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10 Essential Trading Words

  
  Education
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1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum. (more…)

Avoid Tick charts

  
  Education
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TICKCHARTWe know that the random element in the market represents at least 40 to 60 percent activity. Therefore, it’s not logical to look at every tick or to think that every tick or every chart formation has meaning. They don’t. There are too many traders trying to look at the markets from too stringent an analytical viewpoint. Most of what happens in the markets is meaningless. Why try to interpret every little movement, every little reversal, every little tick? In trying to do too much, they’re actually paying too much attention to the market. You have to keep a distance from the market. Only then will you have the psychological resources to let your profits ride. You won’t be looking at every tick and interpreting it in a fearful way.

My 10 Favorite Nicolas Darvas Quotes

  
  Education
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My favorite Nicolas Darvas quotes from the book on the subject of:
Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.”
Technical Analysis versus Predictions
“I believe in analysis and not forecasting.”
Trading Psychology
“I became over-confident, and that is the most dangerous state of mind anyone can develop in the stock market.”
Risk Management

“I decided never again to risk more money than I could afford to lose without ruining myself.”
Fundamental Analysis

“All a company report and balance sheet can tell you is the past and the present. They cannot tell future.”
Trend Following
“I made up my mind to buy high and sell higher.”
The Market tells its own story best

I accepted everything for what it was-not what I wanted it to be.”

Trading Discipline

  
  Education
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Trading DisciplineEmotions are probably the biggest obstacle any trader has to overcome. Many traders become losers because they can’t follow a plan. They see a couple of losses, get excited, abandoned the plan and start to take wild shots at the market.

Traders who develop a sound set of trading rules that match their financial situation with their objectives, and then stick with those rules, increase their chances of becoming big winners. Trading discipline can be more important than your trading system.

Discipline means you must become mechanical in making trades when certain price actions occur. You must shut off your emotions, and not accept one trading signal over another. Disciplined traders let profits run and keep losses short by following rigid guidelines. (more…)

Five market scenarios that place you at the most risk.

  
  Education
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FIVE-







  1. 1.Bad Markets – A good pattern won’t bail you out of a bad market, so move to the sidelines when conflict and indecision take hold of the tape. Your long-term survival depends on effective trade management. The bottom line: don’t trade when you can’t measure your risk, and stand aside when you can’t find your edge.
  2. Bad Timing – It’s easy to be right but still lose money. Financial instruments are forced to negotiate a minefield of conflicting trends, each dependent on different time frames. Your positions need to align with the majority of these cycles in order to capture the profits visualized in your trade analysis.
  3. Bad Trades – There are a lot of stinkers out there, vying for your attention, so look for perfect convergence before risking capital on a questionable play, and then get out at the first sign of danger. It’s easy to go brain dead and step into a weak-handed position that makes absolutely no sense, whether it moves in your favor or not. The bottom line: it’s never too late to get out of a stupid trade.
  4. Bad Stops – Poor stops will shake you out of good positions. Stops do their best work when placed outside the market noise, while keeping risk to a minimum. Many traders believe professionals hit their stops because they have inside knowledge, but the truth is less mysterious. Most of us stick them in the same old places.
  5. Bad Action – Modern markets try to burn everyone before they launch definable trends. These shakeouts occur because most traders play popular strategies that have been deconstructed by market professionals. In a sense, the buy and sell signals found in TA books are turned against the naïve folks using them.

5 Facts for Speculators & Traders

  
  Education
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1) It’s not by making large profits that money is made over time. It’s by consistently keeping losses small in relation to profits. 
2) Making Money and Being Right are at opposite ends of the performance spectrum, and — very surprisingly to most — most professional traders admit their primary job is to minimize losses, NOT focus on being right. Why? Minizing losses (well over 50% of the time losses can’t be avoided) ensures their average winner will be greater in relation to the average loser. 
3) No one knows FOR SURE how much profit any trade is likely to make. Fortunately, it is possible to know THE INITIAL RISK a trader is willing to lose. 
4) Projection of future prices are only a BEST GUESS, never a 100% certainty. 
5) Top traders only control three things all the time: Initial Risk, Exits, and EMOTIONS…  

My Checklist :During and After the Trade

  
  Education
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checklist-1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others? (more…)

Book Review :Sell & Sell Short

  
Analysis, Education
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Sell and Sell Short (Wiley Trading) by Alexander Elder

If you are searching for a book on trading stocks then look no further, this is it. I have been a successful trader for years and read over 160 books on trading,and in my opinion this is one of the very best. Alexander Elder actually read the change in the market from bull to bear in late 2007 and was able to get this books first edition released in early 2008 when it was needed most.

While as the title suggests it teaches when to sell your stocks for profits, and also does the best job I have seen on explaining short selling and when technical indicators show to short. This book is a complete book for any trader. The main lessons of this book is when to lock in profits and exit a trade using a target, and how to double your potential for profits by not only buying stocks, but also selling stocks short and buying them back at a lower price for profit. Professionals sell short because while overall the stock market drifts upward, when a stock falls it falls over
twice as fast as it rises. I sell short and it is a powerful tool when used correctly. This book will show you when it is appropriate to short.

Dr. Alexander Elder is the only author I am aware of that integrates trading psychology, money management, technical analysis and keeping a trading journal into one book. These four factors will determine whether you are successful in the market or not, even more than the trading method you choose.

You will learn the three great divides in trading:

technical vs. fundamental
trend vs. counter trend
discretionary vs systematic
The author follows a discretionary, technical approach trading counter trend for the most part. However what you learn in this book can be applied to any type of trading. The authors own technical approach uses prices, volume, exponential moving averages (13 day, 26 day), envelopes, MACD, and force index. Limit your tools to no more than five, more is less, any more just causes confusion. The main method you will learn in this book is using the moving averages as a technical base for agreed upon value and buying at the lower edge of the envelope and selling at the high edge of the envelope when you have favorable MACD and force index agreement, or buying at value between the EXP MAs.

If you are going to be a trader you must follow the money management suggestions
in this book. NEVER risk more than 2% of your total equity on a trade, and if you lose 6% of your equity in a month you must stop, clear your head and start back next month. If you follow the 2% rule from the book, it will be a major life lesson in your trading and save you a ton in equity draw downs and will almost completely eliminate your risk of ruin. (more…)

RBI data :Can create Tremor in Bank Stocks

  
Analysis, Economy, Education
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 After looking at the number of Indian Banks….it looks “All is not well ” The numbers are reminiscent of the previous rate hike cycle. The overall asset quality of Indian banks has started deteriorating. The Indian entities endured a long and painful exercise of cleaning up their asset quality. However, they are once again facing problems sustaining the same.



The latest RBI data shows that the Indian banking system’s gross and net NPAs have risen by 50% YoY and 25% YoY respectively. This certainly is a cause for concern. Banks can distort their NPA proportion by growing assets aggressively. But unless they check the quality of growth, their profits are sure to get eroded.

12 Market Wisdoms from Gerald Loeb

  
  Education
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1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find. (more…)

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