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Recipe for catching a reversal:

recipesIngredients: For this recipe you will need one (1) well-known or “classic” technical chart pattern on a daily time frame, preferably near the high or low of the mid-term price range. When your pattern of choice has been observed, you will then need to collect at least two (2) or more instances of public expressions of sentiment which confirm the prognostication of said pattern: pre- or post-market media bytes, business news website headlines, confident/fearful declarations on your favorite trading forum, or any other variety of before-the-fact assumption.

Preparation: When the above ingredients have been secured, wait for a daily close which would confirm “ripeness” of the pattern. Next morning, enter a stop order at the confirmation price in the opposite direction of pattern breakout to initiate position. If stop is triggered, immediately enter protective stop at prior low/high.

Parboiling: If market moves quickly in your favor, take profits on at least a partial portion; mentally “set aside” closed profit for re-entry if market pulls back towards initial entry price with next few days. If pullback manages to hold above prior high/low, re-enter full position at your discretion.

Cooking: Set protective stop for entire position at breakeven and let sit undisturbed for a few days or more if possible.

Presentation: Dish is ready when “failure” point of pattern is breached; serve at market or with trailing stop, whichever you prefer.

Livermores Seven Trading Lessons

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game.

Lesson Number Four: Let profits ride until price action dictates otherwise.

“It never was my thinking that made the big money for me. It always was my sitting.”

One method that satisfies the desire for profit and subdues the fear of a losing trade is to take one half of your profit off at a predetermined level, put a stop at breakeven on the rest, and let it play out without micromanaging the position. (more…)

7 Trading Rules of Jesse Livermore’s

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. (more…)

Livermores Seven Trading Lessons

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game.

Lesson Number Four: Let profits ride until price action dictates otherwise.

“It never was my thinking that made the big money for me. It always was my sitting.”

One method that satisfies the desire for profit and subdues the fear of a losing trade is to take one half of your profit off at a predetermined level, put a stop at breakeven on the rest, and let it play out without micromanaging the position.

Lesson Number Five: Buy all-time new highs.

The psychological merits of buying all-time or 52-week highs are immense and shouldn’t be discounted as a part of your overall strategy. (more…)

Livermores Seven Trading Lessons

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you. (more…)

Recipe for catching a reversal:

Ingredients: For this recipe you will need one (1) well-known or “classic” technical chart pattern on a daily time frame, preferably near the high or low of the mid-term price range. When your pattern of choice has been observed, you will then need to collect at least two (2) or more instances of public expressions of sentiment which confirm the prognostication of said pattern: pre- or post-market media bytes, business news website headlines, confident/fearful declarations on your favorite trading forum, or any other variety of before-the-fact assumption.

Preparation: When the above ingredients have been secured, wait for a daily close which would confirm “ripeness” of the pattern. Next morning, enter a stop order at the confirmation price in the opposite direction of pattern breakout to initiate position. If stop is triggered, immediately enter protective stop at prior low/high.

Parboiling: If market moves quickly in your favor, take profits on at least a partial portion; mentally “set aside” closed profit for re-entry if market pulls back towards initial entry price with next few days. If pullback manages to hold above prior high/low, re-enter full position at your discretion.

Cooking: Set protective stop for entire position at breakeven and let sit undisturbed for a few days or more if possible.

Presentation: Dish is ready when “failure” point of pattern is breached; serve at market or with trailing stop, whichever you prefer.

12 Difference between Losers & Winners Traders

1.       Losers trade against the trend, but winners trade the impulsive wave of the current trend.

2.       Losers have no money management because they aim quick profit; but winners target steady profits by risking 2 or 3% of their investment.

3.       Losers don’t set stop loss order expecting to be faster then the market in case of reversal; winners know that any time news can make the price reacts suddenly. Therefore use protective stop loss in case of news release.

4.       Losers have no trading plan, they emotionally jump in and out of the market when the price moves; winners build solid entry and exit plans.

