Stock Trading Rules: Best 122 to Amp up Your Trading

Picture of paper money.

Hi friend!  This blog post is a supplement to my last blog post.  Below you will find 122 stock trading rules that work that will enrich your trading experience.  I haven’t left anything out.  This is the full Monty you have been waiting for, including intraday trading rules.

If it’s after hours stock trading rules that you are looking for, please check out my blog post entitled After Hours Trading.   

If you can think of other trading rules in stock market, please let me know here.  I don’t pretend to know them all, but I’ve given it my best shot here, based on years of experience.

Table of Contents:

Intro
122 Stock Trading Rules
UCP Pattern Redux
Quiz Time
Breach of Old Highs
My Formula for Success
TradingSmarts Wins Award#2
Quotes
Conclusion

NB:  If at any time you get overwhelmed going through these stock trading rules, take a break, come back to the Table of Contents, and pick another topic to check out.  You can always come back to the rules later, or even bookmark this blog post for future reference.

122 Stock Trading Rules

  • My opening salvo… pay attention to which way the market is going. That will have a direct bearing on what happens with your stocks.  In other words, we want to be trading in a rising market.  In most cases, there is a direct relationship between the attitude of the market, and which way stocks will go.  With the stocks that I work with, that follow my set of catalyst criteria (we will get into that later), you want to believe that they will generally move in tandem with the overall market, in most cases (there’s always an exception to every rule).  I am only looking to buy stocks on the upswing, which presupposes that the market is doing the same.  In the environment we are in, governments will keep pumping the markets with additional stimuli.  For example, at this writing, the various central banks are prepared to provide liquidity backstops to corporations, and provide monetary stimulus.  The Fed is even sounding very dovish when it comes to its tightening cycle.  In sum, if the market is rising, look for opportunities to go long.  Buy stocks on the upswing.  Never short stocks.  That’s a mouthful.  I hope it all makes sense to you.  If not, get a hold of me here.       
  • Promptly enter a trade, once the market confirms the direction of your stock, based on your assessment of the technical indicators I will get into later on in this post.
  • Stick with trades that continue to be in the money, and exit trades that are losing. More details later.
  • Stop trades when the upward trend of your stock dissipates, as reflected by the 50 EMA turning sideways (or down), or when MACD punches down through its trigger line from being overbought.
  • Only trade stocks that line up the way I describe in my last blog post.
  • Don’t buy more of a stock that has fallen just to average losses.
  • Get out of a trade, instead of meeting a margin call. When you employ margin, you are effectively borrowing money from your broker to finance all or part of your trade.  Margin can increase or leverage potential returns, when used properly.  The problem comes when a trade goes against you.  Margin can then exacerbate losses.
  • Don’t enter a trade during the first 15 minutes of market action, because that is when panic trades, or market orders placed the night before, are executed. I much prefer to enter my trades towards the end of a trading session.  That way, I can see how a stock has behaved throughout the day, and how it is closing.  If it closes near the high for the day, it will more than likely open down the next day.  Continuation of that momentum is a possibility too, but don’t count on it.  I’m not saying it isn’t a buy – perhaps just not yet.
  • Regarding ETFs, there are some rules that are unique to those securities – like, never trade in the first half hour or the last half hour, and always use limit orders.  
  • I usually enter my orders at market, because they take right away – the caveat being that the spread between bid and ask must be tight. If there is a wide spread, then using limit orders is advisable.  Such an order gives you absolute control over the maximum price you’ll pay, or the minimum price you’ll sell at.  A market order, on the other hand, simply indicates that you want to buy or sell at the best available price.  The disadvantage of such an order was evidenced during the ‘flash crash’ of 2010, where sell orders were sometimes filled much lower than expected – as much as by 10, 15, or 20 points.
  • Stick to a trading plan – in other words, the approach you take on any given trade. It should be according to the precepts outlined in my last blog post.  And, before you press enter on a trade, you should know your entry and exit points (i.e., profit potential).  You should plan on using protective stops, protective puts, or VIX calls (more on options strategies in a future post) – just in case disaster strikes – or even mental stops, at the very least.  Rehearse your strategy in your head, before entering a position.  Know where you will get out of the trade, if it takes too long to play out.  When in doubt, don’t be afraid to bail on a trade.  You can always get back in.  Don’t be greedy.  If your profit projection is met, bank the money, and leave some on the table for somebody else.
  • You can always scale in and scale out. By that I mean you can either start with one position, and add to it, or start with multiple positions, and take partial profits along the way, until you meet your objective.    
  • Continually evaluate your trading plan, based on your trading results, in an attempt to ‘fine-tune’ it. Losing trades are a great teacher.  In particular, they will help you understand where adjustments need to be made to your plan.  Or, perhaps you were just not following your plan to begin with.      
  • Keep a trading journal. Record all your losers and winners.  Recording the outcome of each trade will improve your odds next time.  Every once in a while, go to a quiet corner somewhere, and review your journal.  You’ll discover what to do next time – or what not to do.
  • Trading reminds me of flying, which I do. You don’t just jump in your plane, and take off.  There is pre-flight prep and walk-around, before you even get in the plane and taxi.  Even then, you’re at the mercy of ground control, before you get the green light to finally take off.  That whole process can take upwards of an hour, before you are airborne.  Talk about preparation.  
