1. Protect Capital: Manage your downside risk by adhering to strict stop loss rules.
2. Always follow the market trend: Put the odds in your favor by initiating purchases only if the market is moving-up (long positions) and higher than average volume exists.
3. Mathematically manage the risk versus reward ratio based on market conditions: In a sideways market don’t expect much more than 2:1; in a runaway market you could possibly get 5:1 or higher.
4. Seek high probability trades with low risk entry points: This is accomplished through understanding technical analysis and specifically chart patterns.
5. Protect Break Even: Move your stop up to break even after you have a reasonable gain and never let a winner turn into a losing trade.
6. Never add to a losing position.
7. Focus on selling (minimal loss, break-even, sell into strength, reduce position size when your profit reaches approximately 20%).
8. Discipline and patience to follow all of the rules and execute the plan.
9. Know when not to be in the market.