1) Do I treat my trading/investing like a business? Have I prepared for it the way I would for any other business?
2) Do I have a business plan – a working document to guide my trading business?
3) Do I have a set of written rules to follow?
4) Am I following a regular procedure to prevent mistakes? A mistake means not following your rules that you have laid out for yourself.
5) Do I have a tested trading methodology?
6) Do I know how my methodology will perform in different kinds of markets?
7) Do I know what kind of market we are currently in now and what to expect from my methods in such a market? Should I be trading these markets?
8) Do I trade with exact exit points that are preplanned for every trade (position) I take?
9) Have I developed specific objectives for my trading/investing?
10) Do I understand that I achieve my objectives through a POSITION SIZING METHOD? Have I developed a specific position sizing method to meet my objectives?
11) Do I truly understand the importance of all the questions mentioned above?
12) Do I understand that I create my own trading/investment results through my thoughts and beliefs?
13) Do I accept full responsibility for that creation?
14) Do I regularly work on myself to make sure that I follow the very important points (questions) above? (more…)
The title of this book is misleading, this book is not about trend trading. This book is about swing trading. This is a book about specific trading setups for swing trading using technical analysis. It gives you criteria for generating long and short trading ideas using any simple trading software.
This is a very basic book and goes in to very basic information like how to set up broker account, which broker to look for, what computer you need, what kind of Internet connectivity and so on. The first few chapters take beginner readers through these basic things and basic introduction to chart reading and technical analysis..
The second part of the book deals with determining overall market direction. Thomas Carr describes trend trading as he practices as a way to capture bulk of major moves in a trending stocks. For this one must enter after a new trend has started and exit before the trend ends. The author recommends setting up a watchlist of possible trend trading candidates using three criteria:
- Price: between 10 and 100
- Average Daily Volume: 500000 plus
- Beta: greater than 2
Once you set up a list like that the author suggest using technical analysis to enter or exit. How to play these setups is determined by the trend of overall market. Thomas Carr describes five different kinds of market conditions:
- Bullish Strongly trending
- Bullish Weakly Trending
- Bearish Strongly Trending
- Bearish Weakly Trending
- Range Bound
He suggests focusing on long plays in first two types of market , short plays in the next two types of market, and a long and short approach in last type of market. He uses 20 and 50 day moving average to determine above 5 kinds of market conditions.
Part three of the book talks about specific setups. Specific setups are set of conditions a stock must meet to qualify for a bullish or bearish entry. Thomas Carr describes five bullish and five bearish setups. He provides detailed guidelines for scanning for these set ups and narrowing stocks from these scans. He also provides alternative scans for same set ups.
Five Bullish Setups
- The pullback
- The coiled spring
- The bullish divergence
- The blue sky breakout
- The bullish base breakout
Five Bearish Setups
- The relief rally
- The bearish divergence
- The gap down
- The blue sky breakdown
- The rising wedge breakdown
This section has many good ideas and while the specific setups mentioned in the book may or may not be profitable, this book will give you lot of ideas to create your own setups. All these setups can be easily scanned in Telechart. The author discusses various approach to entries and exits post trend identification. Last part of the book deals with options and how to trade the above setups using option.
Overall this is a very simple book on swing trading with some good ideas for trading setups for beginners. One major negative in this book is blatant self promotion by the author of his own prowess and website. It is excessive and irritating.
While trading is a game of math, probabilities, charts, and earnings it is also a mind game. Many times a trader’s beliefs will determine their success more than anything else. All traders start out believing it is possible to make money in the markets. Many want to earn their living one day by trading. However it is perseverance, beliefs, and mental determination that will determine who wins and who just quits. Shockingly the majority of millionaire traders lost most of their accounts when they started or they experienced huge draw downs while learning lessons the hard way.
- 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.
- 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.
- 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.
- 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.