Rule #15: Stops Based on Percent
All the stops you use should be based on percent of the price of the current market. Check back and you will find that a certain percentage stop works on the market most of the time and it is based on the current price of the market. Usually a 1 perce
nt stop will protect you. Check back and see what previous stops have held the market and you will find one secret to trading successfully.
Rule #16: Trading Positions
There are three different positions you can be in at any one time. Those being long, short and neutral and not in the market. Don’t be afraid to be out of the market. When cycles are changing, there are times when you should not be in. Changing cycle markets give you poor signals. You are also constantly being stopped out in these markets. If you are stopped out of 2-3 trades, you probable won’t take the next trade because of psychology and that will be the one that works.
Rule #17: Odd Price Orders
When you place limit price orders, they should be not even but odd. That means if you want to buy corn at $3.00 you should place the order at $3.01. That is a little above the price level. The price level of $3.00 is a strong psychological level and many orders are placed there. The chances are that you would not be filled at that price level and the market would then rally sharply.
Rule #18: Fundamentals
You should not dismiss fundamentals. They are what move the markets. You should always be aware of upcoming reports, weather and other fundamentals in the commodity’s markets. In stocks, you should know what’s happening with sales, earnings,
new products, management and other fundamental factors. The technical charts will then give you a leading indicator as to how those fundamentals will change. For example, in commodities the market will often go up into a report. The report will come out bullish and will jump the day of the report, just to turn down again the next several days.Checking further you will find that the report was on a cycle high day in a major down trend.
Rule #19: Anniversary Dates
Anniversary dates are very important. If you check back on your long -term charts (using daily) you will find that harmonic years many times will move in the same direction. The important harmonic years are every 10 years back. Therefore, if
you find that December Wheat made a high on October 20, 1978 and we are approaching October 20, 1988 watch that anniversary date, If it reverses that same day it is very important and could lead to a major reversal.
Rule #20 Gaps
Gaps are extremely important. There are three types. One is the breakaway gap, which occurs after a congestion area. It usually leads to a big move in the market. The next is a midway gap. This is a gap, which occurs after the market has moved in the same direction for some time. It usually will tell you the market will move the same amount in the same direction for another extended period. The last type of gap is the exhaustion gap. It is where the market exhausts itself. For example, in a bull market when the bear finally gives up, throws in the towel and the market gaps up, and trades a few days up there, then finally starts down the market is through. The market will start a major downtrend.
Rule: #21 Swing Charts
Swing charts are extremely important. They tell you the direction of the market. When a previous swing low is broken, the market should be sold on any rallies and when a swing top is broken the market is ready to start up and all lows should then be bought. Using a stochastic oscillator on your charts sometimes tells you the relative importance of any particular swing high or low.