Archives of “Wheat” tag

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A Trader’s 5 Best Teachers

  
  Education
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Trading Losses: There are two types of losses, one loss is caused by the market simply not being conducive for the profitability of your system. The other loss is due to your lack of discipline causing your system not to work. If you followed your trading plan and had a loss that is to be expected. If you are trading a proven and tested method then you have simply learned that taking a loss is simply part of trading. However if your breach of discipline caused your loss, whether not taking a stop, over riding your plan, not taking an entry, trading too big, etc. then it is time to learn why you had the loss. Ego? Fear? Greed? Overconfidence? Laziness? and many other things cause losses. It is crucial that you learn why you broke your trading plan so you do not repeat the mistake again.

Charts: Studying the past price action of charts is very educational. It will show you how prices have reacted at  support/resistance levels in the past along with moving averages and any other indicators that you may choose. It is important that you understand how your market has historically traded whether it is currencies, commodities, stocks, or bonds. It is crucial that you learn how to identify a trend, a swing trade, and a range bound market. (more…)

A Deal in Wheat

  
  Education
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Frank Norris, author of The Pit, wrote this short story in the early 1900s. It’s critical of the grain trade as it paints the farmers and consumers as victims. Still, the story is a very quick and easy read. Also attached to this link are some other great stories of the old and new west.

Many valuable trading lessons here.

Jesse Livermore Advice – How To Trade In A Bull Market

  
  Education
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The first quote is from the foreword by Jack Schwager the ensuing excerpt in my opinion is one of the most important passages in ‘Reminiscences’. Enjoy!

I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.

In Fullerton’s there were the usual crowd. All
grades! Well, there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others.
He did not seem very keen to get tips that is, he never asked the talkers what they’d heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn’t donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.
The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap’s answer was always the same.
The customer would finish the tale of his perplexity and then ask: “What do you think I ought to do?” (more…)

Donchian rules

  
  Education
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Richard Donchian is known as the father of trend following. His original trend following ideas form the basis for all trend following success that has followed. Below in an excerpt from an article written in 1995 about his 5 and 20 day moving average system:

Title: Donchian’s five- and 20-day moving averages. 
Author: Richard Donchian
Publication: Futures (Cedar Falls, Iowa) (Magazine/Journal)
Date: November 15, 1995
Publisher: Oster Communications, Inc.
Volume: v24 Issue: n13 Page: p32: ISSN: 0746-2468

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On Wall Street there are two conflicting adages:
1. “You’ll never go broke taking a profit.”

2. “Cut your losses short and let your profits ride.”

Experience has shown that in commodities trading, the first of these “old saws” is dangerous and misleading, while the second may well be regarded as the one lesson the inexperienced commodity trader should learn if he wishes to have a better-than-even chance to come out ahead.

Every well-designed, trend-following, loss-limiting method for trading in futures (or stocks) rests on the basic principle that a trend in either direction, once established, has a strong tendency to persist, at least for a time. Among the many trend-following approaches now in use are the Dow Theory, point-and-figure chart techniques, swing methods (other than the Dow Theory), trendline methods, weekly-rule methods and moving average methods. We’ll focus on moving average methods and, in particular, the comparatively simple five- and 20-day moving average method.

The Method (more…)

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