Archives of “charts and graphs” tag

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The Market Is King

  
  Education
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If you are a disciplined, follow the rules trader, then I am sure you are familiar with the many and various ways the stock market can play tricks on you.  For instance, a disciplined, technical trader will adhere to a particular strategy based on current market conditions.  In so doing, trades are assessed and entered based on specific criteria, usually by combining mechanical and discretionary means.

Technical traders base their current trade decisions on past price action, noting distinct historical patterns that have the possibility of replication.  However, the outcome of two strategically similar trades are never exactly alike if for no other reason than those trading a specific stock now are not the same ones who traded it two months, or even two weeks or two days previous.  The elements of uncertainty (e.g., changes in sentiment and differences of opinion) exert such an influence on stock prices that exact replication is impossible.  Therefore, the market enjoys a “King Jester” status. (more…)

John Murphy’s Ten Laws of Technical Trading

  
  Education
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Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today’s technical analysts.”

The following are John’s ten most important rules of technical trading:

• Map the Trends
• Spot the Trend and Go With It
• Find the Low and High of It
• Know How Far to Backtrack
• Draw the Line
• Follow That Average
• Learn the Turns
• Know the Warning Signs
• Trend or Not a Trend?
• Know the Confirming Signs

Note: All of the following is the work of John Murphy (not me) (more…)

Book Review :Elder, The New Sell & Sell Short

  
Analysis, Education
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Most traders have read Alexander Elder’s Trading for a Living, originally published in 1993. Elder has, of course, written other popular books such as Come into My Trading Room (2002) and Entries and Exits (2006). His latest work, The New Sell & Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines (Wiley, 2011) is an expanded second edition of his 2008 book. It comes with a built-in study guide: three sets of questions and answers. Although it is a paperback, the charts and graphs are printed in color and the stock is of high quality.

The first part of the book covers Elder’s signature contributions to the trading literature: psychology, risk management, and record-keeping. It is brief because we’ve been there before, but Elder does describe some new ways to keep records—an ongoing project because he believes that “the single most important factor in your success or failure is the quality of your records.” (p. 341)

Part two tackles the all-important question of how to exit a (long) trade. Elder offers three alternative scenarios: sell at a target above the market, be prepared to sell below the market using a protective stop, and “sell before the stock hits either a target or a stop—because market conditions have changed and you no longer want to hold it.” (p. 59)

Elder then moves on to shorting stocks, futures, and forex; he also has a section on writing options. Finally, he points out some lessons of the 2007-2009 bear market. (more…)

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