As I do every weekend, below is an article from an outside blog. Each Saturday I try to provide you with a different perspective other than my own to broaden your understanding of the market. This week’s article comes from a popular website called xTrends started by Atilla Demiray, a well-known Turkish-American trader, inventor of xTrends theory and founder of Demiray & Co. Capital Sciences. The article below provides you with his Trading Rules as posted his website. Everyone of them speaks to the truth of trading and hopefully can make an impact on your trading going forward.
1- Maximize Your Profits, minimize your losses.
2- Do not over-trade. Be selective and take only those with low risk/reward ratio.
3- Do not use widely followed indicators and tools. Develop your own trading system and methodology.
4- News are irrelevant. The market do not react to news, news react to the market because news are most likely already priced in before they are released. Initial reaction to news usually get faded.
5- The market tends to reverse after the day of FOMC announcement
6- Do not hold double or triple ETFs for a long time, no matter where the market goes, they are subject to price erosion by design
7- Volatility can be your friend and enemy. If you know how to use it… If you don’t , keep your trading small.
8- Dont buy and sell easy trades, there will be more profitable trades among those the crows finds objectionable.
9- Always trade in the direction of main trend.
10- Be patient with winning trades; be enormously impatient with losing trades.
Click Here to See the Rest of the xTrends Trading Rules.
11- Bear markets are more violent and so also are their retracements.
12- Buy corrections in bull markets, sell retracements in bear markets. To do this, you must have a system to measure where exactly the retracement or correction is likely end.
13- An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings and opportunities for you to profit arose from their mistakes.
14- Your trading time frame affects your long term performance. Try not to day-trade. Try to buck big trends.
15- The longer term trends and their reversals are much more powerful then shorter term trends. Always keep the big picture in mind when you trade counter-trend.
16- Gaps are very important. Daily opening and closing prices contain more information than highs and lows. Especially weekly and monthly gaps posses extreme importance for the longer term direction.
17- Always use a scaling technique when you enter and exit a trade. You can never know the exact top and bottoms, use ranges.
18- Let the others have the last few bucks , don’t try to squeeze the final pennies out of a trade.
19- You have to maintain a steady mind set. Take some break after a sizable profit or loss, reevaluate.
20- Markets can remain illogical longer than you or I can remain solvent. Dont overstay in a loosing position, always have an exit strategy.
21- Tops take time to form, they are process. Bottoms are event, printed in short time frames.
22- Implied volatility increases near the end of topping processes. This can be observed from VIX index. VIX shows relative strength despite the market keeps going higher.
23- Implied volatility decreases near the end of a sell off. This can be observed from VIX index. VIX shows relative weakness despite the market keeps going higher.
