Before you start trading, you should know the rules of trade and every factor that can influence your trading results. Gartman explains the 20 Rules of Trading you should know:
provided by Dennis Gartman, Editor / Publisher Gartman Letter
1. Never in any circumstances be added to a losing position .... never, never!. Needless to say, to do otherwise is not logical and will actually lead to destruction ... Count on it, and rely more!
2. Trade like a mercenary guerrilla. We shall fight on the side of the win and are willing to change sides as soon as one side has gained the upper hand.
3. Capital comes in two varieties: Mental and Actual. Of the two types of capital, the mental is the more important and expensive of the two. Holding a position to lose the amount of actual capital cost measured, but the number of diverse mental capital costs.
4. The goal is to not buy low and sell high, but to buy high and sell higher. We can never know what the price of Nor "low." Can we know what price is "high." We can, however, have a chance, simply makes sense to find out what these trends and act on that trend.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That might seem obvious, it is not, however.
6. "The market can remain irrational longer than you can remain solvent," according to our good friend, Dr A. Gary Shilling. It makes no sense reigned and the market is often a very efficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy the show's biggest strength. Allegories, when bearish we need to throw our rocks into the wettest paper sacks, for they break most easily. In bull markets, we need to rise above strong wind ... they will take us higher than lower.
8. Try to trade the first day of the gaps (either higher or lower), for gaps usually indicate violent new action. We have come to respect "gaps" in 25 years we watch the market, but in world trade 24 hours, they become less and less important, especially in dealing with forex. None the less, when they occur (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good, most bad. Trade large and aggressively when trading well; small and simple trade when trading poorly. In the "good time," even errors are profitable, the "bad time" trading of even the most well-researched awry. It is the nature of trade; accept it.
10. To trade successfully, think like a fundamentalist, trade like a technician. It is important that we understand the fundamentals driving the trade, but we understand the market technicals as well. 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 drive the market earlier. Respect them. Even more respect should be paid to the reversal of "weekly" and "monthly,". Pay heed!
12. Keeping your technical systems simple. complex systems breed confusion; simplicity elegance descent.
13. Respect, retracements to expect and embrace the very normal 50-62% that took prices back to major trends. If a trade is missed, wait patiently for the retracement that.
14. In the trading / investing, an understanding of mass psychology is often more important than understanding about the economy .. at least many, if not most, time.
15. Establish initial positions on strength in bull markets and weakness in bear markets. The "In addition" the first must also be added to the strength as the market shows the trend
to be working. Furthermore, subsequent additions to be added on retracements.
16. Bear markets harder than the bull market retracements and so did they ..
17. Be patient with winning trades; become very impatient with losing trades.
18. The market is the sum total of wisdom ... and ignorance ... of everyone connected in it, and we do not dare argue with the wisdom of the market. If we learn nothing more than that we have learned a great deal.
19. Do more work and less of what does not: If the market is strong, buy more, if the market is weak, sell more. new highs more often then not be purchased; new lowest for sale.
20. BROKEN ALL THE RULES is intended to: The trick is knowing when ... and how these rules may be rarely invoked.!
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