General Trading Rules

A. General Guide Lines

Outline:

B. When to Buy and Sell

Buy at Strength and Sell at Weakness

One of the predominately accepted concepts in trading is buy low and sell high. It may look ideal, but it is in the arbitrary category. A trend is not a trend until it is on its way. Using AbleTrend in trading you must be willing to buy at strength and sell at weakness. Good traders take advantage of direction and duration, not cheap prices. So the phrase buy low and sell high may be modified to be buy high and sell higher", and "sell low and buy lower.

C. Take Small Losses

Be more Than Willing to Take Small Losses

In order to win big profit, you must be more than willing to take small losses.

If you are willing to take small losses in order to win, you will enter the market when it just begins to move. This is the most uncertain time, but it is also the time with the lowest risk. You do not know anything for sure, but neither do other traders. At this time, no one dares to play big. The risks compared with your potential profits are small enough to provide you a chance to win.

Don’t worry about small losses: they are a part of our plan and they are a part of the winning profits. Without those small losses, you wouldn’t be able to achieve big profits.

Based on the concept of go the opposite way of the general public, AbleTrend is designed to take chances with small losses with the highest probability, but to stick with the big move to achieve the optimal profit. Without taking chances on small losses, big profits become impossible. Just like in any business, you have to take a chance based on limited information. Small losses are a part of necessary expenses without which you may lose the chance of riding on a big trend. Remember, small losses are a part of the winning profit; without those small losses, you wouldn’t be able to achieve big profits.

D. Switch Positions

Be more Than Willing to Switch Positions

To succeed in trading we must obey the market. Be flexible. Do not allow any theories, methods, or predictions to limit your view of the market. Any indicator is secondary. The key indicator always is the market price itself. As soon as we find that we are in a wrong direction, we must be more than willing to switch our positions. Not just exit from a wrong position, but switch your position from buy to sell, or from sell to buy. It is an essential skill in professional trading.

E. Stick with the Big Trend

Stick With the Big Trend Until AbleTrend Says to Exit

It is easy to take a small profit and run, but you won’t win overall. To succeed, you must become a type II paradigm trader who will stick with the big move until AbleTrend tells you to exit or change direction.

F. Why Place Stops

Place Stops Immediately after Entering a Trade

Why place stops? We place stops to limit our risk. We must take care of losses, and let the market take care of the profits.

AbleTrend is designed to do just this. You must be willing to take small losses and stick with the profitable trend until AbleTrend says to exit. In trading, we can do things right a thousand times but we cannot afford to be wrong even once without a predetermined stop. So when you enter the market, right after your order is filled, place a stop immediately. That is a must. There are no exceptions for any reason. Just think about that crash which could come now or any time after you enter the market when you are in a long position without stops. What will you do if the market crashes, dropping far below your margin limit?

To put yourself beyond possibility of defeat, you must place a stop in the market right after you place an order to enter the market. AbleTrend is an offensively and defensively well-balanced trading device. Making use of the AbleTrend stops will benefit you. One of our users once said, "I enter the market according to my own systems, but I definitely exit if AbleTrend indicates an exit. It has saved me a bundle." Remember, a stop is not a stop until you place it in the market. Any mental stops are not relevant.

G. How to Move Stops

Only Move Stops in the Desired Direction

Where should you place the stops? We must place stops for logical reasons. A common mistake is arbitrariness. People place stops by money management stops using $2, $500, $785 or $3,000. Where do they get these numbers? They are arbitrary. Market conditions vary from trade to trade, time to time, day to day, market to market... Nothing is fixed. So let AbleTrend tell you the optimal stops, which are defined by market price itself.

We must place stops according to what the market tells us. What can the market tell us? (1) The current price scale can tell us what the probable price will be in the near future. (2) The current price range tells us the probable price range in the near future. (3) The current price trend tells us the probable market direction in the near future. AbleTrend is designed to use the market’s own predictions to place stops. This is called placing the stops by reason. Therefore, do not move stops unless you have a better reason.

Only move stops in the desired market direction. This means, for a long trade, we only move the stops up; for a short trade, we only move the stops down. When you see your stops being hit, do not feel hurt. This is a part of business expenses.

H. Mental Power

Turn Your Mental Power into Profit

An ancient Chinese wise tale goes: At an ancient archery contest, the contestant performs his best when nothing is at stake, but when asked to wager a sack of rice his performance goes down, being distracted by what he may lose. The contestant performs even worse when wagering an ounce of gold. Even though he possesses the same skills, his heart becomes distracted by the fear of what he might lose. Human emotion can play a significant factor in one’s performance, no matter what the arena. Being able to control our emotions is the key to success.

Because psychology plays an important role in trading day in and day out, a specific psychological training method for trading has proven to be very powerful. It is that you should visualize real money on the line while you are paper trading, and treat real trading like paper trading. The more visualization that you practice, the better trading result you will achieve. In this way you will be able to turn your mental power into profit.

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