Turtle Trading Principle
Trade with an edge, manage risk, be consistent, and keep it simple.
The entire Turtle training, and indeed the basis of all successful trading, can be summed up in these four core principles.
Curtis Faith, Way Of Turtle
Why Chart Patterns Repeat Themselves
All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope.
That is why the numerical formations and patterns recur on a constant basis.
Jesse Livermore, How To Trade In Stocks
Stick To Your Trading Rules
Successful trading is about finding the rules that work and then sticking to those rules.
William J. O’neil
Perfect Speculator
Perfect speculator must know when to get in; (more…)
Archives of “chart patterns” tag
rss5 Trading Mistakes & Destroy Yourself
Instead of cutting a loss the trader holds it stressing over it for the rest of the day or a week. This destroys the trader’s mental capital and inflicts completely unnecessary emotional pain. The first loss it the best loss.- A trader that trades their opinion instead of the price action has a lower success rate than someone who just trades price action. The vast majority of traders make money by following trends and chart patterns not their own opinion.
- A trader who puts on the one big trade that they think they just can’t lose on is usually the one that blows up their account. A trader must always have stops and must always manage risk regardless of their belief in any one trade.
- Believing that you are right about a trade and the market is wrong is a sure path to destruction. The market is always right because price is reality. How do we know when we are wrong? We lose money that is proof enough.
A trader who endlessly searches for stock picks and predictions instead of learning how to trade a robust method while managing their own mind and using risk management is doomed to failure.
Trading Book Review Of the Week: The Three Skills of Top Trading
This book is written about how three mutually reinforcing skills make a complete trader.
1). Pattern Recognition and Discretionary Trading.
Using the Wyckoff method you will see chart representations of how hot growth stocks are accumulated in bases for long periods of time. They eventually have pull backs then break out to new highs and trend. You will also see how they eventually have exhaustion tops on high volume that fail to rally and they begin to break down in distribution with lower lows and lower highs. The author encourages discretionary trading through experience by being able to identify market action through the models from past stocks. This work ties in nicely with the school of thought from legendary traders William J. O’Neil, Jesse Livermore, and Nicolas Darvas.
2). Behavioral finance and systems building.
The book teaches that readers must be flexible in their trading. We are merely a ship on a sea of market participant opinions. Follow the prevailing sentiment during the middle of the the trend, and go contrary to it at the extreme tops and bottoms. Hope, fear, and greed are the dangers and the movers of the market that cause support and resistance, trends, and chart patterns. The action of the stock market is nothing more than a manifestation of mass crowd psychology in action. The Pruden model shows a chart of how accumulation, mark-up, distribution, and markdown works in the market tied to price, volume, sentiment, and time. It truly explains how the price pattern and charts in growth stocks generally play out historically. (more…)
M. William Scheier, Pivots, Patterns, and Intraday Swing Trades-Book Review
You can buy M. William Scheier’s book Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts (Wiley, 2014) for a little north of $50 or, if you have money burning a hole in your pocket, can take his ten-lesson e-mini trading course for about $3,000 or buy his indicator package software (included in the price of the course) for $250. Let’s look at the cheapest alternative.
The book is divided into four parts: time frame concepts, day model patterns, repetitive chart patterns, and confluence and execution.
Scheier’s methodology combines “old school” technical analysis with a “new school” proprietary algorithm for what he calls the Serial Sequent Wave Method. In the book he focuses exclusively on the former. (more…)
An Interview with a Modern Day Nicolas Darvas
Don’t Miss to Watch 3 VIDEO’s
Who is Dan Zanger?
Dan Zanger is the modern day version of Nicolas Darvas.
His mother Elaine loved the stock market and Dan would often watch the business channel with her. One day in 1978 Dan saw a stock explode across the ticker tape at the bottom of the screen hitting $1. He made his first purchase and sold the stock a few weeks later at over $3. From that sale on, he was hooked on the action of the market tape, usually carrying a quotetrek with him to stay up on stock prices on his jobs in Beverly Hills as an independent contractor building swimming pools. (more…)
Discretionary & Systematic Traders
Discretionary Traders…
- …trade information flow.
- …are trying to anticipate what the market will do.
- …are subjective; they read their own opinions and past experiences into the current market action.
- …trade what they want and have rules to govern their trading.
- …are usually very emotional in their trading and taking their losses personally because their opinion was wrong and their ego is hurt.
- …use many different indicators to trade at different times. Sometimes it may be macro economic indicators, chart patterns, or even macroeconomic news. Many discretionary traders are trying to game what they believe the majority of other traders will be doing based on market psychology as if it is one big poker game.. They are trying to form an opinion on what the market will do.