  • Avoid so-called ‘hot tips’ – you know, the ones you pick up at cocktail parties or over the fence. You don’t know what homework, if any, went into them.  They will invariably lead to disaster.  Use your own judgment, and pick stocks the way I outlined in my last blog post.
  • If you want to survive to trade another day, get out of a trade, where price has fallen, say 12%. It’s called capital preservation.  See my post on Stock Trading Stops.  If you made a bone-headed trade, or just feel that you got your entry point wrong, get out fast quick.
  • You will have some losses (we all do). It’s inevitable in this business.  In such cases, just get up on a chair, and yell at the top of your lungs, “Next!”  But, next time, continue to follow the trading guidelines I laid out in my last blog post, so that you will hopefully do better next time.  And, don’t let a losing trade run away from you.  Bite the bullet, and be done with it.  Just remember… a loss is God’s way of kicking you to a higher level.  Think of a losing trade as a learning experience.  It’s a great motivator.
  • Trading is business and, as such, there will be expenses, losses, and taxes – not to mention the attendant risk, stress, and uncertainty. Yes, you are running a business.  You must do your homework, and plan your trades, as outlined in my last blog post.
  • Don’t trade with money that you can ill afford to lose. Think of where you are going to get that ‘lost money.’  What family vacation will you have to forego?  What car won’t you be able to buy?  If you trade the way I outlined in my last blog post, you should get it right, and be able to recover from the odd trade that goes astray.
  • You are on a journey. You will need to continually learn about the markets.  Pay attention to the news, but with a jaundiced eye, because there is a lot of noise in what you hear and read.  Read a number of newspapers (at least the financial sections) on a regular basis.  I read three.  And, watch the news channels.  I watch BNN and CNBC.  I much prefer BNN, because it is less commercialized, and there is less noise.  The more you know about what’s going on in the world, the more you will have an edge with your trading.  Embrace continuing education – learning new concepts and methods, researching different trading approaches, etc.  This will improve your intuition, and hone your trading skills.
  • Become an ‘info sleuthing junkie.’ Knowledge is power.  Keep in mind – especially if you are a long-term investor – that market blow-outs, such as we had following the mortgage fiasco in the U.S. and after the recent Brexit vote, are great buying opportunities.  You should never bail at such times, as governments will always come to the rescue in the form of providing liquidity to stabilize the markets, or ease up on interest rates.  Quite the opposite… you should be looking for good buying opportunities.
  • If you are an investor, keep an eye on your portfolio, with a view to fine-tuning it, based on crisis situations around the world. For example, TAP (Molson Coors Brewing Co. Cl B (NYSE) took a hit, after the Brexit vote, because it has beer interests in the U.K.  It has since recovered, but at least you now know why it swooned.
  • Don’t be afraid to seek counsel from professional people-in-the know – like financial planners, investment advisors, etc. But, sift and sort what they tell you.  Don’t take every word they say as gospel.  They too can be wrong sometimes.
  • Keep your emotions in your hip pocket (or purse). Trading stocks (or any other tradable, for that matter) is serious business.  You should treat it as such, and don’t let your emotions get in the way of your trading decisions.  Stick to your plan.  Don’t speculate, don’t trade unknown companies, and don’t take on too much risk.  It is sometimes difficult to filter out negative headlines and noise, but remain patient.  By sticking to your goals, and following them like a pit bull on a pork chop, you will achieve success with your investing and trading.
  • Be on top of technology, and use it to your advantage. Most platforms support a variety of devices and software.  Being fluent with the technical aspects of trading will go a long way to furthering the outcome of your trading endeavours.
  • No ‘Hail Mary passes’ please! By that I mean closing your eyes and winging it with a trade.  That will only lead to disaster.  Trust me.  You may as well just go play darts at your local pub.
  • This is not a ‘race.’ It’s not the number of trades you take that counts.  It’s the amount of money you have in your account at the end of the day that matters.  Know the facts, do your homework, be patient, take your time, and you’ll accomplish your trading goals.  BTW, nobody is watching.  It’s just you and the markets.
  • It never ceases to amaze me how people will rush out to buy a stock trading course, and then expect to become an overnight wonder. Won’t happen.  It took you many years to become proficient in your career, whatever it is that you do (or did).  No different with trading.  It takes blood, sweat and tears to make it in this business.  This is not a ‘get rich quick’ scheme.  With me, I had to crawl over crushed glass to get to where I am today.  I can’t tell you the number of mountains I climbed and the tribes I befriended before it all sank in.
  • Avoid distractions while you are trading. Trade in a quiet place – away from the hustle and bustle and noise of daily life.  And, be sure to do your homework, as outlined in my last blog post.
  • Be in peak condition mentally and physically. Even if you are just having a ‘bad hair day,’ you may wish to take a break from trading, and do something totally unrelated.  The markets will always be here, and there will always be another train coming down the tracks.
  • Be realistic in your expectations. If you have a small trading account, you can’t expect to generate huge returns.  But, you have to start somewhere.  Most successful traders started at the bottom of the pile, and clawed their way up from there.  Warren Buffett says that earning more than 12 per cent in a stock is just plain dumb luck.
