Trading rules

Nothing new, but nice to see people's lists. This from Joe Fahmy, clipped from ritholtz

Note also that these are rules for a trader, not an investor.


1) Accumulation and Distribution Days: When should traders go to cash? Follow the big boys! The big institutions control the market, so pay attention to their actions by tracking accumulation and distribution days. When institutional selling builds up over a short period of time (2-4 weeks) AND leading stocks start to break down, that is a great sign to start raising cash.

2) Uptrends and Downtrends: Don’t get caught up with the terms Bull and Bear market. Just recognize if we are in an uptrend or a downtrend. For example, use the 50-day moving average on the NASDAQ Composite as a general indicator to be in or out of the market.

3) Scale In: When conditions start to improve, SLOWLY scale back in. If the rally is for real, there will be PLENTY OF TIME to make money. If you are wrong, at least you can get out quick with minimal damage and protect your portfolio. Think Defense First!

4) Buy the Strongest Earnings & Sales Growth: When markets are in a confirmed uptrend, be in the best! Don’t settle for low rate stocks. Look for companies that have strong earnings and sales growth.

5) Fundamentals AND Technicals: Start with strong fundamental companies AND combine the proper technical timing to identify ideal entry points to effect your best risk vs reward trades.