Dennis Gartman's 22 Rules of Trading

Here we go with Master Trader Dennis Gartman's 22 Rules of Trading, many of which you can apply to all sorts of life situations, as well as the markets.
                             Every day, Dennis Gartman gets up at about 2:30 AM and writes an information packed 4 page newsletter on the world markets, oil, currencies, commodities political happenings and much more. He is read by the major trading houses and traders all over the world, as they stumble bleary eyed into work, grabbing the Gartman Report to find out what happened as they slept and to get insight as to what the issues of the day will be, and suggestions on how to trade. Dennis puts his trades on public display and talks you through his logic. It is a most remarkable work, and I find it a key part of my struggle in trying to keep up with what is going on. I am always amazed when on the occasions I find myself in the office at an early hour to find Dennis' letter hit my inbox about 5:00 AM. His travel schedule makes mine look tame, and from wherever in the world he finds himself, he writes and sends his letter. And he still maintains a single digit
handicap on the golf course.

On the Friday after Thanksgiving, he publishes his "Rules of Trading," adding to them as wisdom increases.

Here is today's list:

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.


16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

10 Ways to Make the World a Better Place

An important part of our growth and motivation as people lies in contributing to the greater good, being part of something greater than ourselves. While “making the world a better place” often calls to mind images of great leaders at the head of mighty social movements, white-coated researchers developing new medicines or energy sources, or geniuses dreaming up theories that explain the world around us, there is plenty of room for less lofty acts that create small measures of happiness in the lives of those around us. Little gestures can create or strengthen our sense of community and of shared humanity, lightening our burdens for just a moment and giving us something to smile about. And that’s no small matter.

Here are ten little gestures, all of them easily within our grasp, that can spread goodwill in our own communities, as well as increase our own sense of mindfulness about the people around us and our relationship to them.

1. Tip generously: As often as you can afford, leave a tip of 25%, 50%, 100%, or even more. (Obviously this applies mostly in countries where 15% tips are the norm.) Unless the service was simply awful – and even then, it might pay to consider what your server goes through – leaving as large a tip as you can afford not only puts a little extra extra money in your servers’ pocket, it tells them that they’re appreciated, a message that often slips our minds in our demanding, service-now society.
2. Compliment someone: Tell someone how much you like the job they’re doing, their outfit or new haircut, their singing voice – whatever. Be honest and sincere. I like to practice “drive-by compliments”, sending an out-of-the-blue email to someone whose website, post, or comment on a post I really liked. Don’t expect anything in return, just let someone know that something they’re doing works and move on.
3. Be totally open with someone: Let someone know exactly how you feel about something on your mind (though not something negative about them – there’s a different “protocol” for that sort of thing). We often keep too much to ourselves; letting someone into your confidence can be a great way to show your trust and appreciation of them. Of course, you have to judge what is and isn't appropriate – it is possible to move past openness to dragging others into your problems, and that’s not making the world a better place.
4. Give someone a book you've read: Making a gift of something you've read and enjoyed is more than just a nice gesture, it’s a way of showing someone that a) you think of them, b) you understand them, and c) you want to share something with them. The moment doesn't end when they take the book – once they've read it, you can talk about your reactions together. Don’t do this with people around you who don’t read, though – you’ll build up an obligation that will be painful for them to discharge.
5. Make something for someone: Bake an extra batch of cookies, draw a picture, decorate an extra Christmas ornament, and give it to someone for no good reason. Like giving someone a book, it tells them that you were thinking about them and wanted to do something nice for them, and that it’s something you made adds a nice touch. Give without expectations – whether they return the favor or not, whether they like it or not, whether they’re nice to you or not, these are all irrelevant.
6. Send a letter, email, tweet, or text message out of the blue: Email someone you haven’t spoken with for a while, or text someone you see every day just to be nice. Maybe they’ll respond, maybe not – it’s beside the point. They just need to know that they’re important to you.
7. Commend an employee to their manager: It’s one thing to tip or compliment someone for their service, it’s another to contact their manager and tell them what a great job they've done. If you don’t have time at the time of service, note the employees name and call, email, or write a letter later.
8. Teach someone how to do something: Share your skill or talent with someone by showing them how to do something. Not so they won’t bother you with it, but so they can move a little bit towards improved mastery of the world around them. Have patience and respect for the person you’re helping – you’re giving them a gift, not compensating for some lack in their character.
9. Let someone shine: Put a spotlight on someone else’s talents by letting them take over a presentation, deferring to their wisdom, asking them advice, or otherwise flex their “talent muscles”. Especially if they are junior to you, giving them a chance to strut their stuff shows that you trust them and appreciate them, as well as allowing them to get the attention they deserve (and which might often be obscured by your own shadow).
10. Connect like minds: Introduce two friends or colleagues who you feel have something to gain from each other. You’ll be letting them know you value them – and maybe creating a partnership that will make everyone better off.