Very Useful Trading Rules developed by Wall Street Master: The 1-2-3 Rule and The 2B Rule

The 1-2-3 Rule

For a trend to change, three events must occur.

1. The trend line must be broken - prices must cross the trend line drawn on the chart.
2. Prices stop making higher highs in an uptrend, or lower lows in a downtrend.
3. Prices must go above a previous short term minor rally high in a downtrend, or below a previous short-term minor sell-off in an uptrend.

The 2B Rule

In an uptrend, if prices penetrate the previous high, fail to carry through, and then immediately drop below the previous high, then the trend is apt to reverse. The converse is true for downtrends.

Stock Market Wizards

Steve Cohen:

40% of a stock's price movement was due to the market, 30% to the sector, and only 30% to the stock itself, which is something that I believe is true. I don't know if the percentages are correct, but conceptually the idea makes sense. 

I compile statistics on my traders. My best trader makes money only 63% of the time. Most traders make money only in the 50 to 55% range. That means you're going to be wrong a lot. If that's the case, you better make sure your losses are as small as they can be, and that your winners are bigger.

All traders make mistakes; the great traders, however, limit the damage.

There is no single right way to trade the markets.

It is important to make sure you have a good reason for putting on a trade.

No single style or approach can provide superior results over long periods of time. To continue to outperform, the great traders continue to learn and adapt.

Cup-With-Handle Pattern

283% increase in 27 weeks

Cup-Without-Handle Pattern

267% increase in 38 weeks

Double Bottom Pattern

82% increase in 23 weeks

Flat Base Pattern

328% increase in 139 weeks

Base-on-Base Pattern

1564% increase in 169 weeks

How to Make Money in Stocks I

Bump and Run Reversal

Projecting a Target, Measuring the Move

The Philosophy of Investing

1. Never buy or sell a stock without checking the chart.
2. Never buy a stock when good news come out, especially if the chart shows a significant             advance prior to the news release.
3. Never buy a stock because it appears cheap after getting smashed.
4. Never buy a stock in a downtrend on the chart.
5. Never hold a stock that is in a downtrend no matter how low the price/earnings ratio.
6. Always be consistent.

Accumulation/Distribution Line

Advance/Decline Line