Trading Hints and Tips


1. OPPORTUNITY. There are dozens of these every day, unfortunately you can’t buy them all, so only pick the top 10 and then narrow them down to 2 to 3.
 This is done by using your buying criteria which is part of your trading plan which you already have written down. (Hopefully you have one?)

 2. BUYING and SELLING. I have a pre planned strategy which I have developed by trial and error; this was achieved by learning by my trading mistakes  and the mistakes of others.
 3. PATIENCE.This is definitely a virtue worth developing. Sometimes the market is going up in the right direction, but is not going as fast upwards as you  would like.  Be patient and use a “stop loss” to lock in those profits. However small they may be.  Also don’t always be in a hurry to “buy that next share” just because you have that money burning a hole in your pocket.  Do your homework and then you have chosen the right share for the right reasons and not just because it looked good 

 4. STRESS.If it is hurting! Don’t do it, cut your losses or be content with a small profit and get out. (more…)

The 13 Virtues, from Dylan Distasio

I am sure you have seen and heard the story of Benjamin Franklin’s 13 moral virtues, but here they are as a good reminder for all of us:

TEMPERANCE. Eat not to dullness; drink not to elevation.

SILENCE. Speak not but what may benefit others or yourself; avoid trifling conversation.

ORDER. Let all your things have their places; let each part of your business have its time.

RESOLUTION. Resolve to perform what you ought; perform without fail what you resolve.

FRUGALITY. Make no expense but to do good to others or yourself; i.e., waste nothing. (more…)

Keep perspective


IF you can keep your head when all about you
Are losing theirs and blaming it on you
If you can trust yourself when all men doubt you
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;

If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools: (more…)

Trading Lessons

The market is a tough battle.  Each day there are chances and opportunities to make money though, it is the greatest form of free market capitalism known to man.  It’s a vast ocean with treasures; we just have to be able to unearth them at the right moment.  We have the ability to navigate carefully through markets, put our bets out there and see where the chips fall.

But if we are too loose with our capital then we are headed for a bad ending.  Discipline is one of the keys to success:  learn your craft and practice.  Each day that passes is one more great learning experience – capture it, analyze it and grow from it.  Use a trading system, pay attention to the timeless patterns of price/volume and believe in what you see and not what you hear. (more…)

Trade Like an O’Neil Disciple -Book Review

The CANSLIM enthusiasts, and they seem to be legion if the reviews on Amazon are any indication, have nothing but praise for Trade Like an O’Neil Disciple by Gil Morales and Chris Kacher (Wiley, 2010). I decided to be a little more focused and less ebullient in this post and write about a trade setup not found in the standard O’Neil repertoire. Consider this a follow-up to yesterday’s discussion about the eye of ambiguity.

The setup is alternatively described as a pocket pivot or buying in the pocket. It is “an early base breakout indicator, which is designed to find buyable pivot points within a stock’s base shortly before the stock actually breaks out of its chart base or consolidation and emerges into new high price ground.” (p. 128) The pocket pivot indicator provides direction in what might be seen as an ambiguous situation. It is, the authors claim, particularly valuable in sideways moving markets.

A major virtue of a pocket pivot buy point is that it is a low-risk entry point—relatively close to support and far enough from resistance to be profitable even if the stock can’t break through to higher highs. Or, as the more optimistic authors claim, “the pocket pivot buy point technique can get an investor into a stock at a lower-risk price point and thereby make it more possible for the investor to sit through a pullback if the all-too-obvious new-high breakout buy point fails initially and the stock retrenches, corrects, or sells off.” (p. 129)

What are the characteristics of a pocket pivot buy point? “[A] stock should be showing constructive price/volume action preceding the pocket pivot. … [T]ighter price formations, that is, less volatility should be evident in the stock’s price/volume action as viewed on its chart. The stock should have been ‘respecting’ or ‘obeying’ the 50-day moving average during the price run that occurred prior to the time the stock began building its current base. … Except in very rare cases, … pocket pivots should only be bought when they occur above the 50-day moving average. Ideally, the stock’s price/volume action should become ‘quiet’ over the previous several days, which contrasts with the much larger and stronger volume move that comes on the pocket pivot itself. On the pocket pivot you want to see up-volume equal to or greater than the largest down-volume day over the prior 10 days.” (pp. 132-33)

The authors offer a series of variations on this generic trade setup. For instance, there’s the continuation trade: buying on volume after a pullback to the 10-day moving average. Or the bottom-fishing trade where a stock, after carving out a bottom, pushes through its 50-day moving average. They urge caution if a pocket pivot is too extended from its 10- or 50-day moving average when it begins its move or if a stock has been “wedging” upward instead of drifting downward before a pocket pivot. As they write, “context is everything.” (p. 162)

This setup is certainly not a revolutionary breakthrough in the world of technical analysis. In fact, anyone familiar with the literature might recognize several patterns rolled into one here. In the context of yesterday’s post, it is a “fast-follower” strategy because it requires a volume spike, created by the “first movers.”

