Psychological Guidelines

● Always know any trade's risk/reward ratio. If a trade doesn't have decent ratio, then that
trade isn't worth pursuing.
● Never make a trade where the loss (risk) is too great to stomach.
● A stop-loss should be placed at a key technical level which eliminates or greatly harms
your trade.
● Never go all-in on a trade unless it has a very high risk/reward ratio on top of a very
probable technical pattern with an unquestioned stop-loss point.
● Never impulse trade. In other words, don't enter into a position because you feel like you
have to trade something.
● Only trade with a planned exit (stop-loss and target) strategy. Investing is different from
trading in this regard. Furthermore, always stick to your stop-loss point.
● When you are feeling overly bullish or overly bearish, take a step back and re-analyze
the situation from the opposite perspective. Always have an eye on a bullish and bearish
scenario.
● Avoid over-trading, and instead, be picky with your trades. You do not need to be right
all the time and profit from every move. Remove ego and emotion from your trading
because they are never helpful.
● After closing an extremely profitable or unprofitable trade, take a break and clear your
head before returning. Careless mistakes are often made during this post-trade
euphoria.
● After a loss, avoid going into the next trade expecting to make that loss back. Moreover,
avoid holding onto a position past its stop-loss point and selling or covering a significant
portion of a position before it's reward point unless justified.
● Always remember that market valuations and prices are largely determined by irrational
traders trading based on emotions of greed and fear instead of from a scientific formula
or method. In short, “markets can remain irrational longer than you can remain solvent.”
– Keynes
● Don't be afraid to bet big if you are extremely picky with your trading method and see a
very high risk/reward ratio trade form around a very probable technical pattern. Fortunes
are often made in a very short period of time by traders who are extremely disciplined
enough to wait a long time for a great trade to develop. Alternately, fortunes are often
lost by traders who are not picky and bet big on low risk/reward ratio trades just because
they feel like they need to trade.
● Whenever you feel pressured into making a certain trade because the price is moving
quickly against your viewpoint and you're afraid of missing a move, don't trade. You
always want to be in control whenever you are making a trade and this pressured feeling
is emotional and not logical. Often times, this pressured feeling occurs right before a
reversal.
Buy / Long Guidelines

● If price goes down, either do nothing or buy more until stop is reached. If stop is
reached, sell everything and look for another trade setup.
● If price goes up, do nothing.
● If price goes up, continuously raise stop at key technical levels.
● If price goes up, continuously raise stop while buying more above these key technical
levels.
● Place limit sell at important channel/trend-line, Fibonacci retracement/extension, and/or
horizontal resistance area. If the price forms a significant reversal pattern or breaches an
important support region before this area is reached, sell part or all of position.

Sell / Short Guidelines

● If price goes up, either do nothing or short more until stop is reached. If stop is reached,
cover everything and look for another trade set-up.
● If price goes down, do nothing.
● If price goes down, continuously lower stop at key technical levels.
● If price goes down, continuously lower stop while shorting more at key technical levels.
● Place limit cover at important channel/trend-line, Fibonacci retracement or extension,
and/or horizontal support. If price forms significant reversal pattern or breaches an
important resistance region before this area is reached, cover part or all.

Patience Guideline
Patience with discipline! Never trade before a well-conceived plan calls for it. Moreover, avoid
buying in anticipation of a breakout and selling in anticipation of a breakdown. Let a good trade
develop before trading instead of forcing one.