Some Trading Secrets

  • Stop placement
    • Don’t place stops at round numbers (which are common support / resistance zones).
    • Place stops below support zones (above resistance zones) to give price every opportunity to move in desired direction.
  • Trade with the trend
    • Select stocks that are moving with the general market and industry trends.
  • Enter on breakouts near the yearly high
    • Breakouts from chart patterns within a third of the yearly high perform best (statistically). If price doesn’t rise within a few days, consider selling immediately.
  • Exit only on expected significant price turns
    • Don’t be so quick to sell. Learn to predict significant price turns.
  • Use trendlines as sell signals
    • If prices are trending up and then drop below a trendline, the trend isn’t up any longer. However it doesn’t mean that the trend is down.
    • Victor Sperandeo’s criteria to determine if a trend has changed from up to down: (i) price drops below an up-sloping trendline, (ii) lower high (or failed breakout), (iii) lower low.
  • Ignore news
    • Don’t believe scenarios spun by news outlets.

A Venerable Technique

JL-One of intelligent honest things that Livermore did was to get out of one market by selling a related market, inducing the other traders to think that there was weakness in one market which would carry over to the related market. The art of indirection and letting people use their own intelligence and inferences to come to their own conclusion. for example if he wanted to get out of cotton, he’d sell some coffee. If he wanted to get out of a common, he’s sell the preferred or a related company that owned a big chunk of it, like sell Christiana which owned general motors et al. This technique one wonders how often is it used today. When it happens, is it artful indirection or chance? How to quantify and what predictions to be made? Would the robots be smart enough to do this?

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