  • Don’t follow the masses (the herd instinct). An analogy… at Christmas time, there is the usual phenomenon, where this year’s toy all of sudden is what all the kids just have to have.  They can’t get enough of it.  Their parents trundle on down to Toys “R” Us to jump into the mayhem, until all the stock is all gone.  Ditto for the latest stock craze.  Don’t fall for it.  Stay on the sidelines, and be on the alert for bona fide trades.  I’m not saying that, when the Chicago Bulls win, you shouldn’t wear a Bulls shirt, but I think you get the point.  
  • Don’t try to time the market. Here, I am talking about investing, not trading.  You can’t do it.  Warren Buffett doesn’t.  According to Antil Chopra, group CEO and director, Bajaj Capital, nobody has ever consistently and successfully timed the market over multiple business or stock market cycles.
  • Be disciplined. Whether you are investing or trading, follow a plan, and stick to it.  If you are investing, stay the course during market melt-downs, and don’t panic.  No matter if you are investing or trading, follow my approach in my last blog post.
  • Continue to read, research and study anything and everything you can get your hands on regarding investing and trading. Try to set aside an hour or two for this each and every day, even if you have a day job, or are a student.  This will give you a leg up on the lazy folk.
  • Become a pattern trader, trading with patterns that repeat themselves over and over again. Check out what I mean in my last blog post.
  • Stay motivated, and work like a bugger to make your trading dreams come true. I don’t know any lazy folk who have become successful traders.
  • Don’t risk your entire account on any one trade. Play it safe, and risk only a small portion.
  • Buy slowly, cut losses quickly.
  • Don’t exceed your comfort level. If a trade doesn’t feel right, take a pass.
  • There is nothing wrong with trading small amounts – say 100 shares at a time, until your confidence level rises, your emotions are in check, you understand the process, and your win-to-loss ratio is high.
  • It’s okay to be wrong. Ty Cobb’s batting average was .367.  Having access to the right information, like you do at TradingSmarts, will improve your odds.
  • Stick to always trading long – never short. Why bother with shorts, when there are so many opportunities to go long.  You will get the gist of what I mean in my last blog post.
  • You may have bad-hair days, or days where you either don’t feel like trading, or you can’t find a trade that feels right. That’s okay.  Trading is not a nine-to-five job.
  • Focus on one trade at a time, do your best to plan it out, and execute it well. The key word is ‘focus.’  I can remember asking a doctor how he managed to get through medical school with so much to learn.  He said that he would focus on one subject at a time, and forget about everything else, until he got there.
  • Don’t become a fundamentalist, unless you are planning on making a career out of it. I only worry about catalysts like analyst ratings, earnings beat, best price action, and technicals, as described in my last blog post.  Analysts have access to far more information that you and I ever will.  The news is factored into price immediately.  That’s why it is the number one indicator.  Everything you want to know about a stock is reflected in price.  That said, trading involves paying attention to technical analysis and fundamental analysis (to a lesser extent), as noted above.
  • Don’t pay any attention to what company management say. After all, they’re cheerleaders for their companies.  They will lie through their teeth, if they have to.  Think Enron.  Some companies in trouble will hype themselves up to raise cash and stay afloat.  Pay more attention to what analysts have to say about a company.  The more who are on side with it, the better.  There’s strength in numbers.  They do all the research and, for the most part, make the right calls.
  • Understand that a company can fail, no matter how rosy the data and press releases look. From a purely trading perspective, just because a company may eventually fail does not mean that its stock won’t still go up in the meantime.  Of course, if you trade the way I do, and follow my advice in my last blog post, this will never be an issue for you.   
  • My method doesn’t employ any fancy technical analysis tools – just a handful of indicators, including the trend indicator.  
  • My approach has nothing to do with ‘falling knives.’ I only deal with stocks that have been trending up for a matter of years.  I work with momentum stocks that have good upside potential.  And, I typically trade stocks that move 200,000-five million shares a day to avoid any choppiness with higher volume stocks.  That said, higher volume is okay.  If you are trading a small number of shares per stock (say 100), volume is nothing to worry about.
  • As I do, you should continually be on the lookout for tradable stocks that follow my formula, as delineated in my last blog post.
  • You may discover that a high percentage of your profits come from a small percentage of your trades. That’s okay, because you are going to exit bad trades quickly, and you are going to use stops, puts, or VIX calls as added insurance.  See my post on Stock Trading Stops.       
  • Keep an eye on the markets and what you are trading, even when you travel, or go to work. Treat this like a business, and baby-sit it all the time.  Keep it top-of-mind at all times.  After all, this isn’t a hobby.
  • Don’t get stuck in woulda, coulda, shoulda thinking. The past is gone.  You can only learn from your past trading history.  Don’t stew over it.  Relish your victories, and learn from your mistakes.
  • Don’t work with stocks that have limited upside potential. Pick stocks the way I do in my last blog post.
  • Don’t let your losers run away from you. Big losses are unacceptable, as they will not only affect your account, but your confidence too.  You are in control.  Show price who’s boss, and cut your losses quickly.  That way, your wins will more than make up for your tiny losses.  You will be right more often than wrong, if you follow my precepts.
  • It’s okay to be afraid of trading. When it comes to money, that’s understandable.  As an aside, one of my heroes is Sean Tucker, a world-class aerobatic pilot, who performs stunts that scare the heebie jeebies out of me.  Even though I am into flying, you’d never catch me in a plane with him for any amount of money.  When I met him for the first time last July (2015) at the Oshkosh air show, he confided that he is still afraid of flying, and confronts his fears every time he goes up.  As a matter of fact, when he was learning to fly as a teenager, it took him four years to get his pilot’s license because of his fear of flying.  So, it’s okay to be afraid of trading.  Just be as prepared as you can, and you’ll make it.
