|StockFetcher Forums · Filter Exchange · TRO's BLACK BELT TRADING||<< 1 2 >>Post Follow-up|
- Ignore clam61
|5/20/2006 5:29:32 PM
Are you recommending using a real time intraday chart and looking at the following indicators for entries and exits or looking at these indicators every night on stockfetcher, and then waiting for green intraday?
BLACK BELT TRADING TECHNIQUE
Use a 3 month/Daily www.prophet.net (or similiar) chart
If RSI(2) < 1, look for a long entry signal
If RSI(2) > 99, look for a short entry signal
If a lower price is making a higher RSI(2) value that is POSITIVE DIVERGENCE... get ready to load the boat!
If a higher price is making a lower RSI(2) value that is NEGATIVE DIVERGENCE... get ready to get your shorts on!
3) EMA(13) vs. EMA(26)
If the EMA(13) is ABOVE the EMA(26) then the trend is up, stay long.
If the EMA(13) is BELOW the EMA(26) then the trend is down, stay short.
If the CLOSE closes ABOVE the EMA(5) AND the EMA(5) is rising then it is safe to enter the trade long.
If the CLOSE closes BELOW the EMA(5) AND the EMA(5) is falling then it is safe to enter the trade short.
5) LINEAR REGRESSION
If the LINEAR REGRESSION line is RISING then the trend is UP.
If the LINEAR REGRESSION line is FALLING then the trend is DOWN.
If the price touches or breaks through the LOWER LINEAR REGRESSION line AND the trend is up, go LONG.
If the price touches or breaks through the UPPER LINEAR REGRESSION line AND the trend is down, go SHORT.
6) BOLLINGER BANDS
If the price is ABOVE the UPPER BOLLINGER BAND and the candle is red, do not enter long.
If the price is BELOW the LOWER BOLLINGER BAND and the candle is green, do not enter short.
If there are conflicting signals, do nothing.
- Ignore TheRumpledOne
|5/21/2006 10:26:31 AM
Are you recommending using a real time intraday chart - NO.
Or looking at these indicators every night on stockfetcher, and then waiting for green intraday - YES.
- Ignore TheRumpledOne
|1/25/2007 8:59:28 AM
Bruce Lee’s most famous quotes
Jeet Kune Do is training and discipline towards the ultimate reality in combat.
Jeet Kune-Do is the only non-classical style of Chinese Kung Fu in existence today. It is simple in its execution, although not so simple to explain. Jeet means 'to stop, to stem, to intercept,' while Kune means 'fist' or 'style,' and Do means 'the way' or 'the ultimate reality.' In other words--'The Way of the Intercepting Fist.'
On JKD not being a style
I have not invented a "new style," composite, modified or otherwise that is set within distinct form as apart from "this" method or "that" method. On the contrary, I hope to free my followers from clinging to styles, patterns, or molds. Remember that Jeet Kune Do is merely a name used, a mirror in which to see "ourselves". . . Jeet Kune Do is not an organized institution that one can be a member of. Either you understand or you don't, and that is that.
There is no mystery about my style. My movements are simple, direct and non-classical. The extraordinary part of it lies in its simplicity. Every movement in Jeet Kune-Do is being so of itself. There is nothing artificial about it. I always believe that the easy way is the right way. Jeet Kune-Do is simply the direct expression of one's feelings with the minimum of movements and energy. The closer to the true way of Kung Fu, the less wastage of expression there is.
Finally, a Jeet Kune Do man who says Jeet Kune Do is exclusively Jeet Kune Do is simply not with it. He is still hung up on his self-closing resistance, in this case anchored down to reactionary pattern, and naturally is still bound by another modified pattern and can move within its limits. He has not digested the simple fact that truth exists outside all molds; pattern and awareness is never exclusive.
Again let me remind you Jeet Kune Do is just a name used, a boat to get one across, and once across it is to be discarded and not to be carried on one's back.
On martial arts styles
To reach the masses, some sort of big organization (whether) domestic and foreign branch affiliation, is not necessary. To reach the growing number of students, some sort of pre-conformed set must be established as standards for the branch to follow. As a result all members will be conditioned according to the prescribed system. Many will probably end up as a prisoner of a systematized drill.
