Technical analysis is a windsock, not a crystal ball. It is a skill that improves with experience and study. Always be a student, there is always someone smarter than you!
• “Thou Shall Not Trade Against the Trend.”
• Let volatility work in your favor, not against you.
• Watch what our “Politicos” do, not say.
• Markets tend to regress to the mean over time.
• Emotions can be the enemy of the trader and investor, as fear and greed play an important part of one’s decision making process.
• Portfolios heavy with underperforming stocks rarely outperform the stock market!
• Even the best looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.
• When trading, if a stock doesn’t perform as expected within a short time period, either close it out or tighten your stop-loss point.
• As long as a stock is acting right and the market is “in-gear,” don’t be in a hurry to take a profit on the whole position, scale out instead.
• Never let a profitable trade turn into a loss and never let an initial trading position turn into a long-term one because it is at a loss.
• It’s not the stocks that you sell that go higher that matters, it’s the stocks you don’t sell which go lower, that do.
• Don’t think you can consistently buy at the bottom nor sell at the top. This can rarely be consistently done.
• Don’t buy a stock simply because it has had a big decline from its high and is now a “better value;” wait for the market to recognize “value” first.
• Don’t average trading losses, meaning don’t put “good money” after “bad.”
• Your odds of success improve when you buy stocks when the technical pattern confirms the fundamental opinion.
• We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us. As I like to say, “Overweight Statistical Probability. Underweight Emotion!”
• Understanding mass psychology is just as important as understanding fundamentals and economics.
• When investing, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in our business … the Paul Tudor Joneses; the Steve Cohens; the Andy Halls; the George Soros’…all have this same trait: the ability to shift on a dime when the shifting time comes.”
• Any dead fish can go with the flow. Yet it takes a strong fish to swim against the flow. In other words, what seems “hard” at the time is usually, over time, right.
• Don’t make investment or trading decisions based on tips. Tips are something you leave for good service.
• Where there is smoke, there is fire – bad news is usually not a one-time event, more usually follows.
• To the best of your ability, try to keep your priorities in-line. Don’t let the “greed factor” that Wall Street can generate outweigh other, and just as important, areas of your life. Balance the physical, mental, spiritual, relational, and financial needs of life.
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