Richard Donchian’s 20 trading guides
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| READ THIS TWICE |
General Guides:
- Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
- From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
- Limit losses and ride profits, irrespective of all other rules.
- Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing.
- Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal.
- Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses, and from certain formations such as triangular foci to take positions. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation.
- In a market in which upswings are likely to equal or exceed downswings, heavier position should be taken for the upswings for percentage reasons – a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100%.
- In taking a position, price orders are allowable. In closing a position, use market orders.
- Buy strong-acting, strong-background commodities and sell weak ones, subject to all other rules.
- Moves in which rails lead or participate strongly are usually more worth following than moves in which rails lag.
- A study of the capitalization of a company, the degree of activity of an issue, and whether an issue is a lethargic truck horse or a spirited race horse is fully as important as a study of statistical reports.
Technical Guides:
- A move followed by a sideways range often precedes another move of almost equal extent in the same direction as the original move. Generally, when the second move from the sideways range has run its course, a counter move approaching the sideways range may be expected.
- Reversal or resistance to a move is likely to be encountered
- 0n reaching levels at which in the past, the commodity has fluctuated for a considerable length of time within a narrow range
- On approaching highs or lows
- Watch for good buying or selling opportunities when trend lines are approached, especially on medium or dull volume. Be sure such a line has not been hugged or hit too frequently.
- Watch for “crawling along” or repeated bumping of minor or major trend lines and prepare to see such trend lines broken.
- Breaking of minor trend lines counter to the major trend gives most other important position taking signals. Positions can be taken or reversed on stop at such places.
- Triangles of ether slope may mean either accumulation or distribution depending on other considerations although triangles are usually broken on the flat side.
- Watch for volume climax, especially after a long move.
- Don’t count on gaps being closed unless you can distinguish between breakaway gaps, normal gaps and exhaustion gaps.
- During a move, take or increase positions in the direction of the move at the market the morning following any one-day reversal, however slight the reversal may be, especially if volume declines on the reversal.
NIFTY FUTURES STRATEGY - JULY 26
Overall support is good @ 5398-93
Resistance 1 @ 5465 &
R2 @ 5485
Support @ 5410
If trades below 5461
slide upto 5433 and after that 5412 is
possible
3 DEMA – 5433
7 DEMA – 5409
BANK NIFTY
Resistance1 @ 10099 & R2 @ 10151
Support @ 9986
If trades below 10095
above an hour slide upto 10043 and after that 9992
3 DEMA: 10043
7 DEMA: 9986
11 Trading Rules
Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.
Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.
Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.
Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.
Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.
Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.
Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.
Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.
Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.
Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.
Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.
RELAX CORNER
and all the credit goes to idiotic politicians...
DRAGGING A WIZARD TO THE SATURATED POINT..
DEAR POLITICAL POISONERS,
Never ever disturb a good artist who is really in fond of improving a society..
News may be old but pain remains same..
Disclaimer: I assure this space doesn't defend this great actor but an anxiety of a real citizen
WATCH IT TO UR SHOCK
- EDITOR
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