SIX Ways to Improve Your Self-Discipline Today

1. Acknowledge Your Weaknesses – Whether cookies are the downfall to your diet, or you can’t resist checking your social media accounts every two minutes, acknowledge your pitfalls. Too often people either try to pretend their weaknesses don’t exist or they try to minimize the negative impact their bad habits have on their lives. For example, many smokers think, “I could quit if I wanted to,” because they don’t want to admit they’re hooked.

2. Establish a Clear Plan – No one wakes up one day suddenly blessed with self-discipline. Instead, you need a strategy. Whether you want to increase good habits like exercising more often, or you want to eliminate bad habits like watching too much TV, develop a plan that outlines the action steps you’re going to take to reach your goals.

3. Remove the Temptations When Necessary – Although we’d all like to believe we have enough willpower to resist even the most alluring enticement, it only takes one moment of weakness to convince ourselves to cave to temptation. Making it difficult to access those temptations can be pivotal to increasing self-discipline. If your weakness is Facebook, turn off the internet while you’re working. If you can’t resist overspending when you go to the mall, leave the credit card at home and only take a small amount of cash.

4. Practice Tolerating Emotional Discomfort – It’s normal to want to avoid pain and discomfort, but trying to eliminate all discomfort will only reinforce to yourself that you can’t handle distress. We can usually stand a lot more discomfort than we think we can. Practice allowing yourself to experience uncomfortable emotions like boredom, frustration, sadness, or loneliness and increase your tolerance to the negative emotions that you may experience as you increase your self-discipline. (more…)

26 Points For Traders

  1. First things first
    • Do you really want to trade?
  2. Examine your motives
    • Why do you want to trade?
    • Don’t trade for excitement.
  3. Match the trading method to your personality
    • Choose a method congruent with your personality and comfort
  4. It is absolutely necessary to have an edgeDerive a method
  5. Developing a method is hard work
  6. Skill versus hard work
  7. Good trading should be effortless
    • Be in sync with market
  8. Money Management and risk control
    • 1-2% AUM
  9. The trading planDiscipline
    • Draw up trading blueprint/business plan
  10. Understand that you are responsibleThe need for independence
    • your choices led to your results
  11. Confidence
  12. Losing is part of the game
  13. Lack of confidence and time-outs
  14. The urge to seek adviceThe virtue of patience
    • Get out of trade if you need an opinion
  15. The importance of sittingDeveloping a low risk idea
    • “Be right and sit tight”
  16. The importance of varying bet size
  17. Scaling in and out of trades
  18. Being right is more important that being a genius
    • Go for consistency trade-to-trade, not perfection
  19. Don’t worry about looking stupidSometimes action is more important that prudence
    • Don’t talk about your position
  20. Catching part of the move is just fine

Learn to be Disloyal

Loyalty many be a virtue in family ,friends ,and pets ,but it is a fatal flaw for a trader.Never have loyalty to a position.The novice trader will have  lots of loyalty to his original position.He will ignore signs that he is on the wrong side of the market ,riding his trade into a large loss while hoping for best.The more experience trader ,having learned the importance of money management will exit quickly once it is apparent  he has made a bad trade.However ,the truly skilled trader will be able to do a 180- degree turn ,reversing his position at a loss if market behaviour  points to such a course of action.

Learning to Trade from a Legend-Victor Niederhoffer

Study horse racing books. The odds against winning at a parimutuel racetrack are overwhelming. Yet some touts have systems that produce a profit (against all odds). Can you apply any of these horse racing principles to your trading?

• Write down trading prices (by hand). There were a ton of computers in Victor’s trading room. Yet Victor made me do price analysis by hand. He felt there was enormous virtue about getting close and comfortable with trading figures.

• All markets are related. Learn what a move in bonds does to gold. And to S&P futures or the Japanese yen. Don’t trade markets in isolation

• Only make a trade when the odds are at least 60% in your favor.

• Don’t take losses to heart. I lost $20,000 on a Friday, the first day I traded real money for Victor. I wiped out my trading account. After stewing over my losses all weekend, I offered to resign and refund my losses. Victor refused my resignation and put $20,000 back in my trading account.

• Don’t take wins to heart. I remember making a lot of money following (I thought) Victor’s instructions while he was away. When Victor returned, he was not impressed by the fact the firm made money. He told me that I had traded erroneously and was lucky to have survived my trades.

• Be a mentor. Victor was generous with his time and advice. Despite the fact that several employees exploited his generosity, Victor continued to help new traders.

•  Get out when the trade is over. All trades have a beginning and end (based on time and price). Get out whether you’re winning or losing when the time or price has been met.

• Write down your moves. Learn from your mistakes.

• Learn concentration and game strategy from champions in other disciplines (such as ping-pong and checkers).

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