If you are short term derivative trader using Market Profile then here are some of the very important cardinal rules which could help traders to take better trading decisions
1)Never fight against the short-term/Dominant traders(Smart Traders) unless things are getting emotional (Poor Structure, Spikes, Emotional News based Seling, Stealth Auction, etc.,)
2)Never hold the positions in the same direction for too long if the trading inventory is getting long to too long or short to too short.
3)Never Average your trade on the losing side.
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4) Never fight against the high confidence buying/ high confidence selling unless things are getting too emotional or Never fight against the trend unless exponential trading odds persist.
5)Use Hedged Futures/In the Money Options for directional high conviction bets.
6) Trade At the Money or Out of the Money options when things are getting super freaky/super emotional and where the majority of the crowd is expected to take the same side and where the crowd is likely to go wrong.
7)Avoid ATM/OTM options in regular low volatile markets for positional trading
8)Use Credit/Debit Spreads during low volatile markets (e.g during falling vix and falling ATR situations)
9)Never start the week without Top Down Analysis. Start the week/month with both direction and volatility analysis. Frequently check the ongoing volatility.
10)Stay Away from reacting to ADR/GDRs, SGX Nifty, Huge Premium/Discounts, World Markets, Crude Oil, or Fundamental information. Markets may react to these pieces of information in a very very short term momentarily however markets have minds on its own. And has short-term memory loss to such information.
41)Give More Importance to Acceptance of Short term reference levels as it reflects the change in trend.
12)Go neutral on Weekends and Go neutral if you really don’t have any idea what is happening
13)Try to do chunking when visual references are on both sides and plan to execute trades one step at a time, Stay away from trades in case still, a strong dilemma persists or until one side of the references
gets cleared.