Styles tend to not only separate men - because they have their own doctrines and then the doctrine became the gospel truth that you cannot change. But if you do not have a style, if you just say: Well, here I am as a human being, how can I express myself totally and completely? Now, that way you won't create a style, because style is a crystallization. That way, it's a process of continuing growth.
To me totality is very important in sparring. Many styles claim this totality. They say that they can cope with all types of attacks; that their structures cover all the possible lines and angles, and are capable of retaliation from all angles and lines. If this is true, then how did all the different styles come about? If they are in totality, why do some use only the straight lines, others the round lines, some only kicks, and why do still others who want to be different just flap and flick their hands? To me a system that clings to one small aspect of combat is actually in bondage.
This statement expresses my feelings perfectly: 'In memory of a once fluid man, crammed and distorted by the classical mess.'
On adapting to each student
I believe in having a few pupils at one time as it requires a constant alert observation of each individual in order to establish a direct relationship. A good teacher can never be fixed in a routine... each moment requires a sensitive mind that is constantly changing and constantly adapting.
A teacher must never impose this student to fit his favourite pattern; a good teacher functions as a pointer, exposing his student's vulnerability (and) causing him to explore both internally and finally integrating himself with his being. Martial art should not be passed out indiscriminately.
On creating your personal way of fighting
Learn the principle, abide by the principle, and dissolve the principle. In short, enter a mold without being caged in it. Obey the principle without being bound by it. LEARN, MASTER AND ACHIEVE!!!
Knowledge in martial arts actually means self-knowledge. A martial artist has to take responsibility for himself and accept the consequences of his own doing. The understanding of JKD is through personal feeling from movement to movement in the mirror of the relationship and not through a process of isolation. To be is to be related. To isolate is death. To me, ultimately, martial arts means honestly expressing yourself. Now, it is very difficult to do. It has always been very easy for me to put on a show and be cocky, and be flooded with a cocky feeling and feel pretty cool and all that. I can make all kinds of phoney things. Blinded by it. Or I can show some really fancy movement. But to experience oneself honestly, not lying to oneself, and to express myself honestly, now that is very hard to do.
On the mental attitudes of combat
Question: What are your thoughts when facing an opponent?
Bruce: There is no opponent.
Question: Why is that?
Bruce: Because the word ''l'' does not exist.
A good fight should be like a small play...but played seriously. When the opponent expands, l contract. When he contracts, l expand. And when there is an opportunity... l do not hit...it hits all by itself (shows his fist).
Any technique, however worthy and desirable, becomes a disease when the mind is obsessed with it.
On the power of the fluid
Be like water making its way through cracks. Do not be assertive, but adjust to the object, and you shall find a way round or through it. If nothing within you stays rigid, outward things will disclose themselves.
Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water my friend.
On reacting to the opponent
The highest technique is to have no technique. My technique is a result of your technique; my movement is a result of your movement.
A good JKD man does not oppose force or give way completely. He is pliable as a spring; he is the complement and not the opposition to his opponent’s strength. He has no technique; he makes his opponent's technique his technique. He has no design; he makes opportunity his design.
One should not respond to circumstance with artificial and "wooden" prearrangement. Your action should be like the immediacy of a shadow adapting to its moving object. Your task is simply to complete the other half of the oneness spontaneously.
In combat, spontaneity rules; rote performance of technique perishes.
Do not be tense, just be ready, not thinking but not dreaming, not being set but being flexible. It is being "wholly" and quietly alive, aware and alert, ready for whatever may come.
The danger of training with the heavy bag is that it doesn't react to one’s attack and sometimes there is a tendency to thoughtlessness. One will punch the bag carelessly, and would be vulnerable in a real situation if this became a habit.
In JKD, one does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.
Before I studied the art, a punch to me was just like a punch, a kick just like a kick. After I learned the art, a punch was no longer a punch, a kick no longer a kick. Now that I've understood the art, a punch is just like a punch, a kick just like a kick. The height of cultivation is really nothing special. It is merely simplicity; the ability to express the utmost with the minimum. It is the halfway cultivation that leads to ornamentation. Jeet Kune-Do is basically a sophisticated fighting style stripped to its essentials.
