Stephen Prior, Publisher, Monument Traders Alliance Dear Reader, In the letter I wrote earlier this week about the exciting new stuff coming down the pipeline for the Monument Traders Alliance (You can read that here)... I mentioned that Chris "CJ" Johnson (formally of Money Morning) will be joining the team as the Lead Host of Monument Traders Live and Senior Analyst. Chris isn't some newsletter writer theorizing about markets from a cubicle. He's a 30-year Wall Street veteran who's lived through every crash, bubble, and manic episode the market can throw at you. He built his reputation as a quantitative analyst tracking millions of records daily through proprietary forecasting models he's been refining since 1998. His contrarian calls and technical expertise have been featured in Barron's, The Wall Street Journal, and USA Today. Now, as the lead host of Monument Traders Live / senior analyst, CJ brings that same data-driven, contrarian approach to our members. He doesn't follow conventional wisdom because conventional wisdom creates conventional losses. Now, he's traveling with his family this week... And we're hoping to formally introduce him to the community next week on Monument Traders Live (more to come on Monday)... But to help introduce him, he gave me a list of his 10 trading commandments that he likes to follow. These ten commandments come from three decades of him watching traders succeed and fail - and learning exactly what separates the two. They're battle-tested truths he learned losing money, making money, and watching thousands of traders do both. Some will feel obvious. Others will challenge everything you think you know about markets. But he has found that they all have one thing in common: they work. Follow them and you'll have an edge. He says if you ignore them, you'll become another statistic. THE COMMANDMENTS: - The Trend Is Your Friend The single most reliable signal in the market is the 50-day moving average. It gets the day-to-day directional move right roughly 67% of the time. When a stock is above its rising 50-day, you buy dips. When it breaks below, you stop pretending the fundamentals matter. Fighting the trend is voluntarily choosing worse odds - and the tape punishes that.
- Never Run with the Crowd Crowds chase tops and panic at bottoms. Your edge comes from doing the opposite. The best buys happen when selling pressure peaks and forced sellers are handing you shares. The best sells happen when euphoria blinds discipline. If you're not early, you're not profitable - and if you're following the herd, you're already late.
- Don't Fight the Tape - Know Your Breaking Point Price action doesn't care about your opinion. When the tape disagrees with you, it wins every time. Never risk large losses for small gains - the "pennies in front of a steamroller" problem. Every loss you take is tuition. Pay it, learn from it, and move on with clean discipline.
- Overbought Can Get More Overbought - Cheap Can Keep Getting Cheaper Valuation traps destroy portfolios. Technical indicators don't cap how far a squeeze can run or how low a broken stock can fall. Stocks don't obey your sense of "reasonable." Overbought signals can become launchpads. Oversold signals can mark the start of a collapse. Play the trend, not the fundamental story you're telling yourself.
- Smart Money Never Tells You What It's Doing - But It Leaves Tracks Institutions don't announce their moves. They leave footprints. The options flow exposes those footprints better than any earnings call, analyst note, or headline. Open interest clusters, skew shifts, and unusual call buying will always tell the truth long before CNBC does. Follow the data, not the narrative.
- Short Sellers Are a Bull's Best Friend Short interest is stored energy. When the trend turns higher, shorts become forced buyers - accelerating upside momentum. Some of the most explosive rallies are born from heavy short positioning. Don't fear the shorts; use them.
- Round Numbers Are Natural Support and Resistance Price gravitates toward simplicity. $10, $50, $100, $1,000 - these levels act as psychological anchors for both retail and institutional players. Breakouts above round numbers attract buying. Breakdowns through them attract selling. The more zeros, the more important the level. Never ignore these zones.
- Volatility Is Your Best Friend Volatility creates opportunity. It widens ranges, breaks correlations, and forces emotional players to make mistakes. You profit from those mistakes. Static conditions reward passive investing; volatile conditions reward skilled execution. A calm tape offers no edge. A shaking tape offers plenty.
- Speculation - Not Fundamentals - Drives Stock Prices Fundamentals build long-term narratives, but speculation moves stocks today. Capital flows, options positioning, liquidity pockets, and sentiment swings dictate price. Fundamentals matter eventually - speculation issues now. Play what investors believe, not what accountants report.
- There Is an Exception to Every Rule No single commandment works 100% of the time - which is why risk management is your only true constant. Great players adapt. They recognize when conditions shift and adjust, rather than forcing a strategy onto a tape that no longer respects it. Flexibility isn't optional; it's survival.
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