- … generally have a very small watch list of stocks and markets to trade based on their expertise of the markets they trade.
Systematic Traders…
- …trade price flow.
- …are participating in what the market is doing.
- …are objective. They have no opinion about the market and are following what the market is actually doing, i.e. following that trend.
- …have few but very strict and defined rules to govern their entries and exits, risk management, and position size.
- …are unemotional because when they lose it is simply that the market was not conducive to their system. They know that they will win over the long term.
- …always use the exact same technical indicators for their entries and exits. They never change them.
- …trade many markets and are trading their technical system based on prices and trends so they do not need to be an expert on the fundamentals. (more…)
Six Positive Trading Behaviors
1) Fresh Ideas – I’ve yet to see a very successful trader utilize the common chart patterns and indicator functions on software (oscillators, trendline tools, etc.) as primary sources for trade ideas. Rather, they look at markets in fresh ways, interpreting shifts in supply and demand from the order book or from transacted volume; finding unique relationships among sectors and markets; uncovering historical trading patterns; etc. Looking at markets in creative ways helps provide them with a competitive edge.
2) Solid Execution – If they’re buying, they’re generally waiting for a pullback and taking advantage of weakness; if they’re selling, they patiently wait for a bounce to get a good price. On average, they don’t chase markets up or down, and they pick their price levels for entries and exits. They won’t lift a market offer if they feel there’s a reasonable opportunity to get filled on a bid. (more…)
Six steps for Traders
- Define the question
- gather information and resources
- form hypothesis
- perform experiment and collect data
- analyze data
- interpret data and draw conclusions that serve as a starting point for a new hypothesis.
1. Define the question: What is it exactly that you are trying to achieve? Are you shooting for high returns with high risk, long term gains with minimal risk, day trading, swing trading, position trading? Are you trying to make enough money to buy a new car or enough to buy a yacht? First define what it is that you want out of your trading!
2. Gather information and resources: What will be the best route to achieve your trading goals? Are you going to be a stock trader, a futures trader, a forex trader? Maybe everything? Doing the necessary research and taking the time to really get to know your market/markets is absolutely key to successful trading. Some people make great futures traders but horrible stock traders and vice-versa, while others are able to dabble in a little bit of everything and be successful. One way to see what fits you best is to try trading a little bit of everything and see where you feel the most comfortable. Start with small accounts and see what fit is a good one for you.
3. Form hypothesis: This is the fun part and where you get to design your “system” or “rules” by which to trade. Does your trading hypothesis revolve around chart patterns, trendlines, support and resistance, or are you more of a numbers kind of person that trades strictly off price? Do you use indicators? Maybe you are a programmer that has developed an algorithm. Whatever it is I believe it is important to form a hypothesis and then… (more…)
Six Positive Trading Behaviors
1) Fresh Ideas – I’ve yet to see a very successful trader utilize the common chart patterns and indicator functions on software (oscillators, trendline tools, etc.) as primary sources for trade ideas. Rather, they look at markets in fresh ways, interpreting shifts in supply and demand from the order book or from transacted volume; finding unique relationships among sectors and markets; uncovering historical trading patterns; etc. Looking at markets in creative ways helps provide them with a competitive edge.
2) Solid Execution – If they’re buying, they’re generally waiting for a pullback and taking advantage of weakness; if they’re selling, they patiently wait for a bounce to get a good price. On average, they don’t chase markets up or down, and they pick their price levels for entries and exits. They won’t lift a market offer if they feel there’s a reasonable opportunity to get filled on a bid.
3) Thoughtful Position Sizing – The successful traders aren’t trying to hit home runs, and they don’t double up after a losing period (more…)
Candlesticks: Patterns Signalling Range-Trading
- Doji
- Psychological state of uncertainty.
- Engulfing / Outside bars
- This pattern must appear after a preceding trend in the price.
- An outside bar would have taken out the stops of both the bulls and the bears, with no follow-through. Hence both sides become less confident and this leads to range-trading behavior.
- Hammer bottom
- After a downtrend, the market opens near to the previous close, drops a lot, before closing the period up towards the level at which it opened.
- Signals an end of the downtrend where the next period will be characterised by range trading.
- Shooting star
- After an uptrend, the market opens near the previous close, rallies a lot, but closes the period down towards the level at which it opened.
- Signals that that supply and demand have become more balanced, and this balance can mean range trading.
- Hanging man
- After an uptrend, market does not rise much but falls a lot, before closing back up near to the level at which it opened.
- This is bearish, and represents the last buyers getting into the uptrend.