7.5

DBBs- 4 Rules, Rule 4

This lesson reviews Rule 4 of the DBB trading strategy rules. Rule 4 attempts to cut the risk of buying at the top or selling at the bottom that comes with chasing a strong trend that has already made significant progress and may be approaching major resistance or (if it has broken past historic highs or lows) exhaustion.

This rule is not easy to implement. Your success depends on how well you read and interpret the other technical and fundamental evidence, therefore we will talk about how to distinguish a bargain from a “falling knife” (i.e. an apparent bargain that continues moving against you after your trade entry, resulting in a loss).

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