AI Summary
Dr. David Paul, an engineer and full-time trader since 1988, shares his three rules for trading: the good trade is a hard trade, fade the short-term trend against the longer-term trend, and place entries where the masses put their stops. He explains how institutional behavior drives market moves and offers practical advice for retail traders.
Chapters
Dr. David Paul is an engineer who started trading in 1982, went full-time in 1988, and now trades shares, futures, and Forex.
Rule 1: The good trade is a hard trade. Rule 2: Fade the short-term trend against the longer-term trend. Rule 3: Place entries where the masses put their stops.
Before a market rises, it often dips to reach resting orders. Professionals bid the market down to generate liquidity, and panicked traders exit at lows.
Most traders place stops just below recent lows. Market makers often drive prices to these obvious levels to trigger stops and generate liquidity.
Instead of placing a stop at the obvious level, place an entry order there. This flips the logic and can improve trade timing.
Mentioned in this Video
Tutorial Checklist
💡 Key Takeaways
Three Trading Rules
Provides a simple, memorable framework for trading that can be applied by any trader.
01:08Market Moves to Orders
Explains the institutional behavior behind market dips, offering a deeper understanding of market mechanics.
01:23Enter at Obvious Stops
Offers a contrarian entry strategy that can improve trade timing and reduce losses.
02:36Full Transcript
[00:00] Dr. David Paul is my guest, and Dr. Paul, I understand that you teach people how to trade. Walk me through that. Dr. Yes. Well, I'm an engineer to start with, and I started to trade way back in 1982.
[00:16] Way back. Dr. Yeah. And I traded on my own until 88. I cut the corporate umbilical cord in 1988, and I've been trading on my own ever since. What vehicles do you trade?
[00:28] I trade shares over a view of three or four weeks, a swing trade. And I started to trade futures intraday as soon as it became available to the intraday trader.
[00:42] That's some 25, 30 years ago. And over the last 10 years, I've been trading Forex quite aggressively as that became available to the smaller trader, as the internet, in fact, became commonplace.
[00:55] How do you look at trades and decide what to do? What's a good setup for you? I'm primarily a trend follower, but I have three rules. The first rule is the good trade is a hard trade.
[01:08] The second rule is that I want to fade the short-term trend against the longer-term trend. Why? Invariably, before the market goes up, especially in the morning, before the market goes up, it goes down first.
[01:23] And it goes down to the orders. The professionals would rather die than chase the market So they will bid it and they will bid it fairly low And anybody that panics has got to get out of the bid So invariably before the market goes up it goes down first Many people believe
[01:41] that there's somebody out to get them. But in fact, that's rubbish. It's just professionals doing their job. And if you're Goldman Sachs and you bid the market and you control a considerable amount of liquidity in the market, the market will go to the orders. And your third rule?
[01:57] The third rule is that I want to put my entries where the masses put their stops. Most people will put their stops at very predictable places. If you're an
[02:11] institutional trader, your job is to generate the liquidity to get into the position. You just can't press the button like us. So invariably the market makers
[02:23] will not know where the stops are or they couldn't be bothered to find out. But they know that most people will put their stop a tick or two below the last low. And invariably, the market will go to where the obvious stops are over and over and over again.
[02:36] So rule number three is to I want to put my entries at the obvious stop. So the next time you're going to put a trade on and just think, where would I put my stop?
[02:48] And just as you think that, pick something heavy up from your desk and smack it around your head. and rather than putting the order in, put the order in at where you would have put your stop and just watch how many times the market goes to that.
[03:01] David Paul, thank you. Thanks very much. Great pleasure to be here. My guest has been Dr. David Paul. You're watching the MoneyShow.com video network.