Art is the expression of the self. The more complicated and restricted the method, the less the opportunity for expression of one's original sense of freedom. Though they play an important role in the early stage, the techniques should not be too mechanical, complex or restrictive. If we cling blindly to them, we shall eventually become bound by their limitations. Remember, you are expressing the techniques and not doing the techniques. If somebody attacks you, your response is not Technique No.1, Stance No. 2, Section 4, Paragraph 5. Instead you simply move in like sound and echo, without any deliberation. It is as though when I call you, you answer me, or when I throw you something, you catch it. It's as simple as that - no fuss, no mess. In other words, when someone grabs you, punch him. To me a lot of this fancy stuff is not functional.
A martial artist who drills exclusively to a set pattern of combat is losing his freedom. He is actually becoming a slave to a choice pattern and feels that the pattern is the real thing. It leads to stagnation because the way of combat is never based on personal choice and fancies, but constantly changes from moment to moment, and the disappointed combatant will soon find out that his 'choice routine' lacks pliability. There must be a 'being' instead of a 'doing' in training. One must be free. Instead of complexity of form, there should be simplicity of expression.
To me, the extraordinary aspect of martial arts lies in its simplicity. The easy way is also the right way, and martial arts is nothing at all special; the closer to the true way of martial arts, the less wastage of expression there is.
In building a statue, a sculptor doesn't keep adding clay to his subject. Actually, he keeps chiselling away at the inessentials until the truth of its creation is revealed without obstructions. Thus, contrary to other styles, being wise in Jeet Kune-Do doesn't mean adding more; it means to minimize, in other words to hack away the unessential.
It is not daily increase but daily decrease; hack away the unessential.
On form, no - form
Too much horsing around with unrealistic stances and classic forms and rituals is just too artificial and mechanical, and doesn't really prepare the student for actual combat. A guy could get clobbered while getting into this classical mess. Classical methods like these, which I consider a form of paralysis, only solidify and constrain what was once fluid. Their practitioners are merely blindly rehearsing routines and stunts that will lead nowhere.
I believe that the only way to teach anyone proper self-defence is to approach each individual personally. Each one of us is different and each one of us should be taught the correct form. By correct form I mean the most useful techniques the person is inclined toward. Find his ability and then develop these techniques. I don't think it is important whether a side kick is performed with the heel higher than the toes, as long as the fundamental principle is not violated. Most classical martial arts training is a mere imitative repetition - a product - and individuality is lost.
When one has reached maturity in the art, one will have a formless form. It is like ice dissolving in water. When one has no form, one can be all forms; when one has no style, he can fit in with any style.
On efficiency and flexibility
In primary freedom, one utilizes all ways and is bound by none, and likewise uses any techniques or means which serves one's end. Efficiency is anything that scores.
Efficiency in sparring and fighting is not a matter of correct classical, traditional form. Efficiency is anything that scores. Creating fancy forms and classical sets to replace sparring is like trying to wrap and tie a pound of water into a manageable shape of paper sack. For something that is static, fixed, dead, there can be a way or a definite path; but not for anything that is moving and living. In sparring there's no exact path or method, but instead a perceptive, pliable, choice-less awareness. It lives from moment to moment.
When in actual combat, you're not fighting a corpse. Your opponent is a living, moving object who is not in a fixed position, but fluid and alive. Deal with him realistically, not as though you're fighting a robot. Traditionally, classical form and efficiency are both equally important. I'm not saying form is not important - economy of form that is - but to me, efficiency is anything that scores. Don't indulge in any unnecessary, sophisticated moves. You'll get clobbered if you do, and in a street fight you'll have your shirt zipped off you.
On the tools of the trade
I refer to my hands, feet and body as the tools of the trade. The hands and feet must be sharpened and improved daily to be efficient.
It is true that the mental aspect of kung-fu is the desired end; however, to achieve this end, technical skill must come first.
The techniques, though they play an important role in the early stage, should not be too restrictive, complex or mechanical. If we cling to them, we will become bound by their limitation. Remember, you are expressing the technique, and not doing Technique number two, Stance three, Section four?
