Lessons I learned today

1. Do not trade after 3 losses in a row (yes 3, not 2). This will help resolve the problem if you entered just as it is about to retrace. If the market is trending, your 3rd trade will win. If you have 3 losing trades, the market is in a choppy condition.


2. Of course, keep an eye on divergences. Do not enter a trade if you see at least one indicator diverging.


3. After entry, if the next 3 bars go against the direction of your trade (lower lows after a LONG entry, higher highs after a SHORT), exit immediately.



"Limit losses quickly. Most traders hold on to their losses too long because they hope the loss will not get larger. They take profits too soon, because they fear the profit will diminish. Instead, traders should fear a larger loss and hope for a larger profit." -- Mark Weinstein


4. Pay attention to how many waves there are in a direction. There is a minimum of 3 waves in every one.


5. When trading continuations, take only the first continuation (wave 3). The 2nd continuation (wave 5) is dependent on how strong the first continuation (wave 3) is.


6. Keep an eye on the 15-minute chart, which shows the larger degree trend. There should be at least 3 waves on it.


7. Take a look at MBO and SuperIndicator to help confirm divergences. Do not enter when these indicators are diverging, even when the others are not.


8. Last but not least, always use my main trading strategy - Breakout Trigger @LSMA/TSF - and pay attention to price bar color via mid-BB crosses.

The combination of the above guidelines (waves, divergences, larger degree trend) will help you stay out of low-probability trades, and keep your account and your sanity intact.

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(Disclaimer: Even though the above guidelines contain suggestions specific to my trading system, it shows roughly how one can deduce trading rules from lessons learned in the trading arena. Aside from specific indicators, the general concepts above apply to any trader and/or trading system.)