Archives of “Investment” tag

rss

Traders Can Control Only 2 Things

  
  Education
#  #  #  #  #  #

If you understand that you can only control two things in the stock market, the rest is easy. This understanding simplifies decision-making processes and lightens worry…

Your Cash

You can control the cash you have, whether it’s on-hand or in investments.

Entry & Exit Points or Your Stops

You can control where you get in a stock or where you get out of a stock. You can control where you get in a certain stock at a certain price or where you get out of a stock if it’s falling below.

As a stock is climbing higher and higher, it’s a profit point. It’s a point where you get out.

These are the only two things you can control: your cash and your stops. It makes things easy, doesn’t it?

We can’t control the wave of the market as individual investors. We are not the operators; the operators can control much more. We don’t have billons of dollars to put into one stop to make it move.

Of course you can control where your position is on spreads, but where are you getting in and where are you getting out? Your cash and your stops are in your control.

If you focus and remember the two things you can control, the worry will subside…

6 Points For Traders

  
  Education
#  #  #  #  #  #  #  #

1.  Consistently profitable trading is not about discovering some magic way to find profitable trades.
2.  Consistently successful trading is founded on solid risk management.
3.  Successful trading is a process of doing certain things over and over again with discipline and patience.
4.  The human element of trading is enormously important and has been ignored by other authors for years.  Recognizing and managing the emotions of fear and greed are central to consistently successful speculation.
5.  It is possible to be profitable over time even though the majority of trading events will be losers.  “Process” will trump the results of any given trade or series of trades.
6.  Charting principles are not magic, but simply provide a structure for a trading process.

Jesse Livermore Quotes -Must Read & Follow

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

1) The stock market is never obvious. It is designed to fool most of the people, most of the time.

2) Play the market only when all factors are in your favor. No person can play the market all the time and win.There are times when you should be completely out of the market, for emotional as well as economic reasons.

3) Do not use the words “Bullish” or “Bearish.” These words fix a firm market-direction in the mind for an extended period of time. Instead, use “Upward Trend” and “Downward Trend” when asked the direction you think the market is headed. Simply say: “The line of least resistance is either upward or downward at this time.”Remember, don’t fight the tape!

4) The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.

5) The only thing to do when a person is wrong is to be right, by ceasing to be wrong. Cut your losses quickly, without hesitation. Don’t waste time. When a stock moves below a mental-stop, sell it immediately. (more…)

10 Rules If You USE Charts

  
  Education
#  #  #  #  #  #  #  #  #  #

Rule 1 – If you cannot see trends and patterns almost instantly when you look at a chart then they are not there. The longer you stare, the more your brain will try to apply order where there is none.
If you have to justify exceptions, stray data points and conflicting evidence then it is safe to say the market is not showing you what you think it is.
Rule 2 – You can torture a chart to say anything you want. Don’t do it.
This is very similar to Rule 2 but it there is an important point to drive home. You can cherry pick indicators to justify whatever biases you bring to the table and that attempts to impose your will on the market. You cannot tell the market what to do – ever.
Rule 3 – Be sure you check out one time frame larger than the one in which you are operating (a weekly chart for a swing trader, a monthly chart for a position trader).
It is very easy to get caught up in your own world and miss the bigger picture getting ready to smack you. It can mean the difference between buying the dip in a rising trend and selling a breakdown in a falling trend.
Rule 4 – Look at both bars (or candles) and close-only line charts to see if they agree. And look at both linear and semi-logarithmic scaled charts when price movements are large.
Short-term traders can ignore the latter since prices are not usually moving 30% in a day. But position traders must compare movements at different price levels.
As for bars and lines, sometimes important highs and lows are set by intraday or intra-week movements. And sometimes intrday or intra-week highs and lows are anomalies that can safely be ignored. Why not look at both?
Rule 5 – Patterns must be in proportion to the trends they are attempting to correct or reverse. I like the trend to be at least three times as long as the pattern. (more…)

Trading as a Business- Dick Diamond :Book Review

  
  Education
#  #  #  #  #

Dick Diamond has been trading fulltime since 1965. By my calculation that’s fifty years, although the subtitle of Trading as a Business(Wiley, 2015) is The Methods and Rules I’ve Used to Beat the Markets for 40 Years. Ah yes, at the beginning of his trading career Diamond didn’t beat the market. In fact, in late 1968, when he had positions in fifteen low-priced, go-go AMEX stocks, he went on a vacation and let the positions ride. Two weeks later he had lost 70% of his trading capital. It was a pivotal moment: either throw in the towel or change course.

Diamond slowly morphed into a short-term technical trader, comfortable with both long and short trades. He incorporated options into his trading arsenal. After the CME introduced E-mini futures in 1997, they became his preferred day-trading vehicle.

In this book Diamond shares the MetaStock templates he uses to make his trades. Traders who don’t have the MetaStock platform can most likely replicate three of his four templates—the moving average template, the moving ribbons template, and the RMO template. But they won’t have access to the Bressert indicator, which is based on cycle analysis and shows trend direction.

Diamond is always on the lookout for the 80/20 trade, the high-probability setup. Throughout the trading day he reads the market with his indicators, asking (1) whether the indicators are flat, trending, or somewhere in between, (2) whether the moving averages are separating or converging, (3) whether any divergences between price and momentum are developing, (4) whether the indicators are confirming each other or are in conflict, and (5) what the next most likely 80/20 trading opportunity is. (p. 118)

Trading as a Business is a thin book, devoted primarily to describing and illustrating the four templates. But it’s a decent starting place for the would-be technical trader.

