Dennis Gartman’s 22 “Rules of Trading

1. Never, under any circumstance add to a losing position.... ever!

Nothing more need be said; to do otherwise will eventually and
absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side

and be willing to change sides readily when one side has gained the
upper hand. 3. Capital comes in two varieties: Mental and that which
is in your pocket or account. Of the two types of capital, the mental is
the more important and expensive of the two. Holding to losing
positions costs measurable sums of actual capital, but it costs
immeasurable sums of mental capital.

4.The objective is not to buy low and sell high, but to buy high and to
sell higher. We can never know what price is "low." Nor can we know
what price is "high." Always remember that sugar once fell from
$1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5.In bull markets we can only be long or neutral, and in bear markets
we can only be short or neutral. That may seem self-evident; it is not,
and it is a lesson learned too late by far too many.

6."Markets can remain illogical longer than you or I can remain

solvent," according to our good friend, Dr. A. Gary Shilling. Illogic
often reigns and markets are enormously inefficient despite what the
academics believe.

7.Sell markets that show the greatest weakness, and buy those that
show the greatest strength. Metaphorically, when bearish, throw your
rocks into the wettest paper sack, for they break most readily. In bull
markets, we need to ride upon the strongest winds... they shall carry us
higher than shall lesser ones.
8.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.

9.Trading runs in cycles: some good; most bad. Trade large and
aggressively when trading well; trade small and modestly when
trading poorly. In "good times," even errors are profitable; in "bad
times" even the most well researched trades go awry. This is the nature
of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a

technician. It is imperative that we understand the fundamentals
driving a trade, but also that we understand the market's technicals.
When we do, then, and only then, can we or should we, trade.

11. 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.

12. Keep your technical systems simple. Complicated systems

breed confusion; simplicity breeds elegance.

13. 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.

14. An understanding of mass psychology is often more important

than an understanding of economics. Markets are driven by human
beings making human errors and also making super-human insights.
 15. 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. 16. Bear
markets are more violent than are bull markets and so also are their
retracements. 17. Be patient with winning trades; be enormously
impatient with losing trades. Remember it is quite possible to make
large sums trading/investing if we are "right" only 30% of the time, as
long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the
ignorance...of all of those who deal in it; and we dare not argue with
the market's wisdom. If we learn nothing more than this we've learned
much indeed.

19. Do more of that which is working and less of that which is not:
If a market is strong, buy more; if a market is weak, sell more. New
highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if
it is easy to buy, don't. Do the trade that is hard to do and that which
the crowd finds objectionable. Peter Steidelmeyer taught us this
twenty-five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule
submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when...
and how infrequently this rule may be invoked!

GOLDEN RULES FOR SUCCESSFUL TRADING

In order to make a success in trading in stock market, the trader must have
definiterules and follow them. The rules given below are based upon
my personal experienceand anyone who follows them will make a
success.

1. Amount of capital to use: Divide your risk capital into 20 equal parts

and never risk more than onepart of your capital on any trade.2. Use
stop loss orders. Always protect a trade when you make it with
a stoploss order 3 to 5 pointsaway.3. Never over trade. This would
be violating your capital rule.4. Never let a profit run into a loss. After
once you have a profit of 1:3 or more, book partial profit so thatyou will
have no loss of capital.5. Do not buck the trend. Never buy or sell if
you are not sure of the trend according to your charts.6. When
in doubt, get out, and don't get in when in doubt.7. Trade only in
active stocks. Keep out of slow, dead ones.8. Equal distribution of risk.
Trade in 4 or 5 stocks. If possible, avoid tying up all your capital
in anyonestock.9. Never be rigid in your orders or fix a buying or
selling price. Trade as market moves.10. Don't close your trades
without a good reason. Follow up with a stop loss order to protect
yourprofits.11. Accumulate a surplus. After you have made a series of
successful trades, put some money intosurplus account to be used only
in emergency or in times of panic.12. Never buy just to get
a dividend.13. Never average a loss. This is one of the worst mistakes
a trader can make.14. Never get out of the market just because
you have lost patience or get into the market because youare anxious
from waiting.15. Avoid taking small profits and big losses.16. Never
cancel a stop loss order after you have placed it at the time
you make trade. Put stop loss inthe system not in mind.17. Be just as
willing to sell short as you are to buy. Your objective is to keep with the
trend and makemoney.18. Never buy just because the price of a stock
is low or sell short just because the price is high.19. Be careful about
pyramiding at the wrong time. Wait until the stock is very active and
has crossedResistance Levels before buying more and until it has
broken out of the zone of distribution beforeselling more.20. Never
hedge. If you are long in one stock and it starts to go down. Do not
sell another stock tohedge it. Get out at the market; take your loss and
wait for another opportunity.21. Avoid increasing your trading after
a long period of success or a period of profitable trades.22. Never
 change your position in the market without a good reason. When you
make a trade, let it befor some good reason or according to some
definite plan; then do not get out without a definiteindication of a
change in trend.23. Select the stocks with small volume of shares
outstanding to pyramid on the buying side and theones with the largest
volume of stock outstanding to sell short.24. Avoid getting in and out of
the market too often.