  • Patience is a virtue in this business. Don’t push a trade.  Plan it out, as I explain in my last blog post.  Study like you’ve never studied before, so that when you pull the trigger on a trade, you will do so with confidence.  Studying takes the mystery out of trading, and puts you in the driver’s seat.
  • Don’t expect to become a rocket trader over night. It takes time, like everything else in life.  But, once you get it, you’ve got it for life.  It took me since the earth cooled, or so it seems.  I am a slow learner.
  • The ideal trade is one that you patiently wait for that feels so good when it arrives that you’d feel guilty if you missed it. It’s those kinds of trades that you can really take to the bank.
  • It’s okay to have some luck on your side, but you and only you can put yourself on the right side of a trade by buying breakouts or dips that occur with momentum stocks.
  • Your level of success is totally dependent upon your level of commitment. Don’t go at it half-assed.  Dig in, dig deep, and make it happen.
  • Once you are in a trade, you will know within a reasonable period of time, if you have a winner on your hands or not. Don’t wait for weeks or months, hoping for a comeback.  Full transparency… I have three stocks that I am still sitting on, which I should have torpedoed a long time ago (they are slowly recovering now).  So, I too make mistakes.  After all, I am only human.  I don’t beat myself up over things like this.  I just know what I would do different next time.
  • Referencing the point I made above about holding onto my stocks too long, that I should not have done. However, all the stocks I trade are uber-quality that have passed my tough-as-nails acceptance tests.  So, even if they do fall off, and I don’t exit when I should, they will invariably come back to life, given their solid foundations.  And, that’s exactly what they’re doing, as I write this.  Phew!
  • Never stop pushing yourself to learn more, research and study. There’s always a heckuva lot more to learn.  It’s an on-going process.  I won’t live long enough to know it all, and I won’t live long enough to make all the mistakes myself.  Yes, I do make mistakes.  I am not a robot.  Sure would like to be, though.
  • If you really want to be a successful trader, and have financial freedom, you have to work harder than everybody else, and be willing to forego time with your family, friends, and relatives. Bottom line, sacrifices will have to be made.
  • Even if my teachings don’t make you any money for whatever reason, at least the knowledge you have gained should prevent big losses.
  • Be skeptical of all stocks, until the indicators I recommend line up to signal a trade – this after you have checked analyst rankings and earnings beat. Check out my last blog post for what I mean.
  • Focus on taking good trades – those that look like they will behave the way I teach in that post.
  • Patterns like the UCP (Uptrend Continuation Pattern) are usually predictable, as is the attendant profit projection. You could specialize in such a pattern, and execute good trades consistently.  Don’t clutter your mind with a whole bunch of different patterns.  Pick one that works for you, like the UCP pattern, and stick with it.  Study up on the UCP pattern in my last blog post.
  • Accept that, in most cases, news is just noise. I am a technical trader, as you know by now.  Price is the number one indicator.  It will tell you exactly where it is going, if only you would pay attention.  Think pattern recognition.  It will give you a leg up with your trading.
  • Be disciplined, organized, meticulous, and a perfectionist. Know where everything is, so you don’t have to fumble around for things, while you’re in the trading zone.  Start trading with your coffee near by (no booze – later, when you’re doing the victory lap), and having had something to eat.  There’s nothing like hunger pains to screw up your thinking.
  • If a trade is going your way, don’t be afraid to add to your original position, and take larger positions along the way.
  • Never trade with ‘gut feel.’ Be scientific in your approach.  Know how to trade and why.  That will take the guesswork out of your trading, and only add to your confidence level.
  • If you have a need for speed, my approach to trading will bore you to tears. ‘Slow as she goes’ is my mantra.  If you don’t see anything to trade, don’t try to force a trade.  Go fishing or golfing – anything but chasing trades that don’t exist.  You don’t need to sit at your computer all day long with my approach to trading.  I tend to prefer watching the market towards the end of the trading day, after stocks have done their thing.  I want to see how they have behaved throughout the day.  Are they closing strong, or are they falling off?  Remember, I am not talking about day trading.  I am talking about position trading or swing trading.  I am not a scalper.
  • This is just one entry strategy for your consideration… you could let the market come to you in the form of a buy stop, by deciding where you want to enter the market (above the stock’s last high, or all-time high, for example), if and only if the market gets there. Then, let the market do the work for you.
  • I am a firm believer that ‘win-to-loss ratio’ trumps ‘risk-reward’ any day of the week.
  • A breakout over past highs, or a dip in the uptrend, is a clear indication that you should take action.
  • Always be on the alert for golden opportunities. Look, look, look.  Read, read, read.  Study, study, study.  Think, think, think.  Be aware of what’s around you and out there in this business.  Think like a gold miner.  You’re always mining for gold.  Always have the stock market in the back of your mind.  This is not about gambling.  Be prepared to strike with surgical precision, when solid opportunities present themselves.   
  • This business requires uber-commitment. You must love it, or don’t do it.  Otherwise, it will eat you up.  Think perfection.  You will be challenged by the markets.  That goes without saying.  You must be prepared to put this business above everything else in your life.  It’s called ‘passion’ and ‘sacrifice.’  It’s okay to take a break from it every now and then.  That’s the healthy thing to do.  It’s not just the time you will need for trading itself, but also the time you need to devote to diligently learning and practicing.  Practice makes perfect.