5.       Losers cut early their winning trades and let losses run and wipe out their account; but winner s cut quickly their losses. When the trade is positive, they set the stop loss to the break even to protecting their profit. Otherwise, they open to 2 lots to closing the first lot when the stop loss value is reached and let the second winning trade run with a trailing stop from the breakeven until it is touched.

6.       Losers do trade many strategies at the same time, but have mastered none of them; winners master one successful strategy and move to the other.

7.       Losers think the market or the broker is against them, winners don’t fight against the market they try to understand it; they know how to choose between brokers with objective criterions.

8.       Losers think Forex is gambling; but winners develop skills, discipline, self control, and patience, they work hard for being successful traders. Winners learn from their mistakes and constantly improve their main trading strategy.

9.       Losers perform emotional trading after the release of alarming news, winners respect their trading plans.

10.   Losers do overtrading, they even trade at the daily pivot point; winners trade the best opportunities at support or resistance according to the price reaction.

11.   Losers can trade a bad risk reward opportunity; winners aim good risk reward with ratio such as 1/3 or 1/4. A won trade protects their portfolio from several small losses.

12.   Losers use any strategy or expert advisor without back testing it; but winners know that long term profitability is one of the key of Forex trading success. Winners don’t focus on the percentage of winning trades.

Let profits ride until price action dictates otherwise.

jessePerhaps the most famous quote attributed to Livermore is, “It never was my thinking that made the big money for me. It always was my sitting.” Traders are wired to be “doing something,” and this can cause churning, over-trading, getting out of positions too soon, and making your broker the wealthy one. The famous Turtle Traders were trend traders who made few trades and had learned the importance of staying in a winning trade.

For today’s traders, there are multiple variations to keep you in a trade. It’s not so important which method you implement, but that you do recognize when to hold a winner for maximum potential, and when a trend has changed character and it’s time to ring the register.

One method that satisfies the desire for profit and subdues the fear of a losing trade is to take one half of your profit off at a predetermined level, put a stop at breakeven on the rest, and let it play out without micromanaging the position. Even day and swing traders will benefit from letting a partial position play out when all indicators hint that more upside might be in the cards. Always remember this rule is letting a profitable position run, but it’s not a license to bury one’s head on a losing position

During and After the Trade

1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?

8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time?

9. After the trade did you learn anything from the trade?

10. Are you organized sufficiently to have a record of all your trades for your accounting and learning?

11. Should you modify your existing systems based on it?

12. How does recency and frequency and value affect your future?

13. Did you fit your after activities to your mojo?

14. If you made a good profit, did you take some capital out of the fray for a rainy day?

15. Have you learned to say “fair” whenevever anyone asks you how you’re doing and are you sure that you don’t spend a fortune after a good trade, and dissipate your profits with non-economic activities?

16. Is there a better use for your time than monitoring the ticks or the market every minute of the day if you do, and if you don’t, do those who do so and have much faster and better equipment than you have an insurmountable advantage against you?

Recipe for catching a reversal:

sexy-chef
Ingredients: For this recipe you will need one (1) well-known or “classic” technical chart pattern on a daily time frame, preferably near the high or low of the mid-term price range. When your pattern of choice has been observed, you will then need to collect at least two (2) or more instances of public expressions of sentiment which confirm the prognostication of said pattern: pre- or post-market media bytes, business news website headlines, confident/fearful declarations on your favorite trading forum, or any other variety of before-the-fact assumption.
Preparation: When the above ingredients have been secured, wait for a daily close which would confirm “ripeness” of the pattern. Next morning, enter a stop order at the confirmation price in the opposite direction of pattern breakout to initiate position. If stop is triggered, immediately enter protective stop at prior low/high.
Parboiling: If market moves quickly in your favor, take profits on at least a partial portion; mentally “set aside” closed profit for re-entry if market pulls back towards initial entry price with next few days. If pullback manages to hold above prior high/low, re-enter full position at your discretion. (more…)