Here are my rules
1. Shop for a good trade setup
- that's what I use my analysis
tools for
2. Trail an entry stop to get in (Trail In)
- let the market prove you right
3. Trail an entry stop to get out (Trail Out)
I apply these rules to both positon trading and day trading,
but I have more for day trading.
For day trading in particular:
5. Cover It On Close 6. Don't chase a trade 7. Trade in sets of 20 or 30 trades. 8. Grade yourself on EXECUTION 9. When you trade - DO NOTHING ELSE. You won't win while talking
on the phone to your favorite other soul.
- CIOC - like Cash In On Chaos - Play
only ONE GAME. There is no bad day trade that is a good positon trade.
Carrying anything overnight is to SURRENDER CONTROL. It's like
leaving your wallet on the sidewalk in front of your house overnight
and hoping that someone will put money in it while you sleep.
- If you didn't see it setting up, don't
trade it. It's throwing late down the midddle. You already missed
a zillion trades in you previous life, so why worry if you miss this one. There are more coming.
That gives you statically
significant results to evaluate what you are doing. Then take a break.
- IT MUST BE PERFECT. Unlike
driving a car, you can't make small errors of execution. Because if you
do, the S&P will explode against you and make that small error
in execution a BIG LOSS. I give myself 60 seconds to call in
my protective Trail Out stop when an entry stop is hit. I make it an automatic
2 points from my entry point. If I find myself hesitating or not doing this,
I take at least a week off.
Chaos Trading in a Nutshell
Think about it. The markets are chaotic. Trail In, Trail out
will insure A) you catch some small losses, B) you catch some
small gains, and C) you will catch some big gains - even if you
pick the trades at random. The key is that YOU NEVER CATCH A BIG LOSS.
Over time, this works. That is what's built my hotline track records over
the years, and what built my own account. Then, technology to improve
the trade selection improves the results. But I always Trail In- Trail Out.
It's the only way to Cash In On Chaos.