When you decide to make a trade be sure that you are not violating any of
these24 rules which are vital and important to your success. When you
close a trade with aloss, go over these rules and see which rule you
have violated; then do not make thesame mistake the second time.
Experience and investigation will convince you of thevalue of these
rules, and observation and study will lead you to a correct and
practicaltheory for success in stock market

50 Golden Rules for Traders

1. Follow the trends. This is probably some of the hardest advice for a trader to
follow because the personality of the typical futures trader is not 'one of the
crowd.' Futures traders (and futures brokers) are highly individualistic; the
markets seem to attract those who are. Very simply, it takes a special kind of
person, not 'one of the crowd,' to earn enough risk capital to get involved in
the futures markets. So the typical trader and the typical broker must guard
against their natural instincts to be highly individualistic, to buck the trend.

2. Know why you are in the markets. To relieve boredom? To hit it big? When you
can honestly answer this question, you may be on your way to successful
futures trading. 3. Use a system, any system, and stick to it. 4. Apply money
management techniques to your trading. 5. Do not overtrade. 6. Take a
position only when you know where your profit goal is and where you are
going to get out if the market goes against you. 7. Trade with the trends, rather
than trying to pick tops and bottoms. 8. Don't trade many markets with little
capital. 9. Don't just trade the volatile contracts. 10. Calculate the risk/reward
ratio before putting a trade on, then guard against holding it too long. 11.
Establish your trading plans before the market opening to eliminate emotional
 reactions. Decide on entry points, exit points, and objectives. Subject your
decisions to only minor changes during the session. Profits are for those who
act, not react. Don't change during the session unless you have a very good
reason.

12. Follow your plan. Once a position is established and stops are selected, do not
get out unless the stop is reached or the fundamental reason for taking the position
changes.

13. Use technical signals (charts) to maintain discipline - the vast majority of
traders are not emotionally equipped to stay disciplined without some technical
tools

. 14. Have a disciplined, detailed trading plan for each trade; i.e., entry, objective,
exit, with no changes unless hard data changes. Disciplined money
management means intelligent trading allocation and risk management. The
overall objective is end-of-year bottom line, not each individual trade.

15. When you have a successful trade, fight the natural tendency to give some
of it back.

16.Use a disciplined trade selection system...an organized, systematic process

to eliminate impulse or emotional trading.