  • Don’t over-plan. Trading is about the marriage of good planning and execution.  They go hand-in-hand.
  • Study successful traders. You will learn a lot from them.
  • When the going gets tough, and is getting you down, remember Muhammad Ali, bless his soul. He used to hate training, but always kept the end-game in mind – and the prize.  That kept him going.  I loved his rope-a-dope game plan.
  • Put your ego in your hip pocket (or purse). Be humble.  The markets will smack you around, if you don’t keep your bragging rights in check.
  • Once you feel confident about your trading, and have some good success with it, you can then get more aggressive – once you have mastered the catalysts that move stocks and the risks of taking on more risk.
  • Start small, and grow from there. Have a small account at first, and then grow it from there.
  • Never bet the farm on any one stock, no matter how good it looks. You’re only inviting disaster.
  • Imagine that you are a disinterested trader, and that you are looking at stocks dispassionately. By that I mean, pretend that you are only getting back into the game looking for ideal set-ups.  This will prevent you from trading iffy set-ups.
  • To be truly successful in trading, you need to go above and beyond the basic requirements. Now, I am not suggesting you be like Elon Musk (off the topic), but I just finished a book about him.  It’s no mystery why he is so successful with his cars and rocket ships.  He lives them and breaths them.  They are his life, as is solar power now.  Fortunately, he has a wife who understands.
  • Don’t let your stock market insight wither and die. Be aggressive and progressive by staying up-to-date.  The markets are ever-changing, and require constant monitoring.
  • A key ingredient to your trading success is to eat well and be physically fit (and get lots of sleep – a foggy mind will do you no good). You will need all the energy you can muster to stay the course, be clear in your thinking, and be quick off the mark.
  • I learned this one the hard way. I tend to slouch in my ergonomic desk chair (I love to crank it back), and have developed neck pain as a result (spinal trouble could very well be next).  Invest in a good chair, and watch your posture.  Arrange your trading space, so that it is comfortable and distraction-free, with everything in its place and within easy reach.  (I won’t show you a picture of my trading work area.)  Don’t make the same mistake I do.  I have TV access on one of my monitors, and peek in every once in a while – sometimes too often.  It’s just too easy to turn on. 
  • Whether it’s trading or some other endeavour, the thing that will kill you are distractions – like watching too much TV, as I just mentioned. Laser-focus is the name of the game.  Elon Musk has it to the Nth degree, not that you and I will ever come close to his level of concentration.   
  • Don’t hate on the media… just don’t pay too much attention to their naivety. Remember, news is generally noise.  There is more entertainment value to it than hard, cold facts.  Never make trading decisions based solely on news.  Stick to the precepts I posit in last blog post
  • You don’t have to have a PhD to trade – just stick-to-itiveness.
  • You don’t have to create your own system. Just follow my teachings, and ask me questions here.
  • There’s nothing wrong with exiting a trade too soon. I’ve done it.  Being a conservative trader is better than being a broke one.  I am totally risk-averse, and do everything I can to minimize it.  Call me a scared y-cat, if you will, but I only pull the trigger on a trade, when I am 100 percent certain I have checked all my bases – the catalysts I have mentioned before – analyst rankings, earnings beat, and sound technicals (all indicators lining up to signal a trade).  That’s not to say a trade might go bad.  We don’t live in a perfect world.  But, in those cases, I monitor the trade to see if it’s just a minor blip – or a change in trend direction.
  • Regardless of something I said before, if you are holding onto a stock that has tanked for whatever reason, but yet has passed my smell test, as outlined in last blog post, you may wish to hold on to it, assuming the metrics haven’t changed – like analyst ratings and earnings beat. Sure, the technicals will look different in such cases, but the underlying fundamentals should eventually buoy the stock for a comeback.  You may just have to wait a while.  This is the case of a trade turning into a long-term investment.  Nothing wrong with that. Just don’t beat yourself up over letting the stock slide.  I’ve done it.  Perhaps don’t do it again.  Just don’t let a stock slip by more than, say 12%.   
  • There’s nothing wrong with owning cash, if you don’t see a stock to buy.
  • If you don’t have the patience or the time, perhaps you should consider letting somebody else invest or trade your money for you.
  • If you are time-constrained, or just intellectually lazy, perhaps you should forego trading for a while, until you catch your breath, and are ready to give it another go.
  • It’s not about the number of stocks you own, or the number of trades you take; it’s about the money you make. It’s probably easier not to load up the boat with too many stocks or trades at any one time.  It’s hard to stay on top of a lot of inventory at the same time.  On any given day, I may have 25 or so stocks that I monitor for possible trades.  But, only a handful of those pass my rigid scrutiny.
  • Don’t listen to anybody, no matter how close you are to them. Trust your own judgment.  After all, it’s your money that’s at stake.  It’s empowering to pull the trigger on a trade, knowing exactly why you are doing it.
  • Don’t talk about your trading endeavours with anybody. It will just spook you.  Keep it to yourself.
  • Stay away from chat rooms and forums. There’s too much BS and trivia going on there.  You don’t need anybody to support your trading ideas or stock picks.  Just keep to your own counsel.
  • Use good stock charts like www.StockCharts.com. The free ones are good enough.  I don’t use the charts where I trade, because they suck big time.  The other aspects of my trading platform are beyond reproach, though.
