Archives of “finance” tag

rss

David Halsey,Trading the Measured Move -Book Review

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #

David Halsey throws out the old notion of a measured move: that you copy an AB move up (or down) and paste it on a retracement low (or high) of C to get your price target D. In Trading the Measured Move: A Path to Trading Success in a World of Algos and High Frequency Trading(Wiley, 2014) he substitutes Fibonacci levels.

He uses three trade setups: the traditional 50% retracement measured move (MM), the extension 50% MM, and the 61.8% failure. When a trade is entered, its target is 123% from a swing high or low (and sometimes from a breakout) that is followed by a retracement (50% in the traditional setup). That is, the target is AB + 23%. Halsey shows both successful and failed MM trades on charts—unfortunately usually grey bars on a black background, which makes them hard to decipher.

The measured move trade setups are not stand-alones. Halsey discusses the use of multiple time frames, seasonality, NYSE tools, tick extremes and divergences, and gaps. He also discusses how to manage positions and take profits, advanced (actually, pretty basic) risk management, trading psychology, and having a trading plan and journal. (more…)

W. D. GANN’S 24 TIMELESS STOCK TRADING RULES

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #

1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.
2. Use stop loss orders. Always protect a trade.
3. Never overtrade. This would be violating your capital rules.
4. Never let a profit run into a loss. After you once have a profit raise your stop loss order so that you will have no loss of capital.
5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.
6. When in doubt, get out and don’t get in when in doubt.
7. Trade only in active markets. Keep out of slow, dead ones.
8. Equal distribution of risk. Trade in two or three different commodities if possible. Avoid tying up all your capital in any one commodity.
9. Never limit your orders or fix a buying or selling price.
10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.
11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic.
12. Never buy or sell just to get a scalping profit.
13. Never average a loss. This is one of the worst mistakes a trader can make.
14. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.
15. Avoid taking small profits and big losses.
16. Never cancel a stop loss order after you have placed it at the time you make a trade.
17. Avoid getting in and out of the market too often.
18. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money.
19. Never buy just because the price of a commodity is low or sell short just because the price is high.
20. Be careful about pyramiding at the wrong time. Wait until the commodity is very active and has crossed resistance levels before buying more, and until it has broken out of the zone of distribution before selling more.
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short.
22. Never hedge. If you are long one commodity and it starts to go down, do not sell another commodity short to hedge it. Get out at the market: Take your loss and wait for another opportunity.
23. Never change your position in the market without a good reason. When you make a trade, let it be for some good reason, or according to some definite rule; then do not get out without a definite indication of a change in trend.
24. Avoid increasing your trading after a long period of success or a period of profitable trades.

How To Reduce The Effects of GREED?- 6 Points

  
  Education
#  #  #  #  #  #  #  #
  • Trade Small: If you are a beginner, trading a small account can be a worthwhile exercise. Use small position sizes and manage risk fiercely. Many traders get into trouble when they haven’t considered risk exposure while taking positions that are too large for their accounts.
  • Expect to Lose: Be prepared to lose when you enter a trade and DEFINE how much you are ready to lose. Don’t panic and change your mind if the market reaches that point.
  • Plan to WIN: Likewise, DETERMINE the amount of profit that is enough to quench your Greed Buds.
  • Time Horizon: Trade with short time horizon. Even if you are not an intraday trader, a shorter-term viewpoint in today’s volatile market environment gives a quick feedback about your analysis and can decrease the time you are exposed to the unpredictable marketplace.
  • Scared Money Never Wins: Trade only with money you can afford to lose that is less important and not significant enough to be protected. Treat your money well and trade well.
  • Nothing Ventured, Nothing Gained:  Be a little greedy! If you don’t trade, you are engulfed by fear. Come up with a trading style that cuts down the influence of greed and fear and is easy for you.

10 Greedy Characteristics

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #

1.  You find yourself forgetting your rules.  Which during day trading is the last thing you want to happen since your profit margins are often based on smaller movements.

2.  When reviewing your pre-market plays, every stock looks like a winner.

3.  Shortly after opening your position you see a price target that is much higher but you have no justification for the target.

4.  Trading feels stressful all of the time.  From the minute you get up in the morning, until you close your last position.  Instead of approaching trading with a calm head, you have a constant feeling of fighting and living on the edge.

5.  You stop reviewing your trades.  If someone were to ask your win/loss percentage over the last week you would have no idea; however, you would know how much money you need to make for the week.

