What Is The 8 10 Rule For Candles?
What is the 8/10 Rule for Candles?
The 8/10 rule is a guideline for properly lighting a room with candles. It states that for every 10 square feet of space, you should burn an 8 ounce candle. This rule helps ensure that candles are scaled appropriately for the size of the room they are placed in.
The origins of the 8/10 rule are unclear, but it has been a standard recommendation amongst candle makers and home decor experts for many years. The rule emerged as a simple formula to help consumers pick the right candle sizes for their home lighting needs. It accounts for how candlelight is diffused and spread throughout a space based on the candle’s size and melt rate.
The purpose of the 8/10 rule is to create ideal ambiance and lighting with candles. Burning candles that are too large or too small for a room can lead to issues like soot, uneven burning, wasted wax, and weak or overpowering scent. Following the 8/10 guideline helps candles perform optimally and provides enough illumination without being overwhelming.
How the 8/10 Rule Works
The 8/10 rule is a guideline used in candle making that recommends using 1 ounce of candle wax per cubic foot of space. For example, an 8 ounce candle would be recommended for a 10 cubic foot room.
The logic behind the 8/10 rule is that it provides a general formula for approximating the right amount of fragrance to fill a given space. Candles need to have enough throw to properly scent a room, but not so much that they are overpowering.
An 8 ounce candle in a 10 cubic foot room strikes a good balance for most purposes. The 1 ounce per cubic foot ratio allows for enough fragrance to noticeably scent a space without being excessive. It takes into account that some of the fragrance will dissipate over time.
The 8/10 standard is useful as a starting point or rule of thumb. However, the ideal candle size may vary depending on factors like room dimensions, ceiling height, ventilation, personal preference for strength of fragrance, etc. Many candle makers recommend testing different candle sizes in a space to find the perfect balance.
Advantages of Using the 8/10 Rule
The 8/10 rule provides two key advantages for traders:
High win rate and profitability – By cutting losses at 8% and taking profits at 10%, the 8/10 rule maximizes winning trades and minimizes losses. According to Investopedia, “The premise is that even the best traders cannot win 100% of the time, so losses are expected. However, successful traders know how to keep the losses small and let the profits run” (https://www.investopedia.com/articles/trading/10/top-ten-rules-for-trading.asp). Keeping a high win rate improves overall profitability.
Defined exit strategy – Having predetermined stop loss and take profit levels provides a defined exit strategy for each trade. As noted by Investor’s Business Daily, “Having a rule in place ahead of time can help prevent an emotional decision to hang on too long” (https://www.investors.com/how-to-invest/investors-corner/sell-a-stock-cutting-losses-short-is-first-rule/). The 8/10 rule gives clear guidance for when to exit both winning and losing positions.
Disadvantages of the 8/10 Rule
While the 8/10 rule can help day traders minimize risk, there are some potential drawbacks to consider:
Requires constant monitoring – The 8/10 rule requires traders to monitor their positions closely in order to sell once a stock declines by 8%. This can be time-consuming and may not be realistic for traders who can’t watch the market constantly.
According to “What Time Frame to Use When Day Trading”, intraday traders need to be vigilant about actively managing their positions with strategies like the 8/10 rule. Traders who can’t monitor the market may miss opportunities to exit trades.
Could miss bigger moves – Strictly following the 8/10 rule means exiting a stock quickly if it declines by 8% from the entry price. However, this could mean missing out if the stock rebounds for a larger gain. The drop could just be temporary volatility before a larger upwards swing.
As “When To Sell Stocks To Take Profits And Avoid Big Losses” notes, having stop losses like the 8/10 rule could limit further upside after selling your position too early. Traders need to balance limiting losses and giving trades time to work out.
How to Apply the 8/10 Rule
The 8/10 rule provides traders with specific entry criteria, position sizing guidelines, and risk management tactics. Here are the key things to focus on when applying the 8/10 rule:
Entry Criteria and Indicators
Traders using the 8/10 rule look for stocks that have pulled back in price by around 8-10% from their recent highs. This signals an opportunity to potentially enter a swing trade. Analyze the stock chart to identify clear areas of support and resistance to determine ideal entry points. Combine the 8-10% pullback with other technical indicators like increasing volume, positive divergences on oscillators like RSI, and moving average crossovers to improve timing on entries.
Position Sizing
When sizing positions using the 8/10 rule, risk no more than 1-2% of your total account size on any single trade. For example, if you have a $10,000 account, limit your risk to $100-$200 per trade. Calculate the proper position size based on your stop loss and the stock’s volatility. Take smaller positions in higher risk stocks.
Risk Management
Manage risk on 8/10 rule trades by using stop losses to limit potential losses. Set stop losses below key support levels or at a maximum loss percentage, such as 8%. Use wider stops or avoid trading stocks with very high volatility. Move stops to lock in profits as the trade moves in your favor. Apply prudent position sizing and account for commissions in your risk and reward calculations. Cut losing trades quickly per your stop loss rules.
Examples and Case Studies
The 8/10 rule can be applied in various trading scenarios. Here are some examples of how traders have used this rule successfully:
John is a day trader who uses the 8/10 rule for his intraday trades on stock XYZ. When the stock hits an intraday high of $50, which is 8% above the opening price of $46.25, John enters a long position. His stop loss is set at $47.50, which is 10% below the entry price. By using the 8/10 rule, John benefits from momentum in the direction of the prevailing trend while limiting his downside risk.
