The rules and teachings below are from the mouth of the guy who I actually got my start from in trading, back in 2003. He has made ten’s of millions of dollars as a day trader, and goes by the alias Modern Rock, and is one of the most successful penny stocks traders in the world. I have had a lot of success in my trading career and my life because of this man. If you want to know whether you have what it takes to be a trader, or whether you are already knowledgeable about trading, you have to know all this stuff inside and out. This is just the beginning but it will literally give you a foundation. Then the next step is learning how to read charts and technical analysis and that is where this will literally cut your learning curve by 95%!
1. Never fight the trend and always cut your losses quickly because you can always re-buy.
2. Let your winners run but always remember to sell on the way up in partial orders to lock gains which affords you to hold the rest longer!
3. Never averages down. Why add more to a loser? Instead average on the way up.
4. Chart support & resistance are the two most important chart indicators u will ever need to know.
5. Don’t buy stocks that are on sale! Those stocks are on sale for a reason! Avoid the clearance bins. Stick to hot plays.
6. You should shoot for singles but in the process you will hit doubles, triples & even homeruns/grand slams! But it all starts from a single base hit.
7. Choosing the right stock makes trading so much easier. I never trade stocks that are red on the day unless I’m shorting (never fight trend).
8. When trading long I choose green stocks that have a bullish trending chart. When the stock changes trend or turns red on the day get out fast!
9. I’m a small fish in a sea of sharks. So I never fight where the whales want to take the stock. Ride the trend wave and never fight the trend.
10. It is acceptable and necessary to take losses. A small loss or break even is good! Never turn a small loss into a huge one!
11. It’s very hard to make $1k but much easier to make $100. So try to pick trades wisely to gain $100 at a time. Patience is key.
12. I like to make many trades for smaller gains (bat for singles) vs. trying to swing for fences & most likely striking out.
13. If I gain just $100 per HOUR trading (6 hour trading days) that means I will make $170k a year! $50/hr is $85k/hr! In trading $100 per second is more common!
14. By holding a core position I won’t miss big moves. By scalping around a core position I will gain from the smaller movements as well.
15. I am agnostic thus I never use the praying method. Traders who pray must have broken a cardinal rule and so will be punished!
16. I hated every minute of training, but I said to myself “Don’t quit. Suffer now and live the rest of your life as a champion.”
17. 3 Day Rule: On 3rd straight days of green, stocks tend to drop. To be safe I reduce my position in partials each day beforehand.
18. So day 1 should be largest position size then I reduce some on day 2 which cushions me to hold rest to day 3. Not all make it to day 3 so beware.
19. By selling part of my position on way up I lock in PROFITS which will cushion me in case the next day is a red day. When red for the day I am out.
20. It is always better to cry about missed opportunities than actual real money losses. If you’re always crying about lost potential you’re WINNING!
21. Nothing is worse than when you’re green in a stock and you let that turn into a loser. To avoid that you sell on way up in partial orders! Bank that money!
22. Strong stocks tend to get stronger. Weak stocks will get weaker. Avoid clearance bin shopping for stocks. They’re cheap for a reason!
23. The 3 day rule is what turned me into a millionaire! Study the charts of plays and you will see it. This is my million dollar secret.
24. I became successful when treating trading like a JOB. With a job you don’t want to work for free. You need to pay yourself daily!
25. I didn’t become successful overnight. I spent years as a guppy building my bankroll. up slow & steady while learning. No shortcuts.
26. If the trend is bullish and it dips you can buy or add to get average UP. This is not fighting the trend. Trade with the overall trend.
27. Tip if you buy 10k of a $.20 stock and sell it at $.21, you earn $100 off just a $2k position. Do it another time and you are up a day’s pay.
28. When scalping I like to buy on the bid and sell on the offer. Patience is key you have many hours to pick that trade.
29. If you are averaging up that means you are making money. Never average down! If stock goes under the price of any adds sell the add!