  • At that charting site, plot Accum/Dist (Accumulation/Distribution), MACD, Parabolic SAR, Slow STO (Slow Stochastics), 50 EMA, and 200 EMA, and use these indicators as I explain in my last blog post.
  • For intra-day price action, go to www.BigCharts.com, enter your symbol, click on Interactive Chart, then Timeframe, Chart Range, 1 Day, and then you can see how your stock is progressing throughout the day. You may have to click on some other Chart Range, and then go back to 1 Day just to get it going.  Sometimes, the 1 Day doesn’t appear right off the bat (it freezes every once in a while), when you first click on it.
  • Now, I’m not suggesting for one minute that you can’t or shouldn’t use a more comprehensive service like iTrade that gives you all the bells and whistles. I am only giving you the cheaper alternatives that will do the job quite nicely for you on the cheap.  I resorted to BigCharts and StockCharts, in part because my trading platform at the bank I deal with doesn’t have charts that I like, or could work with.  But, that’s where I do my trading, after I have checked the indicators and price action for my stock(s) at those two sites.  It works.  A little bit of jumping around, but that’s not going to make or break your trading.  Trading at a place like iTrade won’t make you a better or worse trader.  Once you know what you want to do with a particular stock, you just have to hit the enter key, irrespective of where you are trading.  All of that said, I do like BigCharts and StockCharts for the price (free).  They are good enough for me.  I am not a fancy dancy trader who needs nothing but the best trading toys.  I am only interested in making money – and having fun doing it in the process.        
  • Investigate analyst ratings on stocks you are considering investing in or trading at http://www.marketwatch.com/investing/stock/jblu. Just substitute your stock symbol for jblu at the end of that link, hit enter, and you’re good to go.  There must be a preponderance of analysts on the buy side, before I would touch a stock.
  • Look up earnings info at http://www.nasdaq.com/earnings/report/kar. Again, just substitute your stock for kar at the end of that link, hit enter, and away you go.  The latest earnings must beat the consensus EPS forecast, or take a pass, and move on to some other stock.  Met is okay, but certainly not less than.  Find out at that link when the next earnings report is due out, and mark it on your calendar, assuming your stock is a keeper.
  • Keep a running list of the stocks you are following in a Word doc, or wherever. These are the ones that pass the smell test, as outlined in my last blog post.
  • When you have a winning trade, celebrate. Savour the moment.  Pat yourself on the back.  You will have moments, when you want to stand on one foot, and kick your rear end with the other, when a trade goes bad.  So, hoot, holler, kick up your heels, and enjoy your success.  You’ve earned it.
  • Tom Landry: “Setting a (trading) goal is not the main thing.  It is deciding how you will go about achieving it with that plan.”  From an investing perspective, research by Vanguard discovered that, not participating in the 10 best trading days can amount to an annualized return of 11.32 per cent, as compared with a gain of 1.66 per cent, by hanging in there with the market, and enduring the volatility.  Yes, even Tom Landry didn’t win all the Super Bowls, but history is a great teacher.  It has shown that the market rewards discipline and diversification over the long haul.  You can’t beat the market consistently, but thinking long-term, having a clear set of goals, and ignoring those annoying short-term surprises may just put you into the investing hall of fame.  (info via Thane Stenner, as reported in The Globe and Mail, July 8/16)
  • Don’t compare yourself or your trading results to anybody else. That’s a fool’s game.  The only comparison you should make is to what you were doing yesterday, what you were like then, and how your trading was going.  In other words, are you getting better as a person and as an investor or trader?  That should be your only benchmark.  That’s all that matters.  Even only incremental improvements will mean a lot to you, and keep you going.  Just aim for slight changes, and get a little bit better each day.  Everything else will be a bonus.
  • It’s okay to have some of your money parked with a reputable institution or wealth management firm that has a solid track record with its funds. I have a sizeable amount invested in mutual funds with my bank.  I meet with my bank advisor once a month to review their progress, and make slight changes.  I welcome feedback from her.  She has been with the bank for something like 38 years, so she has her finger on the pulse.  The decisions are always mine, after I have digested her remarks, and given serious consideration to them.  Bottom line, I am in charge of my money.  Some of the adjustments to my positions I initiate myself, based on research I have done before I meet with her.  I, of course, listen to her feedback and input.  But, I pull the trigger on all my changes.
  • What starts off as a short-term trade can end up being a longer-term investment, if the stock continues to climb, once you are in the trade, and you decide to hold on.
  • In addition to a trading journal, you should keep a binder or notepad, in which you record new things you learn, or thoughts you have about trading in general. I find, with myself, that I learn better, if I write it down.  An old adage… if it isn’t written, it doesn’t exist.  As with your journal, go over what you have written periodically.  There are bound to be things you have forgotten about that will jar your memory, and keep you focussed and sharp.
  • If you’re an investor, you should buy the dips when the market tumbles, and hang in there for the long-term. You will be rewarded, if are patient.   
  • Trading (or even investing for that matter) is not a love affair. I don’t really care what the name is at the stop of a chart.  I am only interested in the potential for profit.  I don’t care what a company does, just as long as the fundamentals (to a certain extent) and the technicals tell a compelling story.
  • When a stock is selling off, keep an eye on volume. If it’s light, that probably signifies some profit-taking taking place, which is nothing to break out into a sweat over.

