Ten Golden Trading Rules
Ten most important rules of technical trading:
1. Map the Trends
1. Map the Trends
Analysis with monthly and weekly charts several years. Even if you only trade the very short term, you will do better if you’re trading in the same direction as the
intermediate and longer term trends.
intermediate and longer term trends.
2. Spot the Trend and Go With It
3. Find the Low and High of It
4. Know How Far to Backtrack
Measure percentage retracement. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retrenchments of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points area in the 33-38% retracement area.
5. Draw the Line
6. Follow That Average
7. Learn the Turns
8. Know the Warning Signs
An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It’s called a “histogram” because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend?
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Know the Confirming Signs
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