1) Patient with winners and impatient with losers
2) Making money is more important than being right
3) View Tech Analysis as a picture of where traders are lining up to buy and sell
4) Before they enter every trade they will know profit target or stop exit
5) Approach trade no.5 with the same conviction as the previous 4 losing trades
6) Use naked charts
a) As we mature we begin peeling off indicators
b) Prices action is key
7) Comfortable making decisions with incomplete information
8) Stopped trying to pick tops & bottoms long ago
a) They make their money in the meat/middle of a trend (wait for confirmation)
b) A trend is much more likely to continue than it is to reverse
9) Do not think of the market as expensive or cheap
a) Ignore whether you think something is overpriced or understand, think price action
10) Aggressive with trade size when doing well or modest when not
a) Do more of what is making, less of what is not
11) Realised that the market will be open tomorrow (more…)
Archives of “confirmation” tag
rssJesse Livermore’s trading rules
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…)
Surfing and Trading
– After a lull (chop, quiet market) a new set of waves (setups, breakouts) will appear. Often, the first wave is not the best wave. Don’t get too excited because you see an OK wave (false breakout) after you haven’t seen any good ones at all. Often there is a better one behind it (look for confirmation).
– If you catch a wave ride it as long as you can, until you see yourself heading into shore, rocks, or other people (end of trend).
– Get into position and be ready to go for a wave so you’re ready to take a good setup once it appears. (focus, attention)
– Once you see a wave you want, commit to it to getting on it. Paddle as fast as you can to get enough speed to go with the wave. (have a plan, preparation, confidence with entry, execute with precision)
– Don’t try to catch the wave too early, make sure it has built up enough energy to carry you along (overly eager entries, wait for confirmation)
– Don’t catch the wave too late or else you’ll catch it on the top of the wave and it will throw you down into the seabed (buying tops or selling bottoms)
– Don’t try to surf every wave (over trading), just the ones that look easy to catch and worth the energy required to catch and ride it (capital preservation, high probability trades)
Any other surfers out there have some surfing/trading parallels? – If there’s no waves (setups) be patient and enjoy the water and sun. A setup will come. If not, then it wasn’t meant to be (sit on hands day) or not a good spot (market). Come back tomorrow or find another spot. Don’t try to make something of nothing.
Jesse Livermore’s trading rules
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. (more…)
Happy Diwali
Happy Diwali & Happy New Year Dear Subscribers & Our Readers, We wish U great Diwali & Great Coming New Year.
- Quit letting trades go through your original stop loss, you were wrong, get out. When you start hoping and stop managing your stops you are losing money.
- Quit over trading, only take the very best entries and trade the very best stocks in your system.
- Quit making up stories about why you decided to hold your position instead of taking your stop when it was hit. trade your plan.
- Stop trading your opinions and start trading what the price action is saying.
- Stop following people in social media that cause you to trade badly and lose money.
- Stop looking at BLUE Channels for trading and investing advice.
- Stop trading so big that you emotions are more involved in your trades than your mind.
- Disconnect your ego from your trading. You determine your risk size and entry the market chooses whether you win or lose.
- Quit riding an emotional roller coaster, your emotions should stay level when winning and losing. If not trade smaller.
- Quit buying falling knives and shorting rocket stocks, wait for confirmation and reversal before entering.
Technically Your’s
AnirudhSethiReport-Team/Baroda/India
20 Habits of Great Traders
1) Patient with winners and impatient with losers
2) Making money is more important than being right
3) View Tech Analysis as a picture of where traders are lining up to buy and sell
4) Before they enter every trade they will know profit target or stop exit
5) Approach trade no.5 with the same conviction as the previous 4 losing trades
6) Use naked charts
a) As we mature we begin peeling off indicators
b) Prices action is key (more…)
Technical Confirmations Explained
Confirmation is necessary to validate a break of important support and resistance levels such as price patterns, moving averages and trend lines. Technicians and traders define Confirmation in various ways. While market situations vary, below is a guideline of three forms of Confirmation:
- Percentage Confirmation: Confirmation is present when there is a 3% or greater break of a support or resistance level. Volume attached to the break, while not necessary, lends confidence to the confirmation. The 3% rule is commonly used by long term traders and investors. Short term traders use a lesser requirement to complement trading objectives, keeping risk/reward in line.
- Time Confirmation: If there are at least three closes above or below a resistance or support level, then confirmation exists. A close varies based on ones trading time frame. Again, volume attached to the break adds significance to the confirmation. (We always write Three Consecutive close +Weekly close must for major upmove or down move )
- Heavy Volume Confirmation: Volume confirmation presents when there is a substantial surge in volume relative to recent volume, combined with one close above or below a resistance or support level.
- Combination: If percentage and time confirmations fall short of the minimum requirement, yet are accompanied by substantial volume (e.g. 1.5% close above resistance with substantial volume), that could be accepted as confirmation.
Traders can use this guideline to develop their own requirements for confirmation as individual investment objectives and time frames vary.
Risk Management for Traders
- Your first loss is the best loss.
- Let winning positions run and cut losing positions short. The market is always right.
- I finally understand why Kirk always says risk management is the most important thing.
- Always know your exit. Before any trade is made, you must always identify your stop beforehand and then follow it without hesitation if it triggers.
- Patterns and trends matter more than I thought…paying attention to them can provide better entry/exit points.
- Patterns and measured moves are key but you have to wait until a pattern is triggered and the trigger holds.
- Being patient and waiting for confirmation instead of trying to anticipate market movements.
- Risk is greatest when everyone who wants to buy has already done so – Apple is the latest example!
- Position sizing is my first and last line of defense.
- Leverage is for losers.