I hope you got a lot out of these 122 stock trading rules that work, including the intraday trading rules.  If you were looking for after hours stock trading rules, you will find them in my After Hours Trading blog post.  If you can think of other trading rules in stock market, please bring them to my attention here.

Screen shot of testimonial from TradingSmarts member George P.

UCP Pattern Redux

Let me start off by saying that, in addition to this pattern, there are others – like the Downtrend Continuation Pattern (DCP), the Downtrend Reversal Pattern (DRP), and the Uptrend Reversal Pattern.  I have chosen to work with only the UCP (Uptrend Continuation Pattern), because the first two are for downtrending situations, which I never talk about, and the third one is not all that prevalent with momentum stocks, which are the ones I focus on.

Besides which, I like to specialize.  I see the UCP often enough that it brings home the bacon enough times that I don’t have to worry about any other patterns.  I should point out that I only work with stocks that have been trending up for at least two years.  I never short stocks, so the other patterns are irrelevant the way I trade.

Okay, let’s get going.  I thought I would take us back to my last blog post, and revisit the Uptrend Continuation Patter (UCP).  I want to reinforce the notion that it is real, and that it repeats itself over and over again.  Hopefully, after studying that post, you now get the hang of it.  Okay, let’s take a look at another example (one of many) I noticed after doing that post.  Here it is:

Screen shot of Boston Pizza Royalties Income Fund BPF/UN – TSE showing evolution of UCP pattern.

(Image via StockCharts.com)

Screen shot of Boston Pizza Royalties Income Fund BPF/UN – TSE showing continuation of UCP pattern.

(Image via StockCharts.com)

This example is not a fluke.  The UCP pattern occurs over and over in chart after chart.  You can see in the first chart above Leg 1 and the Price Equilibrium or Consolidation (PEC) phase in place, and Leg 2 starting to unfold.  In the next chart above, you can see that Leg 2 is indeed in flight.  Leg 2 is usually the same length as Leg 1.  That’s your profit potential. 

See if you can find your own examples.  Better still, enter a trade after the PEC phase, when MACD has completely neutralized back to the waterline, or even below it, and then starts to head back up, after punching up through its trigger line.  In the example above, you would have jumped on board where the dotted line cuts through price.

Notice in this particular example that all of the catalyst technical indicators line up in support of that trade.  Accum/Dist shows the fund being accumulated, MACD is behaving as discussed above, the 50 EMA is above the 200 EMA, following the Golden Cross towards the end of March, and both EMAs are trending up.  The 200 EMA is the trend indicator, so it is further reassuring that it is in an uptrend.  Slow STO (Stochastics) is overbought, but can remain so for quite some time.

Here is the final outcome…

Screen shot of Boston Pizza Royalties Income Fund BPF/UN – TSE showing completion of UCP pattern.

(Image via StockCharts.com)

You could specialize with your trading, and only trade this pattern.  It happens often enough that you would come across it fairly frequently.  What you could do is cycle through all the stocks on your list of stocks that you follow, looking for the UCP to present itself at www.StockCharts.com.  You don’t have to just wait for it to occur with the same stock all the time.  You are bound to find numerous occurrences of this pattern, if you cycle through all your stocks on a regular basis.

I just noticed four more UCP patterns, and couldn’t resist showing them to you…

Screen shot of NVIDIA (NVDA) on Nasdaq showing back-to-back UCP patterns.

(Image via StockCharts.com)

Screen shot of iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) on NYSE with UCP pattern.

(Image via StockCharts.com)

Screen shot of Quebecor, Inc. (QBR/B) on TSE showing all three phases of a UCP pattern.

(Image via StockCharts.com)

Screen shot of Thor Industries, Inc. (THO) on NYSE showing a UCP pattern unfolding.

(Image via StockCharts.com)

Quiz Time

Where do you think NFI stock is headed?  Study the chart below, and see if you agree with my take.

Screen shot of New Flyer Industries Inc. (NFI) on TSE showing second UCP pattern unfolding.

(Image via StockCharts.com)

Breach of Old Highs

One of my all-time favourite strategies is to buy on a breakout of previous highs.  Well, I did just that July 12/16.  Stock in question – MAS (see chart below).  You will notice that I bought MAS at 33.42, which was above its all-time high of ~33.  (For the record, I then sold MAS at 34.07, for a quick profit.)

You can have a look at the MAS chart yourself at www.StockCharts.com.

Screen shot of Masco Corp. (MAS) on NYSE showing my buy on the break of the all-time high.

(Image via StockCharts.com)

My Formula for Success

In a nutshell, my formula for trading success is quite simple… follow the logic in my last blog post, and combine it with patience, perseverance, and stick-to-itiveness.  Deal only with momentum stocks, buying the dips in an uptrend or the breaks above old highs (see examples above).  Make sure you are working with stocks that have been trending up for at least two years, have the lion’s share of analysts on their side, and have beat earnings consensus (or at least met it).  That’s it, plain and simple.  No BS, magic potion, or smoke and mirrors – just KISS.