30. AVOID trading midday unless you’re more advanced or you have a significant catalyst. It’s too risky and volume is bad. Just trade the first hour and last hour of the trading day.
31. A good simple technique is buy STRONG stocks 1/2 hour b4 close then sell 1/2 hour after the open. Stick to green rule & remember 3 day rule.
32. When it goes red = red on the day. Red on the day is a huge danger sign. You should sell a little bit before it gets there. Once it red it’s dead.
33. Green to red (green/red) is a huge trading indicator. When it hits red shorts attack and it will usually drop down hard!
34. Red to green (red/green) is also a huge indicator as the stock was once weak (red) but now crossed into strong (green) territory.
35. The Green to Red is much more reliable indicator. It usually tanks HARD once the stock turns red on the day. This is a MAIN signal to watch!
36. Use the green to red indicator when shorting. The great setups are the promos that been going up daily and is on day 3 or more!
37. There are tons of different ways to trade to make money you have to try some be it paper trading or real and see for yourself. Keep a trading journey.
38. Trading is all about probability. I call it pattern recognition. I recognize certain patterns that been profitable and those are ones I trade.
39. Only way is to keep doing it until it becomes second nature. Do it over & over until it becomes habit and instinct. A trading is a lot like an elite sports athlete.
40. What is the BUY SIGNAL for the 3 day rule. It is break up of trend and volume.
41. Search for a stock breaking out of a flat or downtrend. There is often a day 0 that insiders accumulate in silence before they break it out.
42. Volume PRECEDES chart moves. Meaning spot the increase in the volume you will spot the upcoming movement.
43. How to avoid manipulation by market makers and algos? By trading only plays with high vol. That’s why trading at open and close is best.
44. When times of famine come, you go back to the BASICS. Take VERY small risks. Just scalp with tight stops to make a living & feed yourself.
45. Right now I’m literally trying to make $100 scalps. No hubris here , no ego. It’s a job and I’m going to grind today and all days like this.
46. There’s no secret to making $ trading. You have to work hard and put in your time. It’s all about experience. Whoever says otherwise is trying to SCAM you!
47. When the market closes doesn’t mean your learning ends. Pull up charts for the most active stocks and see how it moves through the day.
48. If you’re nervous don’t worry is also nervous. BUT he relies on pure instinct and STOPS over thinking but just REACTS instead.
49. That’s where practice comes in. You practice, practice, practice so when the time comes you can just react, Trading is like a reflex!
50. The BEST gappers are usually weekend gappers. Because the pumpers are out in force over the weekend hyping up the stock!
51. Once the frenzy slows I can see if it held support for next leg or just a gap and crap which I am ready to just sell all my position.
52. What locking in profits do is helps u hold the rest a bit longer since you REALIZED some of the gain. So now if the stock goes down you are cushioned.
53. How to handle a big gap up when you’re not in the stock: DO NOTHING! DO NOT CHASE right @ the open. WAIT for stock to settle.
54. Stock gaps up & I want to buy it I can: 1) wait for it to settle, dip to see where support is or 2) buy a little & get ready to sell QUICK.
55. I say don’t chase cause many don’t have discipline to SELL QUICK once you’re down. But it’s okay to test waters & nibble to see how stock reacts.
56. When chasing I actually risk $.01. Cause if I’m not in the money immediately why hold on since I’m stupid to chase in 1st place!
57. If the position I’m already in runs higher, I have luxury of adding averaging up since I’m cushioned from a good core avg. But Never forget to sell on the way up!
58. I hardly open new positions right at open. Be patient, wait to see how the stock behaves and settles. If u miss a play it’s okay, there will be another!
59. As much as I like to be a gunslinger, my style is very defensive. I like to attack when odds are in his favor, always sticking to RULES.
60. He will risk only a portion up to maybe half of the gains. NEVER turn a win into a loss because of greed and ego. Book that profit no matter what!
