| Support & Resistance Report |
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and practice the following trading rules. |
| 1) |
I establish trades based on my edges. Trading success requires that we have "edges" over the market. One of the essential edges is that we open and close our trades at areas of either Support or Resistance. |
| 2) |
I predefine the risk of every trade by establishing a maximum amount that I am willing to lose on it. Because the market is an uncertain place, no matter how good a trade looks, it can turn into a loser. Predefining the risk of every trade, therefore, is the only way to prevent a small loss from turning into a big one. One big loss can wipe out the profits of five successful trades. Trading success, therefore, requires that we take small losses. |
| 3) |
I completely accept the risk or I bypass the trade. There's a big difference between pre-defining our risk and accepting the pre-defined risk. The tendency is to hold on to a losing trade because it's painful to lock in a loss. Trading success, however, requires acceptance of the fact that not every trade will be a winner. If our predefined risk is reached, we must close the trade and move on. If, instead, we hesitate, rationalize or hope for things to turn around, then we have not accepted the risk that's unavoidable in the market; and refusing to accept something that's unavoidable will lead to one crisis after another. |
| 4) |
I act on my edges without reservation or hesitation. "Edges" are those aspects of a trading strategy that result in profits over a large sample of trades. We cannot know whether the next trade will be a winner or not. What we can know, however, is that over the next 10 or 20 trades, we will be profitable because of the "edges" that we employ. A casino doesn't know who will win the next hand of Blackjack and so, it doesn't worry about it. The casino does know, however, that it will be profitable over the next 50 hands of Blackjack because of its edge. Trading success requires the same approach. |
| 5) |
I pay myself as the market makes money available to me. Every winning trade comes to a time when it has played itself out and it's time to exit. Trading success requires that we exit a purchase at Resistance (where sellers are likely to regain control from buyers and press prices back down); and that we exit a short-sale at Support (where buyers are likely to regain control from sellers and push prices back up). |
| 6) |
I understand the absolute necessity of these Trading Rules to my trading success and, therefore, I never violate them. |