Mary is a swing trader looking for opportunities in ETF ABC. She notices the ETF has been in an uptrend making higher highs and higher lows. The ETF pulls back to the 50-day moving average and then bounces. When the price hits $75, up 8% from the recent swing low of $69.50, Mary goes long. Her stop loss is 10% below her entry at $67.50. Over the next few weeks, ABC continues climbing higher just as Mary expected based on the 8/10 rule.
A quantitative analyst backtests the 8/10 rule on historical stock market data. He finds that entering trades when a security is up 8% from a recent low and managing risk with a 10% stop loss results in a winning percentage of 62% and profit factor of 1.6. The backtest confirms the edge provided by using the 8/10 rule.
Best Practices and Tips
When implementing the 8/10 rule, here are some best practices to follow:
Set stop losses at precise levels like 8-10% below your entry price rather than round numbers. This increases the likelihood of getting stopped out at the intended level before losses accumulate further as per Investopedia.
Use technical analysis like support/resistance levels to identify logical stop loss points. Exiting based on technical levels improves discipline as it removes emotion from the decision as noted by trading rules in this video.
Consider using a trailing stop loss that follows the price at a defined distance as the trade moves in your favor. This allows for locking in profits while still adhering to the stop loss rule.
When setting stop losses, be aware of volatility and don’t set them too close that normal price fluctuations trigger an exit. However, don’t set them too wide to avoid excessive losses.
Use risk management by appropriately sizing positions so no single trade loss exceeds 1-2% of account value as covered in trading discipline rules like this guide.
Some common mistakes to avoid:
Moving stop losses further away after a trade turns against you. This tends to turn losses into even bigger losses.
Not having clearly defined stop losses before entering a trade. This leads to arbitrary and emotional exit decisions.
Exiting profitable trades too early before giving them room to maximize potential. This leaves gains on the table.
Closing trades that hit your stop loss prematurely instead of letting the stop execute. This reduces discipline.
Ignoring the stop loss rule by holding on to losing trades indefinitely hoping they’ll recover. This typically allows losses to grow.
Alternatives to the 8/10 Rule
While the 8/10 rule is a tried and true exit strategy for traders, there are other approaches that may work better depending on your trading style and goals. Here are some alternatives to consider:
Other Exit Strategies: Some traders use technical indicators like moving averages or support/resistance levels to determine exit points rather than a set percentage loss. This allows exits to be based on the price action rather than an arbitrary percentage. Others use trailing stops that follow the price as it moves in your favor, locking in profits while limiting losses.
Hybrid Approaches: You can also combine the 8/10 rule with other strategies. For example, using the 8/10 rule for initial stop loss placement, but trailing the stop as the trade moves in your favor. Or using technical indicators to determine exit points, but cutting losses at 8-10% if those levels aren’t reached first. The key is finding a strategy that fits with your risk tolerance and trading objectives.
There is no one “best” exit strategy. It’s about testing different approaches and finding what works well for your trading system. The 8/10 rule is a good baseline, but seasoned traders often modify it or use it in combination with other techniques.
Frequently Asked Questions
Here are answers to some common questions about the 8/10 rule for candles:
What is the 8/10 rule for candles?
The 8/10 rule is a guideline for how much wax to use when making candles. It states that the candle diameter should be 1 inch for every 8 ounces of wax used. So for example, if you are using 10 ounces of wax, the recommended diameter is 1.25 inches (10/8 = 1.25). This ratio helps ensure the candle burns evenly and avoids issues like tunneling.
Why is the 8/10 rule recommended?
The 8/10 rule takes into account how quickly wax melts versus how quickly it pulls up through the wick as it burns. Using the right ratio of wax to wick size helps prevent common candle issues like tunneling, mushrooming, drowning wicks, etc. It creates an ideal balance so the wax liquefies into a pool as it burns and feeds the flame at an even pace.
Does the 8/10 rule work for all candle waxes?
The 8/10 guideline is most accurate for paraffin wax candles. Some adjustments may be needed for other waxes like soy, beeswax, or palm wax that melt at different rates. Testing may be required to find the optimal ratio.
What if I want a larger or smaller candle?
The rule can be adjusted proportionally for larger or smaller candles. For example, a 16 oz candle would have a diameter of 2 inches, while a 4 oz candle would be 0.5 inches wide. The ratio of 1 inch diameter for every 8 oz of wax remains constant.
How exact does the diameter need to be?
The diameter does not need to be exact. Aim for within 1/4 inch of the recommended diameter based on the wax amount. Small variations will not make a significant difference in burn performance.https://www.finra.org/filing-reporting/market-transparency-reporting/trade-reporting-faq
Conclusion
In summary, the 8/10 rule is a simple yet effective strategy for traders and investors. It calls for selling a stock if it falls by 10% or more from the original purchase price. The logic is that a 10% drop indicates something may be fundamentally wrong with the company, so it’s prudent to cut losses before the decline worsens. Some of the key advantages of using the 8/10 rule are that it helps improve discipline, prevents large losses, and frees up capital to move into other opportunities. However, a disadvantage is that it can lead to selling good stocks prematurely if they experience temporary dips. Overall, the 8/10 rule is a time-tested guideline that can provide guardrails against destructive losses.
When used properly as part of a larger trading plan, the 8/10 rule is a valuable tool for fostering discipline and managing risk. However, it should not be adhered to blindly. Savvy investors may choose to allow temporary exceptions if a stock’s fundamentals remain strong during a downturn. The 8/10 rule is best applied in conjunction with other analysis to determine if a stock is truly declining or just experiencing normal volatility. With flexibility and common sense, it can aid traders in making wise sell decisions.
