TECHNICAL TRADING SYSTEM
16. Keep your technical systems simple.
Complicated systems breed confusion; simplicity breeds elegance.
17. Establish initial positions on strength in bull markets and on weakness in bear markets.
The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
18. Respect and embrace the very normal 50-62% retracements that take prices back to major trends.
If a trade is missed, wait patiently for the market to retrace.
Far more often than not, retracements happen... just as we are about to give up hope that they shall not.
19. Bear markets are more violent than are bull markets and so also are their retracements.
20. Try to trade the first day of a gap, for gaps usually indicate violent new action.
We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
21. Respect "outside reversals" after extended bull or bear runs.
Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.
22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!
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