Practice all movements slow and fast, soft and hard; the effectiveness of Jeet Kune-Do depends on split-second timing and reflexive action, which can be achieved only through repetitious practice.
When performing the movements, always use your imagination. Picture your adversary attacking, and use Jeet Kune-Do techniques in response to this imagined attack. As these techniques become more innate, new meaning will begin to emerge and better techniques can be formulated.
In Jeet Kune-Do, physical conditioning is a must for all martial artists. If you are not physically fit, you have no business doing any hard sparring. To me, the best exercise for this is running. Running is so important that you should keep it up during your lifetime. What time of the day you run is not important as long as you run. In the beginning you should jog easily and then gradually increase the distance and tempo, and finally include sprints to develop your 'wind.'
Let me give you a bit of warning: just because you get very good at your training it should not go to your head that you are an expert. Remember, actual sparring is the ultimate, and the training is, only a means toward this. Besides running, one should also do exercises for the stomach - sit-ups, leg raises, etc. Too often one of those big-belly masters will tell you that his internal power has sunk to his stomach; he's not kidding, it is sunk and gone! To put it bluntly, he is nothing but fat and ugly.
A fight is not won by one punch or kick. Either learn to endure or hire a bodyguard.
Forget about winning and losing; forget about pride and pain. Let your opponent graze your skin and you smash into his flesh; let him smash into your flesh and you fracture his bones; let him fracture your bones and you take his life. Do not be concerned with escaping safely - lay your life before him.
The main characteristic JKD is the absence of the usual classical passive blocking. Blocking is the least efficient. Jeet Kune-Do is offensive; it's alive and it's free.
The combatant should be alive in sparring, throwing punches and kicks from all angles, and should not be a co-operative robot. Like water, sparring should be formless. Pour water into a cup, it becomes part of the cup. Pour it into a bottle; it becomes part of the bottle. Try to kick or punch it, it is resilient; clutch it and it will yield without hesitation. In fact, it will escape as pressure is being applied to it. How true it is that nothingness cannot be confined. The softest thing cannot be snapped.
There is nothing better than free-style sparring in the practice of any combative art. In sparring you should wear suitable protective equipment and go all out. Then you can truly learn the correct timing and distance for the delivery of the kicks, punches, etc. It is a good idea to spar with all types of individuals--tall, short, fast, clumsy. Yes, at times a clumsy fellow will mess up a better man because his awkwardness serves as a sort of broken rhythm. The best sparring partner, though, is a quick, strong man who does not know anything; a madman who goes all out, scratching, grabbing, grappling, punching, kicking, and so on.
The first rule is to keep yourself well covered at all times and never leave yourself open while sparring around the bag. By all means use your footwork--side stepping, feinting, varying your kicks and blows to the bag. Do not shove or flick at it. Explode through it and remember that the power of the kick and punch comes from the correct contact at the right spot and at the right moment with the body in perfect position; not, as many people think, from the vigor with which the kicks or blows are delivered.
The old-fashioned punching speed bag teaches you to hit straight and square; if you don't hit it straight the bag will not return directly to you. Besides learning footwork, you can hit the bag upward too. Another important function is that after the delivery of the punch, the bag will return instantaneously and this will teach you to be alert and to recover quickly. The bag should not be hit in a rhythmic motion but instead in a broken rhythm. Actually fight the bag as if it is your opponent.
To develop proper distance and penetration against a moving target, use a partner equipped either with a body protector or an air bag. He can either stand still and take the brunt of the kick, or he can back away from the attack. The former teaches proper application of the kick, especially valuable in teaching beginners. The latter training is to teach penetration. As soon as your partner thinks you will attack, he tries to back away as fast as possible. This practice is valuable to both men; one learns to penetrate and the other to back away quickly. The body protector is sometimes used for sharpening the attack. The partner will not attack but will maintain a correct distance in a ready fighting pose. As you begin to attack, he will try to counter, block, or move away. You will have almost the actual feeling of hitting your opponent in a real situation.
- Ignore TheRumpledOne
|1/25/2007 9:28:59 AM
The Zen of Trading
Do not believe in anything simply because you have heard it . . . Do not believe in traditions because they have been handed down for many generations. But after observation and analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it.-Buddha
I recently read a plea for help; It was typical of many rookie (and some intermediate) traders who know they are doing something wrong, but have yet to put their finger on exactly what it is.
