Trading Habits: 39 of the World\'s Most Powerful Stock Market Rules pdfdrive com

12. It is much easier to watch a few than many. – Jesse Livermore
The best way to develop a strong edge in trading is to study, test, trade, and
master a specific thing. It is hard to beat an expert in a specific market, setup,
chart pattern, trading system, or stock. You will have a much better chance if you
have a small watch list of specific stocks or setups.
Knowing how your stocks move around key moving averages and indicators can
give you an edge over others that are trading their opinions. Studying how your
specific market moved around key technical indicators over the past ten years
should provide you with the necessary insight.
Develop a robust system for trading price action across multiple markets. This
simply a matter of finding the entry signals and patterns you’re looking for that
will give you more trading options if your smaller watch list dries up. Get in the
habit of trading a specific winning price action based system, so that your
trading becomes a simple search for the right signals.

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13. Trends never turn on a dime. Reversals build slowly. The first sharp dip
always finds buyers and the first sharp rise always finds sellers. – Alan
Farley
It is important for traders to understand that trends don’t go straight up or
straight down. Instead, they tend to zigzag back and forth from a new high, back
to a lower high, to a higher high, and back down.
Markets and stocks rarely plunge straight down day after day, or go straight up
in price. Even the strongest uptrends in stocks and markets tend to pull back to
the 5 day exponential moving average repeatedly on their way to new highs.
Downtrending stock indexes usually bounce a few times at the 30 RSI before
continuing lower. Bear markets almost always have strong rallies back to key
moving averages like the 200 day SMA before they finally roll over and drop for
multiple days in a row. It is important to step back from your daily trading and
get a perspective of the daily chart’s longer term trend. You have to find good
key price levels to enter where you can position your stops to not be hit before
you’re able to capture a piece of the larger market trend.
In stock indexes, downtrends tend to bounce near the 30 RSI, while uptrends
tend to stall near the 70 RSI. The MACD (Moving average convergence
divergence) technical indicator attempts to measure a change in trend, and signal
a possible entry at the beginning of a new short term trend. A trader can decide
how much of a trend they want to try to capture in their chosen time frame, and
how much of a profit giveback they are willing to risk to capture more of a trend.
Traders should get in the habit of finding ways to capture trends as the price
zigzags and then continues in the primary market direction. Ability to filter out
noise and capture a trend is a trader’s primary responsibility during system
development.

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