Five Trading Rules That Could Save You Thousands (2019-2020 Edition)

by General Trading


July, 2019

A couple of years ago I wrote an article titled 3 Golden Trading Rules That Could Save You Thousands.  In this article, I have expanded those rules to 5.

Why did I do this?

Simple – you have to adapt to the markets.  So, as markets morph and become mostly driven by AI and BOTS, discretionary traders need to be even pickier about the trades they choose.

As an aside I must say this – even with 15+ years of trading experience, I have to keep re-learning my rules the hard way – by getting severely smacked down by the markets.  2019 has been no exception.

Anyway, on to the rules:


Rule #1

Do not sell short when the daily chart is in an up-trend; do not initiate long trades when the daily chart is in a down-trend.

Rule #2

Trade in the direction of the 120 min trend.  (This means that both the daily and the hourly charts MUST be trending in the same direction in order to initiate a trade!)

Rule #3

Enter only in the direction of the 20 period moving average on the daily chart.  The odds are, if Rule #1 is enforced, this rule will automatically be enforced – but there are times when you can be in an uptrend and the 20 period moving average is pointing down with prices printing below it. So, I have made this a separate rule as something to double-check before entering a trade.


Rule #4

Take your favorite oscillator: only initiate long trades when the oscillator is “oversold”, and initiate short trades when it is “overbought”. (Note: this rule does not apply if you’re trading breakouts.)

Rule #5

This rule is actually optional, but strongly suggested: initiate all new long trades when you’re at a clear support level; initiate all new short trades when you’re at a clear resistance level.

Rule #6

A new rule I recently made for myself: NEVER re-enter a trade in a market after exiting a profitable trade.  This applies mostly to swing trades.  But my experience seem to be that re-entering trades encourages me to overstay my welcome.

These rules, when used together, can severely limit your trading opportunities, but it also increases your win rate. By respecting these rules, you can make a lot of other mistakes — even making common position sizing mistakes — and still survive. Every time I have violated them, I have killed My P&L. So let my hard-won experience save you from some heart-burn — tape these rules to your monitor and check them before starting any new trade!

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