6.  You abandon limit orders and start placing more and more trades at market.  Most of the times this will occur when you are trying to get into the position, because you can’t stand the idea of not being in on the winning trade.

7. You start to over trade.  If you normally put on 3 trades per day, you will now find yourself placing 6 or more trades per day.  This sort of behavior will run its course as the increase in trading activity while abandoning your day trading rules always points to losing money. (more…)

Speculation, Trading, and Bubbles-by José A. Scheinkman (Book Review )

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

SPECULATION-TRADING-BUBBLESTo pay tribute to one of its most famous graduates, Kenneth J. Arrow, Columbia University launched an annual lecture series dealing with topics to which Arrow made significant contributions—and there were many. Speculation, Trading, and Bubbles stems from the third lecture in the series given by José A. Scheinkman, with adapted transcripts of commentary by Patrick Bolton, Sanford J. Grossman, and Arrow himself. I’m going to confine myself here to a few excerpts that encapsulate some of the lecture’s key points, ignoring the often perceptive commentary.
Scheinkman offers a formal model of the economic foundations of stock market bubbles in an appendix to his lecture, but he lays out its basic ideas in the lecture proper. The model rests on two fundamental assumptions—“fluctuating heterogeneous beliefs among investors and the existence of an asymmetry between the cost of acquiring an asset and the cost of shorting that same asset. … Heterogeneous beliefs make possible the coexistence of optimists and pessimists in a market. The cost asymmetry between going long and going short on an asset implies that optimists’ views are expressed more fully than pessimists’ views in the market, and thus even when opinions are on average unbiased, prices are biased upwards. Finally, fluctuating beliefs give even the most optimistic the hope that, in the future, an even more optimistic buyer may appear. Thus a buyer would be willing to pay more than the discounted value she attributes to an asset’s future payoffs, because the ownership of the asset gives her the option to resell the asset to a future optimist.” (pp. 15-16)

(more…)

MRI’s of Succesful Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

I’ve seen this study making the rounds on several websites now as a type of neuroeconomic confirmation of Buffetological principles…

Perhaps procedure might be slightly useful as a means of seeing physical brain improvement by training– such as that found through meditative practices.

“Traders who buy more aggressively based on NAcc signals earn less. High-earning traders have early warning signals in the anterior insular cortex before prices reach a peak, and sell coincidently with that signal, precipitating the crash. These experiments could help understand other cases in which human groups badly miscompute the value of actions or events.”

“Neuroeconomists Confirm Warren Buffet’s Wisdom”: (more…)

10 Quotes by Mark Douglas

  
  Education
#  #  #  #  #  #  #  #

reading“I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!”
-Mark Douglas

“There is a random distribution between wins and losses for any given set of variables that defines an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like “right” and “wrong” or “win” and “lose” no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”
-Mark Douglas

The less I cared about whether or not I was wrong, the clearer
things became, making it much easier to move in and out of positions,
cutting my losses short to make myself mentally available to take the next opportunity.
– Mark Douglas (more…)

30 Quotes For Traders/Investors

  
  Education
#  #  #  #  #  #  #

“Wall Street people learn nothing and forget everything.”  Ben Grahameyes-MIRC

“ Buy on the cannons, sell on the trumpets.” Old French Proverb

“A stock broker is one who invests other people’s money until its all gone.”  Woody Allen

“It is fortunate for Wall Street as an institution that a small minority of people can trade successfully and that many others think they can.” Ben Graham (more…)

10 Must Reads Books

  
  Education
#  #  #  #  #  #  #  #

#10. Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris

“Trading and Exchanges demystifies the complex world of trading. It is a must for anyone interested in investing in the public markets” –Maria Bartiromo, CNBC News Anchor

“My goodness, if only I had known this, or hadn’t let it happen to me!” or, “never again, the b##tards!” – Victor Niederhoffer

‎#9. The Art of War by Sun Tzu

The classical Chinese War Manual written 2500 years ago that is a must read at every Military Academy in the world still! Why do we need to understand war? Begin to think in the context of the markets, should I take this trade, should I not the type of conflict present in everyday trading life. ‎

#8. Statistics Without Tears: A Primer for Non-Mathematicians by Derek Rowntree

This primer without any of the mathematical formula and equations uses words and diagrams to help readers understand what statistics is and how think statistically. ‎

#7. Twenty-Eight Years in Wall Street by Henry Clews (more…)

Go to top