Dennis Gartman's Trading Rules
GARTMAN'S SIMPLE
RULES OF TRADING
1. Never, Ever, Ever, Under Any Circumstance, Add To A Losing
Position... Ever! Adding to losing positions will lead to ruin. You can count
on it. Ask the Nobel Laureates in Economics at Long Term Capital!
2. Trade Like A Mercenary Soldier: As Jesse Livermore said, it is not
ours to be bullish or bearish, but to be right.
3. Mental Capital Trumps Real Capital: Capital comes in two types;
mental and real. Holding losing positions costs measurable real capital, but
immeasurable mental capital.
4. We Are Not A Business Of Buying Low And Selling High; We are,
however, a business of buying high and selling higher. Strength begets
strength, and weakness further weakness almost always.
5. In Bull Markets One Can Only Be Long or Neutral, and in bear
markets, one can only be short or neutral. This may seem self-evident, but
very few understand it, and fewer still embrace it.
6. "Markets Can Remain Illogical Far Longer Than You Or I Can
Remain Solvent." J.M. Keynes. Illogic does often reign, and it is our duty
to learn to handle it as best we might.
7. Buy Markets That Show The Greatest Strength; Sell Markets
That Show The Greatest Weakness: Metaphorically, when bearish we
need to throw rocks into the wettest paper sacks, for they break most
easily. When bullish we need to sail the strongest winds, for they carry
the farthest.
8. Think Like A Fundamentalist; Trade Like A Chartist: The
fundamentals may drive a market and need to be understood, but if the
chart is not bullish, why be bullish? Trade when the technicals and
fundamentals, as you understand them, run in concert, one with the other.
9. Trading Runs in Cycles; Some Good; Most Bad: In "good times,"
even errors turn to profits; in "bad times," the most well researched trade
will go awry. This is the nature of trading; accept it and move on.
10. Keep Your Technical Systems Simple: Complicated systems breed
confusion; simplicity breeds elegance. The great traders we've known
have the simplest methods of trading. There is a correlation here!
11: In Trading/Investing, An Understanding Of Mass Psychology is
Often More Important Than An Understanding of Economics: Simply
put, "When they are cryin', you should be buyin'! and when they are yellin',
you should be sellin'!" This is psychology at work and its most elegant.
12. It Takes Buying And Lots Of It To Put A Market Up; It Takes
Only A Lack Of Buying To Put Any Market Down: Gravity is an amazing
force of nature; it is even more amazing in the world of investing.
13. There Is Never Just One Cockroach: The lesson of most markets
is that bad news follows bad... usually hard upon and always with
detrimental effect upon price, until such time as panic prevails and the
weakest hands finally exit their positions.
14. Be Patient With Winning Trades; Be Enormously Impatient with
Losing Trades: The older we get, the more small losses we take each
year... and our profits grow accordingly.
15. Fear Turns To Greed At Break Even... And Vice Versa: Know
this; understand this; accept this and deal with it.
16. Do More Of That Which Is Working and Less Of That Which Is
Not: This works in life as well as trading. Do the things that have been
proven of merit. Add to winning trades; Cut or eliminate losing ones. If
there is a "secret" to trading (and of life), this is it.
17. All Rules Are Meant To Be Broken.... but only very, very
infrequently. Genius comes in knowing how truly infrequently one can do so
and still prosper, but when one must, one must!
AI