TEN Elements of Successful Trading

  
  Education
#  #  #  #  #

In trading you have heard that bulls make money, bears make money, but pigs get slaughtered.

Here is a more expanded truth:

Traders that have the right mind set, money management, and winning method make money, those that are missing even one of the three, will eventually ‘blow up’ their account. This applies to both professionals and amateurs.

Whether you are a swing trader just trading the market with the $SPY ETF, a growth investor up to your eyeballs in Google and Apple, or even a day trader, these principles still apply to you. I believe these are universal principles for all traders, many professionals have proven they are not bigger than these laws of trading, by destroying the capital in hedge funds and even entire banks.

Trading Methodology:

  1. Winning system-Only trade tested systems with a positive expectancy in the long term.
  2. Faith– Your system has to allow you to trade your beliefs about the market.
  3. Risk/Reward-Never trade unless your profit expectations are greater than your capital at risk.

(more…)

Art Huprich’s Market Truisms and Axioms

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

Raymond James’ P. Arthur Huprich published a terrific list of rules at year’s end. Other than commandment #1, they are in no particular order:

• Commandment #1: “Thou Shall Not Trade Against the Trend.”

• Portfolios heavy with underperforming stocks rarely outperform the stock market!

• There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again, mostly due to human nature.

• Sell when you can, not when you have to.

• Bulls make money, bears make money, and “pigs” get slaughtered.

• We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us.

• Understanding mass psychology is just as important as understanding fundamentals and economics.

• Learn to take losses quickly, don’t expect to be right all the time, and learn from your mistakes.

• Don’t think you can consistently buy at the bottom or sell at the top. This can rarely be consistently done.

• When trading, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in Trading all have the same trait: An ability to shift on a dime when the shifting time comes.”

• Any dead fish can go with the flow. Yet, it takes a strong fish to swim against the flow. In other words, what seems “hard” at the time is usually, over time, right.

• Even the best looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.

• When trading, if a stock doesn’t perform as expected within a short time period, either close it out or tighten your stop-loss point.

• As long as a stock is acting right and the market is “in-gear,” don’t be in a hurry to take a profit on the whole positions. Scale out instead.

• Never let a profitable trade turn into a loss, and never let an initial trading position turn into a long-term one because it is at a loss.

• Don’t buy a stock simply because it has had a big decline from its high and is now a “better value;” wait for the market to recognize “value” first.

• Don’t average trading losses, meaning don’t put “good” money after “bad.” Adding to a losing position will lead to ruin. Ask the Nobel Laureates of Long-Term Capital Management.

• Human emotion is a big enemy of the average investor and trader. Be patient and unemotional. There are periods where traders don’t need to trade.

• Wishful thinking can be detrimental to your financial wealth.

• Don’t make investment or trading decisions based on tips. Tips are something you leave for good service.

• Where there is smoke, there is fire, or there is never just one cockroach: In other words, bad news is usually not a one-time event, more usually follows.

• Realize that a loss in the stock market is part of the investment process. The key is not letting it turn into a big one as this could devastate a portfolio.

• Said another way, “It’s not the ones that you sell that keep going up that matter. It’s the one that you don’t sell that keeps going down that does.”

The table below depicts the percentage gain necessary to get back even, after a certain percentage loss. (more…)

Do You want to Win or Lose at Trading?

  
  Education
#  #  #  #  #  #  #

There are things that make you win in the stock market over the long term and then there are things that make you lose quickly even in the short term. The key to trading success is learning the difference quickly and doing what really works not what you emotions or opinions tell you to do.
If you want to win then you must create your own trading plan and follow it, if you want to lose just trade whatever you want whenever you want based on your own opinion.
If you want to win then you must control your risk carefully with only 1% or 2% of your capital at stake in every individual trade, if you want to lose then just trade huge position sizes, put all your chips on the table.
If you want to win plan your entries and exits before you enter a trade then follow them, if you want to lose ask for everyone’s opinion and just make decisions based on other people.
If you want to win cut your losses short and let your winners run, if you want to lose hold your losers and hope that they come back and sell your winners quickly to lock in gains.
If you want to win trade only the best high quality stocks in the market, if you want to lose trade the junk and hope for a miracle come back.
If you want to win then build complete confidence for your system through chart studies and back testing, if you want to lose trade with no idea of if what you are doing even works.
If you want to win go with the current trend of the market, if you want to lose fight the trend and trade against it.
If you want to win then go long the hottest stocks in a bull market, if you want to lose short the hottest stocks in a bull market.
Do what makes money not what you feel like doing.

39 Powerful Trading Tips by Ed Seykota That Will Rock Your Trading!

  
  Education
#  #  #  #  #  #  #

Quotes by Ed Seykota

Technical analysis

1. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.

2. If I were buying, my point would be above the market. I try to identify a point at which I expect the market momentum to be strong in the direction of the trade, so as to reduce my probable risk.

3. If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.

4. I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.

5. Before I enter a trade, I set stops at a point at which the chart sours. (more…)

Wisdom from William Eckhardt

  
  Education
#  #  #  #  #  #  #  #  #  #

1. What is the state of the market?
2. What is the volatility of the market?
3. What is the equity being traded?
4. What is the system or the trading orientation?
5. What is the risk aversion of the trader or client?
Regardless of how you trade or invest … you better have those answers in advance of betting real money. 

Go to top