The science of trend allows you to build systematic rules to play these repeating formations and avoid the chase:
- Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
- Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
- Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
- Trends test the point of last support/resistance. Enter here even if it hurts.
- Trade with the TICK not against it. Don’t be a hero. Go with the money flow.
- If you have to look, it isn’t there. Forget your college degree and trust your instincts.
- The trend is your friend in the last hour. As volume cranks up at 3:00pm don’t expect anyone to change the channel.
- Avoid the open. They see YOU coming sucker
- Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
- Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
- Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds
buyers and the first sharp rise always finds sellers.
- Bottoms take longer to form than tops. Greed acts more quickly than fear and causes stocks to drop from their own weight.
- Beat the crowd in and out the door. You have to take their money before they take yours, period.