Richard Wyckoff used to teach trading via an analogy to crossing the street. Let me break it down in 5 “easy” steps.
The Rules of Crossing a Busy Street
1.) Experienced traders understand when it’s safe to put on a position in the context of price flow (breaking strong resistances, diverging and reversing, etc) and how to manage risk accordingly within that moment (opportunity).
2.) The know what to look for (what type of car is approaching), when to walk across (during calmer market times) and even when to run quickly (during volatile times).
3.) Know that certain behaviors in the market will lead to … unfavorable outcomes, just like crossing a street while distracted or unaware of the danger of traffic will lead to … unfavorable outcomes.
4.) Fighting a powerful trend in motion may cost you your trading career – or at least result in considerable losses. Eventually, most traders learn not to fight powerful trends. Experience teaches them.
5.) Have big decisions predetermined in advance of the actual trading session.
Thank you to Mr. Corey Rosenbloom for posting this nice list of trading rules.
– Faceless Trader