"We hold these truths to be self-evident ... "
Boy, now there's a smart piece of writing. You know, the kind of writing every author would like to lay claim to. On the flip side, I guess if I had written that, uh, I'd be dead right now. And
would certainly be no fun!
But that nifty piece of craftsmanship is a nice intro to my piece today, which I suppose could also be called "The Education of Gary." (Or, for music lovers, the "Miseducation of Gary"!)
In any event, we all learn so much over the years. Things that could be considered "truths" -- and if we took more than two seconds out of our run-amuck lives, we would plainly see they are "self-evident." Things that are clearly more often right than wrong. Things about trading. Things about life. These truths work for me, but they may not work for you. Still, I thought you might be interested. ...
- Your style of trading must match your personality and lifestyle, otherwise you'll never be successful. Never. That's one reason why Gary B. Smith could never be a rapid-fire daytrader. It's just not in my blood.
Taking profits on shorts at 5% always seems to work best.
The breast-stroke segment usually determines who will win the individual medley.
A breakout without a volume surge isn't worth taking.
Whenever you start bragging to your friend, spouse, or significant other about your trading prowess, you're probably only a few days away from your own personal top.
When you start "hoping" about your positions, it's usually best to just take your lumps and close them out.
A contrarian opinion usually works only at one point: a major market turn. More often than not, the majority is right.
When a writer, pundit, analyst or commentator knocks your stock, and you feel the need to vehemently disagree, you're either not confident in your own analysis, or you've fallen in love with your position.
Every day gives a technician one more piece of data. If the charts change dramatically, you're allowed to change your mind. In fact, you
should change your mind.
If you can make 30% compounded per year, year after year, you're a superstar trader. Sure, folks have returned many times that figure, but only for short periods of time.
If you made money this year from Jan. 31 to March 24, and then from March 24 to April 14
using the exact same method, you may be onto something.
"Fairways hit" is always more important than driving distance.
The more indicators you use, the less likely your method will survive for more than a few years.
Good defense in trading is much more important than good offense.
If you want to make money in the market on a regular basis, you have to learn how to go short.
The best indication of the market's strength or weakness is not the advance/decline line, or a chart of the indices, or the number of highs and lows. No, the best indication is the number of long and/or short candidates you have.
There is no one perfect method for every kind of market. Everyone takes lumps at one time or another.
Daytrading can be lucrative, but the odds are really stacked against you. And even if your results are lucrative, the sheer physical grind and inability to trade larger and larger lot sizes will limit your longevity and your prosperity.
If you have a solid methodology, but encounter a nasty losing streak, it's probably not you, it's the market.
Your trade exit strategy is far more important than your trade entry strategy. I could be a successful trader making random entries into stocks. I couldn't be a successful trader making random exits.
Gaps are not always filled.
If you don't have healthy respect for the market -- every single day -- you'll eventually go out of business.
Long-term buy and holders always forget to think of their trading equity as inventory, and therefore ignore the concept of inventory turns.
Short-term traders always assume they'll get perfect fills and therefore ignore the damage that slippage can do.
Whenever I'm worried about the market, I probably shouldn't trade.
You will always take a loss the first day of adopting a new trading strategy or methodology.
You will always take a loss the first day you increase your lot size.
No good golfer ever put club head covers on his or her irons.
I've never had a trading breakthrough or innovation sitting in front of a computer screen. No, my best thinking always comes when I sit quietly and reflect upon my trading for a few hours.
It's OK to be wrong when you trade. It's not OK to stay wrong.
Anyone that's selling a stock-touting service usually has an agenda. And that agenda isn't to make sure you become rich.
Good trading is all about odds and percentages. So, whatever you can use to stack those in your favor is valid.
Charts can lead you to wrong conclusions, but they never lie. However, people can lie. Something for you fundamentalists to remember.
People are much better at looking into the future than charts are. Something for you technicians to remember.
In general, my worst trading days have come when I've violated my methodology, not when the market's been bad.
If you're the kind of person who has to be right all the time, you're unlikely to become a good trader.
Just about everyone would benefit from adding a daily nap to his or her schedule.
This current market is one tough market to trade!
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide Investment advice or recommendations, he welcomes your feedback at