You are certainly correct. However, when I first started trading, 4 years ago, I put stop losses in most of the time until 2 or 3 times a stock would be trading at say 7.50 and my SL would be at 7.20, and the MMs would rapidly (within a minut or two) move the stock down until they hit my SL and then shoot it back up to 8 or 8.50 within SECONDS and it would never come back down to that SL price, much less, the 7.50 range. They were getting ready to run the stock and scoped out anyone with a sell order in so they could get available cheap buys and manipulated it to where they could basically steal my shares. I felt very ripped off, and after the third time, I decided I never wanted to let them see my stop price again. Now, a lot of good that has done me, lol.
My problem is I have not yet figured how to develop your rule #1 because every time I think I might have something, I get caught up in MM manipulation and I get quite frustrated with that.