17. Trade with a plan-not with hope, greed, or fear. Plan where you will get in
the market, how much you will risk on the trade, and where you will take your
profits.
18. Most importantly, cut your losses short and let your profits run. It sounds
simple, but it isn't. Let's look at some of the reasons many traders have a hard
time 'cutting losses short.' First, it's hard for any of us to admit we've made a
mistake. Let's say a position starts going against you, and all your 'good'
reasons for putting the position on are still there. You say to yourself, 'it's only
a temporary setback. After all (you reason), the more the position goes against
me, the better chance it has to come back-the odds will catch up.' Also, the
reasons for entering the trade are still there. By now you've lost quite a bit; you
sell yourself on giving it 'one more day.' It's easy to convince yourself because,
by this time, you probably aren't thinking very clearly about the position.
Besides, you've lost so much already, what's a little more? Panic sets in, and
then comes the worst, the most devastating, the most fallacious reasoning of
all, when you figure: 'That contract doesn't expire for a few more months;
things are bound to turn around in the meantime.' So it goes; so cut those
losses short. In fact, many experienced traders say if a position still goes
against you the third day in, get out. Cut those losses fast, before the losing
position starts to infect you, before you 'fall in love' with it. The easiest way is
to inscribe across the front of your brain, 'Cut my losses fast.' Use stop loss
orders, aim for a $500 per contract loss limit...or whatever works for you, but
do it. Now to the 'letting profits run' side of the equation. This is even harder
because who knows when those profits will stop running? Well, of course, no
one does, but there are some things to consider. First of all, be aware that there
is an urge in all of us to want to win...even if it's only by a narrow margin.
Most of us were raised that way. Win-even if it's only by one touchdown, one
point, or one run. Following that philosophy almost assures you of losing in
the futures markets because the nature of trading futures usually means that
there are more losers than winners. The winners are often big, big, big
winners, not 'one run' winners. Here again, you have to fight human nature.
Let's say you've had several losses (like most traders), and now one of your
positions is developing into a pretty good winner. The temptation to close it
out is universally overwhelming. You're sick about all those losses, and here's
a chance to cash in on a pretty good winner. You don't want it to get away.
Besides, it gives you a nice warm feeling to close out a winning position and
tell yourself (and maybe even your friends) how smart you were (particularly
if you're beginning to doubt yourself because of all those past losers). That
kind of reasoning and emotionalism have no place in futures trading;
therefore, the next time you are about to close out a winning position, ask
yourself why. If the cold, calculating, sound reasons you used to put on the
position are still there, you should strongly consider staying. Of course, you
can use trailing stops to protect your profits, but if you are exiting a winning
position out of fear...don't; out of greed...don't; out of ego... don't; out of
impatience...don't; out of anxiety...don't; out of sound fundamental and/or
technical reasoning...do. 19. You can avoid the emotionalism, the second
guessing, the wondering, the agonizing, if you have a sound trading plan
(including price objectives, entry points, exit points, risk-reward ratios, stops,
information about historical price levels, seasonal influences, government
reports, prices of related markets, chart analysis, etc.) and follow it. Most
traders don't want to bother, they like to 'wing it.' Perhaps they think a plan
might take the fun out of it for them. If you're like that and trade futures for the
fun of it, fine. If you're trying to make money without a plan-forget it. Trading
a sound, smart plan is the answer to cutting your losses short and letting your
profits run. 20. Do not overstay a good market. If you do, you are bound to
overstay a bad one also.

21. Take your lumps, just be sure they are little lumps. Very successful traders
generally have more losing trades than winning trades. They don't have any
hang-ups about admitting they're wrong, and have the ability to close out
losing positions quickly. 22. Trade all positions in futures on a performance
basis. The position must give a profit by the end of the third day after the
position is taken, or else get out. 23. Program your mind to accept many small
losses. Program your mind to 'sit still' for a few large gains. 24. Most people
would rather own something (go long) than owe something (go short).
Markets can (and should) also be traded from the short side. 25. Watch for
divergences in related markets-is one market making a new high and another
not following? 26. Recognize that fear, greed. ignorance, generosity, stupidity,
impatience. self-delusion, etc., can cost you a lot more money than the
market(s) going against you, and that there is no fundamental method to
recognize these factors. 27. Don't blindly follow computer trading. A
computer trading plan is only as good as the program. As the old saying goes,
'Garbage in, garbage out.' 28. Learn the basics of futures trading. It's amazing
how many people simply don't know what they're doing. They're bound to
lose, unless they have a strong broker to guide them and keep them out of
trouble. 29. Standing aside is a position. 30. Client and broker must have
rapport. Chemistry between account executive and client is very important; the
odds of picking the right AE the first time are remote. Pick a broker who will
protect you from yourself...greed, ego, fear, subconscious desire to lose
(actually true with some traders). Ask someone who trades if they know a
good futures broker. If you find one who has room for you, give him your
account. 31. Sometimes, when things aren't going well and you're thinking
about changing brokerage firms, think about just changing AEs instead. Phone
the manager of the local office, let him describe some of the other AEs in the
office, and see if any of them seem right enough to have a first meeting with.
Don't worry about getting your account executive in trouble; the office
certainly would rather have you switch AEs than to lose your business
altogether. 32. Broker/client psychology must be in tune, or else the broker
and client should part company early in the program. Client and broker should
be in touch repeatedly, so when the time comes, both parties are mentally
programmed to take the necessary action without delay. 33. Most people do
not have the time or the experience to trade futures profitably, so choosing a
broker is the most important step to profitable futures trading. 34. When you
go stale, get out of the markets for a while. Trading futures is demanding, and
can be draining-especially when you're losing. Step back; get away from it all
to recharge your batteries. 35. If you're in futures simply for the thrill of
gambling, you'll probably lose because, chances are, the money does not mean
as much to you as the excitement. Just knowing this about yourself may cause
you to be more prudent, which could improve your trading record. Have a
business-like approach to the markets. Anyone who is inclined to speculate in
futures should look at speculation as

