlike the over +2000 stocks, you can only focus on the main pairs of the Forex which makes life much easier. Sure there are other markets out there, but Forex probably provides the best liquidity and is less risky considering we don't abuse the leverage involved with Forex. We will get into leverage in another article.

Remember we are traders and masters of risk!

Long AUD/USD

Looking for a long trade near bottom. We have a double bottom with strong support and over sold on stochastic. Lets take the trade and see what happens.

Entry: 1.06900
SL: 1.06618
TP: 1.07531
1:2.25 RR

Focus on 1 pair...make life easier

Sometimes life is easier without having to multitask too much. Some people are well organized while others not as organized. Some traders trade a multitude of pairs while some prefer a single pair. Through my experience trading one pair makes the most sense. You get to know the pair inside and out and know its short comings. Everything is simplified and that way it makes life easier to make more pips. Next time if you find yourself wandering too much which pairs to trade, try focusing on one pair. You sure will be more efficient.

Remember we are traders and masters of risk!

Be patient, be patient, be patient...

Patience is a critical part of successful trading. Now some people have a lot of patience doing other activities but when involved with money its always the other way around. People want to make money fast. They don't want to wait. It is a natural human tendency to hurry. Heck we all want to get to our destination faster and save more time. However the truth of the matter is that successful trading requires incredible super duper patience. You need to look for the most high probable trades out there. From my experience trading 2-3 times a week is most ideal. I find the best trades happen every 2-3 days. Even trading once a week is good. We don't want to be machine gun traders shooting at everything we see. You want to be a sniper. Yes a sniper. Trade slow motion and you are able to plan ahead and therefore you always get the best fill price. Patience is virtue.

Remember we are traders and masters of risk!

Long AUD/USD

We are still on a uptrend. Looking for a pull back entry at support between 1.07502 and 1.07366.
Entry: 1.07502
SL: 1.07366
TP profit: 1.07792

Short USD/CHF

A fresh wave of optimism has been injected into the Euro, with the single currency outperforming in recent trade on the back of legitimate expectations that a Greece deal is finally near. Greek party officials are slated to meet later today to facilitate the agreement of the bailout, which one party leader says should not end in humiliation for the country. Also seen propping the Euro is a report from the WSJ which says that the ECB might consider making concessions on Greek debt.

Overall USD is still trending down. We will take short trade.

Looking for a short trade on USD/CHF.
Entry: 0.91441
SL: 0.91544
TP: 0.91123

Lets see what happens.

Welcome to Forex Pip Alert!

Greeting to all the readers out there in trading land! I've decided to write this blog to share my experiences and knowledge in the world of Forex trading. A little background about myself first. Started trading equities back in 2007 right before the great market crash of 2008. Those were some volatile times I might add. Spikes in price gyrated up and down like I never seen before. Then I came across Forex and this was the market that suited my personality. The next few years were dedicated to learning indicators, money management, and psychology. After years of study I can finally say that I've reached some consistent success as a trader. I hope I can share my experiences with others. Please feel free to leave comments and discuss. Thanks and trade with confidence!

Remember we are traders and masters of risk!