trade the trade trade the trade

I was asked the other day to elaborate on the term i often refer to so i hope this helps those who have asked as it has helped me immensely in my trading career.
Can i also say the notes/rules i have shown here are ones i have gained from teaching over the years from people willing to share there knowledge with me.
regards
rob


Trade the Trade

Simply learning to “Trade the Trade” enables us to avoid the emotional hype which is created through markets across the world. The best example I can give of this is QBE after the 9/11 event, prior to this even QBE was a great fundamental company yet when the event occurred there creditability was driven down by hype as nothing with the business had changed. So the company that was $12 prior to the event now was bargains under $5. Fear made many sell and fear stopped many from buying at the lows. The chart illustrates what happen but to an optimist what had really happened was the high and low had now given a price projection to look for in years to come.



You can see how powerful psychology in trading is, if you show the same successful trading approach to one hundred different traders. No two of them will trade it exactly the same way. Why? Because each trader has a unique belief system and their beliefs will determine their trading style. That is why even with a profitable and proven trading approach, many traders will fail. They do not have the proper belief system to enable them to trade well.
1. GET EDUCATED - If you are not, the market will make you pay. If you play the market without educating yourself, the market will inevitably take your hard earned money. You may get lucky once or twice, but in the long run the market will take it all. It is definitely cheaper to get educated about the market rather than learn by trial and error.

2. DON’T TRADE WITH CAPITAL YOU CANT AFFORD TO LOOSE- The stress of trading is high enough. Scared money never makes money. The market is unforgiving and will take your last dime if you let it. Trade only with capital that you can afford to lose.

3. KNOW WHY YOU ARE ENTERING A POSITION - Don’t gamble and enter a position just to be in the market. Enter with a plan. Have a target for the position that you enter. More importantly, have an exit strategy for the position if you are wrong. Jesse Livermore, one of the greatest traders to ever live, said 10% was the most he was willing to lose on a single trade.
4. NEVER AVERAGE DOWN ON A LOOSING POSITION - If you have entered a position and you are wrong why compound that loss by adding more. Never average down on you’re losing positions. It is a recipe for disaster.

5. NEVER PUT ALL YOUR CAPITAL ON 1 POSITION - If you leverage yourself too much on one position you will not be able to take another position should a better one come along. Also, it becomes very difficult to control emotions when you are over leveraged in one stock.

6. SELL YOUR LOSSING POSITIONS AND KEEP YOUR WINNING POSITIONS - It is human nature to want to keep your losing position until you are even or positive. Most investors sell the winning position to hold the loser. However, the winner continues to win and the loser continues to lose. We've seen this happen time and time again. Remember keep your winners and cut the losers.

7. LET YOUR WINNING POSITIONS RUN AND CUT YOUR LOSERS FAST - This is a hard one. Many times when you get a small profit you take it too quickly only to see the position go to new highs. Know why you are selling the winner. That is how you make the big profits.

8. LEARN TO LOOSE SMALL - The market is unforgiving. This is a humbling profession and in order to survive you must keep all losses small and understand that they will happen. Once you learn to lose small, you will be on your way to success.

9. BUYING AND SELLING ON NEWS AND TIPS ARE WRONG - News and tips are the same. The market/stock already has the news priced in. This is why many times a stock sells off on great news and rallies on bad news. It’s already factored in.

10. TRADE WHAT YOU SEE AND NOT WHAT YOU BELIEVE - As much as you hope, pray, wish...a trade will act the way it will act. Watch price action and charts; it tells you everything. Once you turn towards faith and hope, just get out!

11. ENTRY POINTS ARE EVERY THING - The correct entry point will make all the difference. Step back, and wait patiently. If you miss it, we promise another trade will come along shortly. How many times have you bought something and a week later you see a flyer with a cheaper price.

12. STOPS - Always use stops. Even better, use a mental stop, but only if you truly can abide by it. NEVER CHANGE A STOP POSITION

13. BIG LOSS - No profitable day trader takes a big loss. Small losses are the key to success. If you are making $2000 per day trade, then the most you should ever lose on one day trade is $2000. Example of the wrong way - If you make $2000 on 9 straight trades and on the 10th trade you lose $20,000, how much did I make or lose? (-$2000). You might be batting 90%, but you're a losing trader!

14. PATIENCE - Trading is like being a lion and waiting in the long grasses to pounce. Stay back and wait for the perfect time to jump on the trade. Do not worry if you have not made a trade all day. One will come along. Jumping out at the wrong time will only mean you go hungry.

15. ENTERING THE TRADE - Before buying or selling a swing trade or day trade always do your DD (due diligence). Analyse the charts, read the technicals and fundamentals, then enter. Know the reason you are entering, and know what you expect to make out of it. Never let it become a losing trade.

16. NEVER LET A WINNER BECOME A LOOSER - Never enter a position, be in the money significantly, and then watch as that position becomes a loser. Once you are in the money on a trade, set a stop at least at break even, or set a trailing stop.

17. NEVER LET YOUR EMOTIONS AFFECT YOUR TRADE - A good trader has no emotions. We are supposed to trade based only on what we see. Just because you're trade was up $10000 dollars 10 minutes ago and now is only up $7000, doesn't mean you shouldn't sell at +$7000. Too many times we have seen people get attached to their max profit and only realize their mistake when that position goes negative. Any profit is a good profit.

18. NO TRADER EVER WENT BROKE TAKING A PROFIT.
19. BULLS MAKE MONEY ,BEARS MAKE MONEY, BUT PIGS GET SLAUGHTERED- Stay humble in the market. Expect each position to pay you off, but don't expect too much. Be smart about knowing when you have made enough. Get out and wait for the next trade.

20. MARKET KNOWS BEST - Realize that the market is always right. If a stock is falling/ rising there is a reason. Do not try and force your views on the stock. It's a losing battle.


Trade the trade best summed up on this simple indicator day chart which i share often, now you might disagree with my indicator but find one that is simple and it usually will become your most powerful trading tool. Its clear why BHP is currently going up ????? Yet market sentiment and belief would make you think otherwise



My best trading method is "impulse moves above resistance" whether it be short or longer term trading and for that i show NCM which is a fantasic stock for impulse once resitance is broken, and the 2nd chart is the current trade i have with the DJIA which is on a 10 minute chart trying to gain best entries as the daily is currently indicating a "buy" for me
You will note the DJIA went into a sideways range which is accumulation and distribution, but once the lows were pierced you can see the buyers snapped it up and then pushed it beyond the box and short term resitance. Will it keep going ? im not sure but for me the hard work is done and you can see the little stop man doing his job in the green box, takes the guess work out of it.
What was amazing to me was Thursday and Friday were crucial data nights in the US and "media hype" were predicting bad things which they got but the chart suggested otherwise and thats the main reason i avoid hype as its like a plague.