a business, and treat it as such. Do not regard it as a pure gamble, as so many

people do. If speculation is a business, anyone in that business should learn
and understand it to the best of his/her ability. 36. When you open an account
with a broker, don't just decide on the amount of money, decide on the length
of time you should trade. This approach helps you conserve your equity, and
helps avoid the Las Vegas approach of 'Well, I'll trade till my stake runs out.'
Experience shows that many who have been at it over a long period of time
end up making money. 37. Don't trade on rumors. If you have, ask yourself
this: 'Over the long run, have I made money or lost money trading on rumors?'
O.K. then, stop it. 38. Beware of all tips and inside information. Wait for the
market's action to tell you if the information you've obtained is accurate, then
take a position with the developing trend. 39. Don't trade unless you're well
financed...so that market action, not financial condition, dictates your entry
and exit from the market. If you don't start with enough money, you may not
be able to hang in there if the market temporarily turns against you. 40. Be
more careful if you're extra smart. Smart people very often put on a position a
little too early. They see the potential for a price movement before it becomes
actual. They become worn out or 'tapped out,' and aren't around when a big
move finally gets underway. They were too busy trading to make money. 41.
Stay out of trouble, your first loss is your smallest loss. 42. Analyze your
losses. Learn from your losses. They're expensive lessons; you paid for them.
Most traders don't learn from their mistakes because they don't like to think
about them. 43. Survive! In futures trading, the ones who stay around long
enough to be there when those 'big moves' come along are often successful.
44. If you're just getting into the markets, be a small trader for at least a year,
then analyze your good trades and your bad ones. You can really learn more
from your bad ones. 45. Carry a notebook with you, and jot down interesting
market information. Write down the market openings, price ranges, your fills,
stop orders, and your own personal observations. Re-read your notes from
time to time; use them to help analyze your performance. 46. 'Rome was not
built in a day,' and no real movement of importance takes place in one day. A
speculator should have enough excess margin in his account to provide staying
power so he can participate in big moves. 47. Take windfall profits (profits
that have no sound reasons for occurring). 48. Periodically redefine the kind of
capital you have in the markets. If your personal financial situation changes
and the risk capital becomes necessary capital, don't wait for 'just one more
day' or 'one more price tick,' get out right away. If you don't, you'll most likely
start trading with your heart instead of your head, and then you'll surely lose.
49. Always use stop orders, always...always...always. 50. Don't use the
markets to feed your need for excitement

Peter Lynch's 25 Golden Rules for Investing

Rule 1: Investing is fun and exciting, but dangerous if you don't do any work.

Rule 2: Your investor's edge is not something you get from Wall Street
experts.

It's something you already have. You can outperform the experts if you use

your edge by investing in companies or industries you already understand.

