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12 Truths-Traders Should Know

  
  Education
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1. Stock prices run in cycles. Periods of re-pricing are usually quick and powerful and then they are followed by trendless consolidation.

2. Stocks are very highly correlated during drastic selloffs and during the initial stage of the recovery. In general, correlation is high during bear markets.

3. Bull markets are markets of stocks, where there are both winners and losers. When the market averages consolidate, there are stocks that will break out or down, revealing the intentions of institutional buyers.

4. In the first and last stage of a new bull market, the best performers are small cap, low float, low-priced stocks.

5. Try to trade in the direction of the trend. It is not only the path of least resistance, but also provides the best profit opportunities. Have a simple method to define the direction of the trend.

6. Traders’ attention (and market volume) is attracted by unusual price moves. Sudden price range expansion from a consolidaiton is often the beginning of a powerful new trend.

7. Opportunity cost matters a lot. Be in stocks that move. Stocks in a range are dead money. (more…)

Hedge Fund Market Wizards: Covel Interviews Schwager

  
  Education
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Jack Schwager wrote the original Market Wizards books, two of the must read, seminal books for investors and traders.

His latest is Hedge Fund Market Wizards — it is a behind-the-scenes look at the world of hedge funds, from fifteen traders who’ve consistently outperformed.

Schwager explores the differences between great traders and everyone else who thinks they can trade. Rare insights into the trading philosophy and methods employed by some of the most profitable individuals in the hedge fund business.

 
Mike Covel interviews Schwager, and its very interesting:

Jack Schwager:

“Five Market Wizard Lessons” 
Hedge Fund Market Wizards is ultimately a search for insights to be drawn from the most successful market practitioners. The last chapter distills the wisdom of the 15 skilled traders interviewed into 40 key market lessons. A sampling is provided below: (more…)

Market Wisdom From Bernard Baruch

  
  Education
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bernardbaruch

You don’t read a lot about Bernard Baruch anymore, but his teachings about the market are useful today as they always have been. There are several good books about him including his own “Baruch: My Own Story” which I recommend highly especially for those of you looking for a book to take with you on your vacations.

Baruch started out as most traders do – i.e. losing lots of money because he lacked the knowledge, experience, & discipline. “You have to lose money in order to better yourself.” (more…)

Five Faiths Needed for Trading Success

  
  Education
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  1. You must have faith in yourself. You must believe that you can trade as well as anyone else.. This belief arises from doing your homework and staying disciplined in your system. Understanding that it is not you, that it is your system that wins and loses based on market action will keep the negative self talk at bay.
  2. You must have faith in your method. You must study the historical performance of your trading method so you can see how it works on charts. Also it is possible to quantify and back test mechanical trading systems for specific historical  performance in different kinds of markets.
  3. You must have faith in your risk management. You must manage your risk per trade so it brings you to a 0% mathematical probability of ruin. A 1% to 2% of total capital at risk per trade will give almost any system a 0% risk of ruin.
  4. You must have faith that you will win in the long term if you stay on course. Reading the stories of successful traders and how they did it will give you a sense that if they can do it you can to. If trading is something you are passionate about all that separates you from success is time.
  5. You need faith in your stock. It helps in your trading if you trade stocks, commodities, or currencies that you 100% believe in. Traders tend to have no trouble trading a bullish system with $AAPL if they believe it is the greatest company to ever exist and will go to $500 within six months. It is much easier to follow an always in trend reversal system with Gold if you believe it tends to trend strongly one way or the other. Of course you have to follow a defined system and take the signals even if it goes against your opinions but believing in your trading vehicle helps tremendously.

Wisdom of Jesse Livermore

  
  Education

Legendary speculator Jesse Livermore is surely one of the most fascinating characters in all of financial-market history.

 About a century ago Jesse Livermore blossomed into one of the most celebrated speculators of all time.  He was trading heavily in the early decades of the 1900s, a wondrous era to speculate in stocks.  His renowned exploits are still viewed with great awe and reverence by today’s elite speculators and his towering speculation wisdom will stand tall for ages to come.

 If you are interested in more background information on Jesse Livermore and my reasons behind writing this series of essays on the man’s awesome speculation wisdom, you may wish to skim the introduction of the first essay in this series.

 Mr. Livermore’s exploits were recorded in the greatest book on speculation of all time.  Originally published in 1923, it is called “Reminiscences of a Stock Operator” and was written by a gifted financial journalist named Edwin Lefevre.  Mr. Lefevre penned the account as if from the first-person perspective of a fictional trader named Larry Livingston.  As Lefevre had spent weeks extensively interviewing Jesse Livermore, market historians are virtually unanimous in viewing Lefevre’s classic book as a thinly-disguised biography of Livermore’s trading life.

 Today “Reminiscences of a Stock Operator” is fondly read with awe by speculators of all levels and abilities all around the globe.  I have personally read the book many times and I try to re-read it at least once a year now.  The speculation wisdom contained within these magical pages is just awesome and truly priceless for all speculators to digest.  (more…)

Extension & Retracement patterns

  
  Education
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  • Extension patterns are Bullish Butterfly, Bearish Butterfly, Bullish Crab and Bearish Crab.
  • Retracement patterns are Bullish Gartley, Bearish Gartley, Bullish Bat and Bearish Bat.

These are the patterns that I used, and the list is not exhaustive. The “hardcore” harmonic traders might look at more patterns such as 5-0, Shark etc and in more time frames.

So here are the key factors I am looking at when using harmonic patterns

  • Identify key market levels, in other words, key support resistance levels. This one of the MOST important step.
  • Identify established price channel. A channel also represent the current trend, applying the appropriate patterns to follow the trend.

EXTENSION PATTERNS
 

RETRACEMENT PATTERSNS

Technically Yours/ASR TEAM/BARODA

Blackstone's Byron Wien Discusses Lessons Learned in His First 80 Years

  
  Education
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Here are some of the lessons I have learned in my first 80 years.  I hope to continue to practice them in the next 80. 

  1. Concentrate on finding a big idea that will make an impact on the people you want to influence.  The Ten Surprises which I started doing in 1986 has been a defining product.  People all over the world are aware of it and identify me with it.  What they seem to like about it is that I put myself at risk by going on record with these events which I believe are probable and hold myself accountable at year-end.  If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.
  2. Network intensely.  Luck plays a big role in life and there is no better way to increase your luck than by knowing as many people as possible.  Nurture your network by sending articles, books and emails to people to show you’re thinking about them.  Write op-eds and thought pieces for major publications.  Organize discussion groups to bring your thoughtful friends together.
  3. When you meet someone new, treat that person as a friend.  Assume he or she is a winner and will become a positive force in your life.  Most people wait for others to prove their value.  Give them the benefit of the doubt from the start.  Occasionally you will be disappointed, but your network will broaden rapidly if you follow this path.
  4. Read all the time.  Don’t just do it because you’re curious about something, read actively.  Have a point of view before you start a book or article and see if what you think is confirmed or refuted by the author.  If you do that, you will read faster and comprehend more.
  5. Get enough sleep.  Seven hours will do until you’re sixty, eight from sixty to seventy, nine thereafter which might include eight hours at night and a one hour afternoon nap.
  6. Evolve.  Try to think of your life in phases so you can avoid a burn-out.  Do the numbers crunching in the early phase of your career.  Try developing concepts later on.  Stay at risk throughout the process.
  7. Travel extensively.  Try to get everywhere before you wear out.  Attempt to meet local interesting people where you travel and keep in contact with them throughout your life.  See them when you return to a place. (more…)
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