Archives of “price patterns” tag

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Wisdom From Bruce Kovner

  
  Education
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On trading ranges and price patterns:

 

…as a trader who has seen a great deal and been in a lot of markets, there is nothing disconcerting to me about a price move out of a trading range that nobody understands.
…Tight congestions in which a breakout occurs for reasons that nobody understands are usually good risk/reward trades.
…The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.
…The general rule is: the less observed, the better the trade.

On predetermined risk points:

Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis… I always put my stop behind some technical barrier.”
I never think about [stop vulnerability], because the point about a technical barrier — and I’ve studied the technical aspects of the market for a long time — is that the market shouldn’t go there if you are right. (more…)

Thinking Without Words

  
  Education
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Dont Miss to watch Video

Here is an eye-opening video of what can be accomplished with an abacus.

Notice that what’s really accomplished here is rapid thinking that does not take place in words.

This is very relevant to recognizing patterns in order flow and very short-term price patterns.

The key is to develop a “language” that is not verbal. The soroban provides a non-verbal language.

17 Points from William J. O’Neil

  
  Education
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READITWilliam O’Neil is likely one of  the greatest traders of our time based on many things. O’Neil made a huge amount of money while he was only in his twenties, enough to buy a seat on the New York Stock Exchange. He runs an amazingly successful investment advisory company to big money firms. He is also the creator of the CAN SLIM investment strategy which the American Association of Individual Investors named  the top performing investment strategy from 1998 to 2009. This non-profit organization tracked more than 50 different investing methods, over a 12 year time period. CANSLIM showed a total gain of 2,763% over the 12 years. The CAN SLIM method is explained in O’Neil’s book “How to Make Money in Stocks”

Those closest to O’Neil that have seen his private trading returns say that they are greater tna Warren Buffett of George Soros over the same period of time. Here are some of the best things that he is quoted as having said.

RISK MANAGEMENT

  1. I make it a rule to never lose more than 7 percent on any stock I buy. If a stock drops 7 percent below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation.
  2. Some people say, “I can’t sell that stock because I’d be taking a loss.” If the stock is below the price you paid for it, selling doesn’t give you a loss; you already have it.
  3. Letting losses run is the most serious mistake made by most investors.
  4. The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.

METHOD

  1. 90% of the people in the stock market, professionals and amateurs alike, simply haven’t done enough homework.
  2. The first step in learning to pick big stock market winners is for you to examine leading big winners of the past to learn all the characteristics of the most successful stocks. You will learn from this observation what type of price patterns these stocks developed just before their spectacular price advances. (more…)

The Pain is Unjustified

  
  Education
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pain-I’ve always said, you don’t have to blow out an entire account before we figure out the significance of being disciplined. You don’t need to feel pain to learn that lesson. You just have to commit to the process of becoming disciplined. It poses a more fundamental question, are you willing to do what it takes to become consistently profitable?

How do we overcome this pain and impulsiveness? Through belief in a system, and a full understanding of the probabilities. You MUST embrace loss as a part of this profession, if you don’t you are in the wrong industry. Do not place another trade. This belief comes with repetitions. The belief has to be earned through proof and practice.

Before you proceed with your next trade, I want you to think about the power of your MIND. (more…)

THE THREE PHASES OF A TRADE

  
  Education
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The ANTICIPATION Phase:  this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present.  Technical analysis is nothing more than finding previous price patterns matched with current market conditions.  Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.

The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process.  Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target (P2), fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.

The REINFORCEMENT phase occurs after the trade is closed.  Whether or not the trade is a win, lose, or draw, the self-talk immediately following trade closure is vitally important for the next trade, and even the next series of trades, as future trades can be negatively or positively affected by building pathways to future success.  These pathways are neurologically based and can make or break a successful trading career.  While it is important to ANTICIPATE right side chart OUTCOMES, what is more important is DEVELOPING right side brain reinforcement.

The Pain is Unjustified…

  
  Education
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Think about this clearly. Breaking your rules or being impulsive in trading causes loss. Loss causes PAIN. REAL PAIN. We are responsible for the pain we create for ourselves.

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I’ve always said, you don’t have to blow out an entire account before we figure out the significance of being disciplined. You don’t need to feel pain to learn that lesson. You just have to commit to the process of becoming disciplined. It poses a more fundamental question, are you willing to do what it takes to become consistently profitable? (more…)

Possibility

  
  Education
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Traders often hear about the potential benefits of preparing actionable trade plans prior to the next trading day. The goal of such preparation is to make yourself immune to mental edge breakdown. One of the greatest threats to your mental edge is coming across something that’s unexpected during the trading day. Seeing an unexpected price move (especially one you perceive to be a big move) is likely to stress and panic you and therefore cause your psychology to shift into an emotional, reactive state. An effective way to prevent this is to prepare with possibility mapping. 
Possibility mapping is a process which will mentally prepare you to expect the potentially unexpected, and therefore will allow you to numb, in advance, any potential emotional responses.  (more…)

Anticipation & Action

  
  Education
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The ANTICIPATION Phase:  this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present.  Technical analysis is nothing more than finding previous price patterns matched with current market conditions.  Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.

The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process.  Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target (P2), fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.

THE THREE PHASES OF A TRADE

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

The ANTICIPATION Phase:  this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present.  Technical analysis is nothing more than finding previous price patterns matched with current market conditions.  Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.

The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process.  Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target (P2), fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions. (more…)

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