Trading Rules

Trading Rules 10 Steps to a Successful Trade 1) Locate and identify pattern/formation Narrow Sideways Channel, 123 top or bottom, Flag, triangle, wedge, etc... 2) Analyze the market for a seasonal bias Using TNT, Futures Seasonal feature, you can determine if a market's historical trending pattern is in line with your current line of thought for market direction. It is recommended never to buck the seasonal nature of a market. 3) Establish short-term trend and retracement. Establishing the sort-term trend lets you know how the market is moving in the overall scheme of things, is it bucking the long-term trend, or is it moving in line with the long- term trend. Remember, a trend in motion generally stays in motion. Locating the short-term retracement gives you a short-term trend target market area to shoot for. This is what your risk vs. reward is based off of. 4) Compare like contracts Watch market families, example: Soy Beans, Soy Bean Oil, and Soy Bean Meal. These are all very similar contracts, but you will often find that one commodity will lead the way, and the others will soon follow. If you see Soy Beans breaking higher, you can be sure that soon after, Bean Meal and Bean Oil will follow suit. 5) Determine long-term trading range and trend To determine a long-term trading range, look over your historical long-term monthly charts, knock off the highest highs, and the lowest lows, and determine a basic long- term range where your particular market trades between. This is very important to help you determine your bias, and to let you know whether your market is currently cheap, or expensive. You want to determine the long-term trend, simply by looking at the historical charts, weekly and monthly, to determine if your over all market is in a major up swing, or down swing. Again, this adds to establishing a bias in which direction you believe the market is heading. 6) Establish long-term retracement Establishing a long-term retracement helps you determine where the market may move to if it retraces; basically setting a possible target point. 7) Reference Indicators for added confirmation Using indicators as a method of confirming your other thought processes is a very prudent way of reassuring yourself your on the right track, but remember, indicators are not perfect. Using indicators alone as a method for market entry and exit is a quick way to give up your holdings to someone else. 8) Establish Risk vs. Reward ratio Never enter into a trade, where you are going against your bias, and never enter into a trade where your risk does not far out way your reward. Your reward is 50% of the last major move, therefore giving you a point to guesstimate how far you can expect the market to move and how much money you would make if it made the predicted move. 9) Determine the best method of market entry Decide if you should enter the market on a stop, when the market performs some type of validation move, or simply enter with a market order. 10) Determine best method of market exit Are you going to follow with stop loss orders, or are you going to exit when target areas of profit have been hit? More Trading Information Placing Orders Making a Trade Q & A Reoccuring Price Patterns Price Limit or Limit Moves Stop Loss Tips and Tricks Trading Rules