61. Why book the gain always? Because u can always REBUY if u sold too soon! Nothing wrong w / rebuying stronger stocks higher! I do it all the time.
62. And that is the secret to trading: buying strong stocks on the bullish up trend. Don’t mess with it when trend changes. Study your charts!
63. Trading is all about pattern recognition. It’s all probability of something happening based on a specific event.
64. Basically it’s I saw this chart setup before & last time it did this so I will trade it like this. If wrong cut losses quick. Nothing is 100%.
65. Avoid the bottom picking game of a slow stock walk down. These are NOT simple bounce play. It’s very hard. Instead wait for confirm of bounce.
66. Techniques used for trading around a core etc works well during moves UP with a bullish trend. Slow walk downs bounces are much harder as bottoms are NOT set.
67. I am a big short when the time is right. What I don’t do is pretend I do it to help others. I do it for personal GAIN $ & don’t cry to SEC.
68. The only one who benefits from a super low price penny stock tanking are the market makers who can short and also bounce out daytraders like me.
69. KISS – KeepItSimpleStupid is how I am profitable daily. My BIGGEST losses are always when I think I know better or over think the obvious.
70. Shorts & sells show up on T&S same exact way. You will never know one from the other nor should you even need to care! Stick to the RULEZ!
71. Learn to be INVISIBLE and you will make more money. Learn to scale in and out so as not to be flagged by market makers who WILL front run big orders.
72. My biggest pet peeve is ignorance stemming from LAZINESS. Before asking a question, you should always try to find the answer yourself FIRST!
73. I don’t need to be the hero w/the absolute lowest buy or top sell, I am happy lowering my risk by playing only the MEAT (middle) of the move.
74. I always say “You only need to get rich ONCE”. So I never ever risk 100% on ANYTHING. When trading I always assume 100% loss just in case!
75. People have different trading strategies. I stopped being arrogant to think my way is best. Some invest, swing, or scalp. Do what works FOR YOU!
76. Unfortunately it may take a HUGE loss or 2 or 10 b4 u realize what you’ve been doing is not working out. There’s No perfect system except HFT.
77. You don’t need to be an “expert” to be successful at trading. Learn the rules so you don’t have to repeat mistakes of an expert.
78. 95/90/90 rule: 95% of ALL traders lose 95% of their money 95% of the time! But u can gain an advantage if u keep discipline and follow a system.
79. Problem is during the crash when is the bottom? Many went BROKE guessing the bottom. You only need to get rich ONCE So don’t take unnecessary risks.
80. BUT what I DO KNOW is when to sell: I sell before others do, leaving money on the table. I rather cry about lost potential versus LOST MONEY.
81. Trading is so simple yet INSANE: if you are making $ keep doing what you are doing. But if you’re losing money, doing the same thing over will do what?
82. It’s MUCH easier to play stocks on the way UP (bullish trend) than to try pick bottom & play bounces. If wrong you’re a dead cat b4 bounce comes.
83. EASIEST way to play a bounce is WAIT for stock to close GREEN on the day. Then you use the 3 day rules to trade out of the confirmed bounce.
84. When does 3 day rule start? Starts when closing price of a stock flips from red2green or from green2red. So 1st day of red or 1st day of green.
85. Summer trading is more temperamental in that you have to be QUICKER since volume is much less & not being disciplined gets you beat up!
86. There’s concept of Day 0 never mentioned before. Day 0 is very special case harder to detect. Day 0 can be bounce day or silent accumulation.
87. You have to adjust how you trade and be more patient. Summer is like fishing but the lake is full of gators ready to eat you alive if u fall.
88. This rule supersedes ALL in any situation: ALWAYS CUT LOSSES! DO NOT average down a loser! ALWAYS cut your losses. Live to fight another day!
89. And always remember it is BETTER to MISS a play or to sell EARLY, missing out on potential gains than it is to CHASE and LOSE real money!