Here is the exact request:
"I have been so burned in the past, I am having a hard time getting back into buying. I see charts that look great, don't buy them and they go up. I need a system. I scan stocks but lose track of them, maybe I am looking at too many.
You know, a 1 to 10 list of things to do, from scanning to tracking and to buying. Maybe there are people who will help a rookie. You see a quarterback standing in the pocket and he fires the pass, but then you see the QB with happyfeet. He throws an interception. I am tired of having happyfeet and need to complete more passes (trades). Your system is giving me stability, but I don't seem to be able to pull the string. -Happyfeet"
Perhaps my perspective is a bit different. I work in the financial services industry, advising stock brokers, institutions and retail investors how to position their portfolios -- and how to avoid disasters.
I suspect that traders like "Happyfeet" are not foundering because of the mechanics of their trading; Rather, it is because they lack the philosophical grounding and preparation which leads up to good trades.
This may seem somewhat atypical advice, but then again, I am not the product of the traditional MBA-to-Wall Street machinery. I took a different route: After a lot of Physics, Philosophy and Mathematics, I ended up going to law school. Instead of being "educated" in the wisdom of long dead economists, I actually had to learn rigorous thinking skills: Logical Reasoning and Critical Analysis, along with a healthy dose of comprehensive research skills.
I find this background to be a huge advantage -- I don't know what is theoretically supposed to work, I only know what has and has not worked for me actual practice. Hey, academic theorization may be intellectually stimulating, but for trading, actual losses teach more important lessons -- and ones much better remembered, too.
The ten steps I outline below are not from a book, nor were they learned at the knee of a mentor. They are the result of actual experience -- blood, sweat and tears -- and of course, real dollars lost.
If what "Happyfeet" truly wants are specific trading rules, there are plently on the net which will tell you how to "scan and track and buy stocks." The following search will yeild 100s of specifics rules.
But that is not what the floundering rookie trader needs. No one can give you the "Ten Steps to Wealth and Happiness." Its the old cliche: "Give a man a fish, and you feed him for a day; Teach a man to fish, and you feed him for a lifetime."
Any equity trading skill you may learn will be worthless without a frame of reference in which to practice them. These rules will provide you with that frame of reference. They were as true 100 years ago as they will be true 100 years from now. All but one of them applies to any tradable asset: futures, commodities, options, bonds, currencies or equities.
No one is going to give you wealth and happiness; Perhaps I can help teach you to fish. Here is a frame work within which you can develop your own 10 "Ten Steps to Wealth and Happiness."
1. Have a Plan: If you are going to actively trade, you must have a comprehensive plan. All too many investors I deal with have no strategy at all -- its strictly seat of the pants reaction to each and every market twitch. The old cliche "If you fail to plan, than you plan to fail" is absolutely true.
I suggest that traders write up a business plan for their strategy, as if they were asking Venture Capitalists for money for a start up; In fact, you are asking an investor for capital -- just because that investor is someone you know a long time (you) doesn't mean you should skip the planning stages.
2. Expect to be Wrong: Accept this fact: You will be wrong, and often. The plea for help is at least a tacit recognition that you are doing something wrong -- and that means you are a giant leap ahead of many failing traders.
Egotists who refuse to recognize the simple truism of being wrong often give up unacceptable amounts of capital. It is only stubborn pride -- and lack of risk management -- that keeps people in stocks down 50% or more.
Even the best stock pickers in the world are wrong about half the time.
Michael Jordan has the best quote on the subject: "I've missed more than 9,000 shots in my career. I've lost almost 300 games. Twenty-six times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."
Mike is the greatest player of all times not merely because of his superb physical skills: He understands the nature of failure -- and its importance -- and places it within a larger framework of the game
3. Predetermine Stops Before Opening Any Position: Once you have come to understand that you will be frequently wrong, it becomes much easier to use stops and sell targets.