Rule 3: Over the past 3 decades, the stock market has come to be
dominated

by a herd of professional investors. Contrary to popular belief, this makes it

easier for the amateur investor. You can beat the market by ignoring the
herd.
Rule 4: Behind every stock is a company. Find out what it's doing.

Rule 5: Often, there is no correlation between the success of a company's

operations and the success of its stock over a few months or even a few
years.

In the long term, there is a 100% correlation between the success of the

company and the success of its stock. This disparity is the key to making

money; it pays to be patient, and to own successful companies.

Rule 6: You have to know what you own, and why you own it. "This baby is a

cinch to go up" doesn't count.

Rule 7: Long shots almost always miss the mark.

Rule 8: Owning stocks is like having children — don't get involved with more

than you can handle. The part-time stockpicker probably has time to follow
8-12

companies, and to buy and sell shares as conditions warrant. There don't
have

to be more than 5 companies in the portfolio at any one time.

Rule 9: If you can't find any companies that you think are attractive, put
your

money in the bank until you discover some.

Rule 10: Never invest in a company without understanding its finances. The
 biggest losses in stocks come from companies with poor balance sheets.
Always

look at the balance sheet to see if a company is solvent before you risk your

money on it.

Rule 11: Avoid hot stocks in hot industries. Great companies in cold, non-

growth industries are consistent big winners.

Rule 12: With small companies, you are better off to wait until they turn a

profit before you invest.

Rule 13: If you are thinking of investing in a troubled industry, buy the

companies with staying power. Also, wait for the industry to show signs of

revival. Buggy whips and radio tubes were troubled industries that never came

back.

Rule 14: If you invest $1000 in a stock, all you can lose is $1000, but you

stand to gain $10,000 or even $50,000 over time if you are patient. The

average person can concentrate on a few good companies, while the fund

manager is forced to diversify. By owning too many stocks, you lose this

advantage of concentration. It only takes a handful of big winners to make a

lifetime of investing worthwhile.

Rule 15: In every industry and every region of the country, the observant
amateur can find great growth companies long before the professionals have

discovered them.

Rule 16: A stock market decline is as routine as a January blizzard in Colorado.

If you are prepared, it can't hurt you. A decline is a great opportunity to pick up

the bargains left behind by investors who are fleeing the storm in panic.

Rule 17: Everyone has the brainpower to make money in stocks. Not everyone

has the stomach. If you are susceptible to selling everything in a panic, you

ought to avoid stocks and stock mutual funds altogether.

Rule 18: There is always something to worry about. Avoid weekend thinking

and ignore the latest dire predictions of the newscasters. Sell a stock because

the company's fundamentals deteriorate, not because the sky is falling.

Rule 19: Nobody can predict interest rates, the future direction of the

economy, or the stock market, Dismiss all such forecasts and concentrate on

what's actually happening to the companies in which you have invested.

Rule 20: If you study 10 companies, you will find 1 for which the story is better

than expected. If you study 50, you'll find 5. There are always pleasant

surprises to be found in the stock market — companies whose achievements

are

being overlooked on Wall Street.

Rule 21: If you don't study any companies, you have the same success buying

stocks as you do in a poker game if you bet without looking at your cards.

Rule 22: Time is on your side when you own shares of superior companies. You

can afford to be patient — even if you missed Wal-Mart in the first five years, it

was a great stock to own in the next five years. Time is against you when you

own options.

Rule 23: If you have the stomach for stocks, but neither the time nor the

inclination to do the homework, invest in equity mutual funds. Here, it's a good

idea to diversify. You should own a few different kinds of funds, with managers

who pursue different styles of investing: growth, value small companies, large

companies etc. Investing the six of the same kind of fund is not diversification.

Rule 24: Among the major stock markets of the world, the U.S. market ranks

8th in total return over the past decade. You can take advantage of the faster-

growing economies by investing some portion of your assets in an overseas

fund with a good record.

Rule 25: In the long run, a portfolio of well-chosen stocks and/or equity mutual

funds will always outperform a portfolio of bonds or a money-market account.

In the long run, a portfolio of poorly chosen stocks won't outperform the money

left under the mattress.