TradingSmarts Wins Award#2

If it’s the excitement of trading currencies on the forex that you’re after, then read my Currency Trading Strategy, and head on over to https://www.tallinex.com/open-account?i=140383, where you can open a free, no-risk trading account.  Of course, you’ll get help from me, whenever you need it.

Screen shot of Award for Excellence in Forex Trading awarded by Wealth and Finance Intl.

This is the second award in two months that TradingSmarts has won.  Last month, the award was for Stock Market Investment Strategist of the Year Canada,’ again awarded by Wealth and Finance Intl.  This time it is was for ‘Excellence in Forex Trading (Canada).’  I must be doing something right.

Quotes

“Don’t wait for the perfect time – you will wait forever.  Always take advantage of the time you’re given, and make it perfect for you” – Daymond John

“There is no substitute for victory.”  Ronald Reagan

Legendary trader Jesse Livermore said it best when he wrote this about tips:  “Nobody can give me a tip that will make more money for me than my own judgment.”

Warren Buffett – “Be fearful when others are greedy, and be greedy when others are fearful!”

“Tell God your plans, if you want to make Him laugh.”

“Planes are built for Wizard of Oz munchkins.”  Bill O’Reilly

“Until people know how much you care, they don’t care how much you know.” – Theodore Roosevelt.

Natalie Cole:  “You can still have victory in your life, while going through turbulent times.”

Quotes from Muhammad Ali:

“Impossible is just a big word thrown around by small men who find it easier to live in the world they’ve been given, than to explore the power they have to change it.  Impossible is not a fact.  It’s an opinion.  Impossible is not a declaration.  It’s a dare.  Impossible is potential. Impossible is temporary.  Impossible is nothing.”

“Make the days count; don’t count them.”

“If you can back it up, it’s not bragging.”

“I knew that I as great before I was.”

“When the match is even, only a man who knows what it’s like to be defeated can reach down to the bottom of his soul, and come up with the extra ounce of power it takes to win.”

“In my mind the losers are those who don’t have a cause they care about.”

“A man has no wings, if he has no imagination.”

“Ain’t nothin’ wrong with going down, inside a ring or out.  It’s the staying down that’s not right.”

“I can achieve it, if my mind can conceive it, and my heart can believe it.”

“Wake up, if you want to make your dreams come true.”

“You will not accomplish anything in life, if you are not courageous enough to take risks.”

“You must believe you are a great champion and the best.  If you’re not, pretend it so.”

“Champions don’t come from gyms.  Champions have it deep down inside them – a desire, a dream, a vision.  They must have the skill and the will.  But, the will has to be stronger than the skill.”

“I hated every minute of training, but I said to myself, ‘don’t give up.’  Suffer in the moment, and live like a champion for the rest of your life.”

“Friendship is the hardest thing to explain.  You don’t learn it in school.  You haven’t learned anything, if you haven’t learned the true meaning of friendship.”

Conclusion

That’s all she wrote friend.  I hope you found this blog post to be instructive.  It is bound to make you a better trader.  Again, if you can think of stock trading rules that I missed, please let me know here.  Or, if you have any questions about this blog post, or wish to comment, you can contact me at the same link.  One-on-one coaching with me can also be arranged at that link.

Don’t forget to come back to TradingSmarts as often as you can, and go to the News link in the row of links at the bottom of each page of the site.  There, I post my favourite stock picks, and also comment on the other markets from time-to-time.

You can also go here to find out more about me.  And, if you haven’t read my previous blog posts, you can do so here:  VIX, After Hours Trading, Trading Volume, Stock Trading Stops, Currency Trading Strategy, and of course my last blog post.

If you would like to help me start a forum and be a moderator, I would love to hear from you.  Just drop me a line using the Contact provision at the bottom of my site.

If you would like to be featured in my blog, I would love to share your success story – or even your trading experience.  Please send me a message using my Contact form at the bottom of this page.

I won’t live long enough to know it all, and I won’t live long enough to make all the mistakes myself.  So, hearing your story will be most helpful not only to me, but also for my other beloved readers.

Please share this post.  Sharing is caring.  Thank you!

I look forward to your articles, feedback, ideas, stories, and suggestions for my blog.  Please post these on my blog at the Contact link below.  

HAVE FUN and ENJOY LIFE!  Remember – FAMILY comes first!

Here’s To Your Success and Quality of Life,

prbain

Peter R. Bain
PS:  Don’t let them steal your dreams!
PPS:  I will help you achieve your dreams!

About Peter R. Bain

Picture of Peter R. Bain, founder of www.TradingSmarts.com – the go-to site for all things trading.

Peter R. Bain

I am a speaker, trader, writer, aviator, car nut, Harley enthusiast but, above all else, I am here for you at TradingSmarts, which I founded some 15 years ago.

TradingSmarts is your best friend when it comes to finding anything and everything to do with trading.  Through my blog you will always find guides, news, reviews, tutorials, and much, much more.

TradingSmarts is a ‘NO-BS, No-Holds-Barred, Take-No- Prisoners’ site for traders who want the straight-bill-of-goods on how to make a full-time income trading less than part-time. 

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Peter R. Bain

I am a speaker, trader, writer,
aviator, car nut, Harley enthusiast
but, above all else, I am here for you.

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