Wednesday, July 28, 2010

Trading Rules

Disclosure.  The following list contains some original content, as well as a good deal of material that I simply wrote down because it sounded good.  Here's a raised martini to the inventors of the copied content.
  • When looking for trend reversals start with low beta names.
  • When a new macro trend is set deploy into small cap reversion.
  • Do not trade options before 345 if intending to hold overnight.
  • Most of your money is made when the markets are closed, through preparation.
  • Remember that institutions are cumbersome, press investments until the chart makes a blowoff.
  • When a stock closes at or near the high of the day on volume, think about taking half overnight.
  • Do not miss a good trade over penny pinching the execution, pick good spots and pull the trigger.
  • Scaling is the only way to trade unless a major macro move is on.
  • The longer a sector non-leader defies comparable intraday gains/losses the larger the reversion candle will be.  (Attributable to ETF rebalancing?)
  • Try to determine early on if the issue at hand (stock or market) is in for a trend day or a range bound day.
  • Always be accountable for your plan and always hold your plan accountable for its results.  Existing conditions factor into the plan, they are not excuses for its failures or successes.
  • Fade the loudest crowd in a counter-trender on any scent of a reversal and reversion to the broad market.
  • When in doubt, palms out.  (Love that, just saw it on Twitter a few weeks ago.)
  • Create a risk limit before buying.
  • Do not overnight uncertainty.