1. Some traders consider trading as a sort of gambling. Without planning and calculations, they throw money at the market. They should distance themselves from gambling behavior. Why a scientific approach is applicable? Markets echo similar patterns over and over again. It allows identify reliable trends and select good trading vehicles.
2. Think in terms of probabilities and act upon them. There are no certainties in trading. You can keep yourself out of trouble by thinking in terms of probabilities. Get comfortable with approximate predictions and interpretations.
3. Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy. Positive emotions could cause us to fail to apply risk precautions. Negative emotion could cause us to hesitate. Trading is a psychological game. Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself.
4. Prices have memory.
5. Bulls live above 200-day moving averages, bears live below and try to eat up all rally attempts.
6. Big volumes kill substantial price moves.
7. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
8. Bottoms take longer to shape than tops. Greed acts more quickly than fear and pushes stocks to drop from their own weight.
9. Losses are a simple cost of doing business. Don't try to justify a bad trade by convincing yourself that it will sooner or later turn into a good trade. Accept losses easily! Successful traders are able to ride through downturn periods. The confidence in their methods reassures them about their future success. The markets offer endless and plentiful possibilities. Missed opportunities exist only in your mind. Prices keep changing and generate other opportunities. The goal of trading is make a net profit after a sequence of trades. It is, therefore, necessary to accept some losses and to look forward without punishing oneself.
10. Don't be a hero. Don't fight the trend. Follow the money flow.
11. Forget the news, remember the chart. The chart already knows the news is coming.
12. Predetermine maximum losses in every potential trade. Do not risk more than 5% of your capital on any trade. Don't average your losses.
13. Do not buy a stock because it is low priced (or sell because the price is high).
14. Buy on rumors; sell on news.
15. Trade active stocks, avoid thinly traded markets.
16. Prepare your action plan before the market hours and follow it. Do not formulate a new opinion during market hours.
17. Learn to monitor yourself and draw conclusions from your mistakes.
18. Take a part of the profit to reward yourself.