A Guide to Real-Life Trading
The goal of this book has been to study a variety of common chart patterns, using real-life examples, in order to understand their behavior and applicability to your own trading. To augment this knowledge, there are some basic guidelines about any kind of trading that will be helpful to most people who decide to trade, be it professionally or casually, and we review those in this chapter.
It is often tempting for people to keep a list of their own trading rules, particularly as they generate losses that they regret and wish to avoid in the future. Keeping a diary of trading experiences is a valuable exercise, but what often happens with a list of rules is that the list grows so long and arcane as to be almost useless. The old saying about how you can never step into the same stream twice holds true for trading, and over the months and years that you are trading, you will be faced with a never-ending set of changing circumstances.
I've got my own list, but it is short and sweet—only seven rules. I ignore some of these rules from time to time, and virtually every time I do, I regret it. If one day I can follow these rules consistently, I'll be a much better trader for it. An acronym for the rules listed below is SOB FEES, which is appropriate considering how many tears were shed while learning them.
1. Stops: A stop price must be in place at all times for all positions.
2. Opening Bell: No new positions should be initiated in ...