90. Learn resistance & support. Good place to buy are at near support and to sell before resistance. If support falls SELL if resistance breaks BUY
91. SECRET: They say buy low sell high. That’s WRONG & BS! Fish says “buy high & sell HIGHER!” Chasing what you think to be the low is how u get STUCK.
92. When I started trading I listened to BS trading advice of CNBC. It’s WRONG! DO NOT average down! That’s how u go BROKE! Cut losses instead!
93. Amazing how successful trading is counter intuitive: we want to buy things on sale which is WRONG for trading. Stocks are on sale for a reason!
94. Always remember the best part of the trade is the MEAT! Sure we may buy higher & sell before the top, BUT we won’t stress & guess. EAT the MEAT!
95. Remember you can sell in partials and lock in gains in pieces on the way up. And you can always re-buy it. Aka trading around a core.
96. How to trade pending events? “Buy on rumor, sell on news” is the best way to trade. Buy then sell on the ramp (for anticipated good news).
97. Holding thru earnings is risky for a day trader (non long term investor) as it’s gambling. Best to wait for news to come out & trade the volatility.
98. Trading is like fishing. Not all catches will be great. You never know what is biting on the other end until you pull up the catch.
99. Problem many have is NOT FOLDING (cutting losses). Then they hold pray for a 1 outter miracle on the river. Then end up folding at the bottom.
100. Buy at support, sell at resistance.
101. Many people try to differentiate a “type” of play. They think they’re smarter than others. BS treat them all the same: STICK to the rules!
102. Problem with trying to label a “type” of trade is your mind is already biased and set. What if you’re wrong & most likely you will be wrong!
103. How many people go broke get hooked and break all rules because the last play was a huge success. NOTE: That’s how crack drug dealers operate too!
104. Trading can be super complex if u allow it to be. I try to KISS: Keep It Simple Stupid. Lock in gains. Control greed & ego to major causes of losses.
105. Greed kills a ton of people cause they get pissed cause stock keeps going after they sell. So on the next play they hold and stock tanks.
106. Risk management is a HUGE aspect of trading. Notice sizes I hold overnight. I’m riding the house money and NEVER go all in. You only need to get rich once!
107. Guys, trading is not about being “right”, it’s about making MONEY. I’m wrong on trades all day long but I cut losses QUICK & don’t fight trend.
108. So many over analyze trades. Learn the KISS Keep It Simple principles. I use only BASIC charting when I trade & my eyeballs.
109. Getting comfy with trading does not come overnight. It requires practice and realizing all rules work TOGETHER, not just singular by itself.
110. Trading is all about pattern recognition, being able to recognize instantly the current situation and how to react & trade on it.
111. Rules of the OTC Fight Club: 1) you don’t invest in OTC 2) you don’t invest in OTC 3) fight is over when investor goes limp and is broke.
112. $400/day is $100k/year? Be patient and pick a few good trades cause it’s easy to make $100/trade, MUCH harder to make $1k/trade!
113. When EVERYONE expects the SAME, singular result on a stock, chances are that stock will do the complete opposite!
114. “Give a man a stock tip, and you feed him for a day; show him how to trade, and you feed him for a lifetime.” – Modern_Rock
115. Money management, discipline, having no ego being able to sell quickly for a loss: keys for LONGEVITY. Slow & steady WINS the race!
116. So much of trading success comes from confidence/mental strength/discipline. When u doubt & 2nd guess yourself is when u lose.
117. NEVER EVER SHORT DAY 1 big movers/short squeezes (like $ACHN). Miss it or follow 3 day rule. Day 3 nears start to sniff a short is ok.
118. The power of the Fish 3 day rule applies to long side as well as shorting. You can trade both sides: long day 1, reduce days 2-3, then short.
119. I reiterate this 100x it never gets old: avoid swinging for the fence & striking out. Bat for singles & that’ll turn to doubles triples & homeruns!
