Some of the salty veterans of Upsidetrader asked me yesterday where my Joe’s Rules tab went. I used to have it on the blog. Anyway, here are some of some things to keep in mind, not only when trading , but also to help understand the Upsidetrader blog. Much of it is common sense stuff. Hope some of it helps.
Joe’s Rules
1- Try your best to stay away from the market for the first 30 minutes, I call that period the “wild wild west”, you will usually get a better price if you wait for the dust to settle, that goes for longs and shorts. My experience tells me that you will get a better entry if you are patient, strong stocks usually pull back to a more “buyable” level, same with short ideas. If we miss an idea that’s OK there are 3000 stocks and I will find another one.
2- I will usually give advice on exiting a recommendation via email alert and on the chat room, so none of you will ever miss anything. I won’t always give an exit on the evening P&L because I don’t want to limit your upside, you should know what kind of profit satisfies you, but I will always tell you when I’m selling. I usually recommend the sale of 1/4 to 1/3 of your position when a stock is moving higher. Example, if I recommend to buy a stock at $40 and it breaks out and trades to $44-45 take 1/4 to 1/3 position off the table. Some stocks will move higher after the partial sale, that’s OK you will still have a 3/4 or 2/3 position remaining. Always raise your stops as price goes higher, I will telegraph that to you as well.
3- After I take a partial gain I will usually raise our stops so we are protected.
4- Rarely will I ever average down in a stock and rarely will I chase a stock unless the technicals tell me to.
5- We will have periods where we have a good run and then things can get a little cooler, when the market is in a strong uptrend we will be mostly long, when the market is in a downtrend we will have more cash and maybe some short exposure.
6- Be diversified, meaning have exposure to as many names on my list as you can. Maybe 5-10% per idea is a good start if you are a beginner. You don’t want to be overweight in one idea, because that could be the one that fails.
7- I will trade opportunistically and I will change my mind based on events. Good traders change their minds.
8- I shun conventional wisdom and NEVER listen to the pundits, I think the financial media is dangerous to a trader’s health.
9-I never watch the financial media during trading hours, or ever for that matter. Turn it off, you’ll be surprised and pleased with the change.
10-Economists never traded and they are usually wrong.
11- Don’t EVER buy a “tip”, it’s like borrowing someone’s Chapstick, you don’t know where it started.
12- JP Morgan said” I will never buy at the bottom or short at the top, but I will make my money in that 60% area” I feel the same way.
13-The market is the one place where following trends and not making them is cool.
14- STOPS- —as you will see on the P&L, I always have stops for each stock. I want you to honor those stops to the best of your ability, HOWEVER, stops are not an exact science, merely a level to protect yourself, so I usually give the stop a little ” wiggle room” depending on the action of the tape.
15- Don’t ever regret taking a loss, its part of the process.
GOOD TRADING!!