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Who Am I ?

I was born in Shrewsbury, Mass to a family of subsistence farmers.  I was thin and often sickly as a child, but a very good student, especially in math.  I ran away from home at the age of 14 with the blessing and help of my mother to avoid being pulled into the life of subsistence farming that my father intended for me.

My first job was as a quote boy (posting stock quotes on a chalk board) at Paine Webber in Boston, Mass. At the outset I had no money, no contacts, no education and no support…not exactly a traditional formula for winning the game of life.  However, it was here, in these early years, that I noticed the patterns that the stock quotes followed, began to develop my system for trading the markets and made my first trades.

My first trades were made in what were then known as “bucket shops.”  These were generally unlicensed brokerage houses that were little more than backroom gambling houses.  Most bucket shop customers lost money, but I did not because my trading was based on the “tape” (the ever-changing stock price patterns printing on the ticker tape).  I am known as perhaps the best pure “tapereader” of all time.  It was also during this time that I came to be known as the Boy Plunger for my willingness to place large “bets” on trades for which I had great conviction. (more…)

Anticipation ,Action & Reinforcement

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.

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.