120. I’ve always told people every loss means that you have to MAKE UP that loss before you have a gain! That’s why keep your losses to a MINIMUM!
121. In trading, a major strikeout can wipe away multiple home runs! Don’t let one strikeout ruin all your hard work!
122. I barely traded this summer means I’m not making $$ BUT it also means I’m not losing either! Remember NEVER FORCE trades $0 better than losing
123. Trading is all about pattern recognition & how to react to it w/high probability of success. So WAIT for your preferred setups!
124. Swings are good, but I have rules that supersede all: 1) NEVER fight trend 2) cut losses quick 3) always take gains along the way/partials.
125. Newbies: I cannot stress enough the importance of charting. It’s more important than L2 when starting out. So LEARN the basics!
126. Trying to cherry pick a bottom on slow walk down weak stocks are how most lose their ass. I trade only parabolic TANKS not SLOW WALK DOWNS.
127. When trading big boards, have SPY/ DJI / Nasdaq charts up. The bounces are often in unison. OTCBB is like the honey badger: doesn’t give a shit.
128. Intraday I like to scalp channels. I find out where the resistance is and support are. and that’s where you buy and sell between.
129. I cannot stress enough the importance of TIMING when trading. You may be BROKE by the time your guru calls are correct. Timing is EVERYTHING!
130. One thing I learned is price action and charts do not lie as much as CEOs or your ego/pride do.
131. Are you losing because: -You chase and buy tops -You hold too long and don’t sell -Don’t cut losses? -Buy illiquid stocks? -You average down & lose?
132. You need to go back to your trades and analyze the root of why you lose so you can avoid them in the future. And it takes time & experience.
133. Another good tip is to go back to your WINNING trades and see what made them successful! Then repeat it! Avoid the pitfalls & stick to rules.
134. Trading is like a sport & the classroom can only take u so far. You need to practice and practice until it becomes a natural reflex.
135. Reason you practice until it becomes a reflex is in battle you don’t have time to think. Trading is about REACTING based on scenarios.
136. Like poker & chess: the more scenarios/situations you’ve seen in the past, the more likely of success. Key is PATTERN RECOGNITION!
137. So when a scenario/chart pattern comes that u don’t recognize, avoid it. Wait for a pattern to develop where u been successful in the past!
138. How I deal with big losses or a losing streak: We all have losses, even me yes lol. And they come in STREAKS cause it’s MENTAL
139. It takes one trade at a time, one day at a time. That’s how you become successful in the first place!
140. When you can’t hit singles anymore like you did in the past, it means something is wrong with your mental state. Also strategy changes over time.
141. In sports, there are sports psychiatrists to help with your mental game. Trading is a huge mental game as well. Don’t trade when angry, hungry, depressed, sick, etc.
142. So that’s how I started my strategy of just making smaller obtainable goals and repeating them over and over. $50 profit a trade adds up!!
143. One often overlooked rule: NEVER turn a PROFIT into a LOSS! How to prevent it: 1. Sell some on the way up 2. See first rule.
144. I’m a scalper, so I like patterns and the pattern I use a lot during the quieter times are channel trades which occur between resistance & support.
145. I make money in the morning then trade w/house money the rest of the day but always making sure I stop before I lose all my hard work money.
146. Money Management is key to both trading as well as your life finances. It’s not how much you make, but how much you keep!
147. I like to trade the MEAT of a stock move and leave the bones for others. Meat tastes good. Going for tops/bottoms gets u BONED!
148. Trading Rules are like bones & sometimes will get broken. It’ll definitely hurt, but the bone will get stronger with each break.
149. Weak stocks that are on sale are on sale for a reason. AVOID trying to chase and cherry pick bottoms else YOU will get spanked!
150. Trading is all about TIMING! I need to remind myself have PATIENCE & wait for the setup to come to me. DON’T FORCE the setup!
And there you have it. This information is pure gold from the mouth of a multi-millionaire trader.
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