I suggest signing a "prenuptial agreement" with every stock you participate in: When it hits a predetermined point, regardless of methodology -- below support or a moving average or a specific percentage amount or the monthly low or whatever your stop loss method is -- that's it, you're out, end of story. No hopin' or wishin' or prayin' or . . . (Apologies to Dusty Springfield)
The prenup means you are making the exit decision before you are in a trade, and when you are neutral and objective.
4. Discipline is Everything: The greatest rules in the world are meaningless if you do not have the personal discipline to see them through. I can recall every single time I broke a trading rule of my own, and it always cost me money.
A friend (GBS) mentions that every time some Hedge Fund blows up -- chock full of Nobel Laureates or Ivy League whiz kids -- you invariably hear the following mea culpa: If only we hadn't overrode the system, we would have been okay.
A lot of people recommend the book Market Wizards -- I read it when I first got into the business, and every few years, I reread it. The single most repeated theme echoed by nearly all of the trading Wizards interviewed? The importance of Discipline.
5. Emotion is the enemy of investors: Therefore, you must have a methodology which relies on a variety of data points, and not your gut instinct. My own assortment of factors are too long to go into here. The purpose of Rules 1, 2 and 3 (especially 2) is to eliminate the impact of the natural Human response to stress -- fear and panic; It also helps avoid the flip side of the coin -- greed (also known as "fear of missing the rally").
Lets face it, you are a herd animal who has evolved to run away from Sabre Tooth Tigers and fight off angry Neanderthals. We were never "hard-wired" for the capital markets. Such is the plight of being slightly cleverer pants wearing primates.
You must know yourself: Your instinctive "fight or flight response" did not evolve to deal with crossing moving averages or restated earnings. Emotions cause people to sell at the bottom and chase stocks up at the top. To buy when there is blood running in the streets, or to sell when everyone else is clamoring to buy takes a detached objectivity not possible when trading on gut emotion.
6. Take responsibility for your self, your capital and your trades. I recently wrote a note in response to some of the "The game is fixed" whining that been endemic lately. (Its titled "Taking Responsibility").
Its part of our national culture of blame passing, and it infected investing long ago: Enron did not cause your losses, nor did stock touting analysts or Arthur Anderson or the talking heads on CNBC; You did. The sooner you understand this the better.
I once read a Chinese proverb which struck me as particularly insightful as applied to trading: "He who blames others has a long way to go on his journey. He who blames himself is halfway there. He who blames no one has arrived."
7. Constantly Improve: You must seek to constantly raise your skill level. Generally, you should try to learn as much as possible about the markets, the economy, trading technologies, various schools of thought. As you read all this, you must do so with a keenly skeptical eye, while retaining an open mind ('taint that easy to do).
As to the specific mechanics of trading, I find keeping a log to be very helpful. I track why I bought something, the price, the timing, even my reservations about the trade at the time. I do a post-mortem, trying to figure out why a certain trade didn't work and why some did. I started ranking trades on a 1 - 10 scale before I entered the position, then I tracked my results. If I only did the "nines" and "tens," my returns would have been spectacular, my costs much lower, and my trading would have flowed more naturally.
A subheading under "Constantly Improve" is this: (7A) Develop an Expertise in Some Aspect of Trading. Find something for which you have a peculiar natural proclivity, or a particular gift, and develop it. It may be moving averages or position sizing or MACD or Bollinger Bands or the Arms index; The specific area of expertise does not matter so much as merely having one. I'll bet that those who have been trading for a while know exactly what I am referring to.
8. Change is Constant: Heraclitus was a Greek philosopher who is best known for his "Doctrine of Flux." It simply states: "The only thing that remains constant is change." Therefore, you must endeavor not only to constantly upgrade your skills, you must be supple enough to adapt to an everchanging field of play.
Skiers have all seen the sign on the slopes: "Beware of changing terrain conditions." Its true in any market, and in fact, any modern endeavor.
Human nature -- especially in herds - is unchanging. But these behaviors must be contemplated within their larger context. Add a new element -- PCs, lower trading costs, the internet, vast amounts of cheap data, even CNBC, -- and you introduce a new factor which impacts all the players on the field.
As conditions change, you must decipher how they impact your strategy, your emotions, and your trading -- and adjust accordingly.
9. Short is not a four letter word: Learn to play both sides of the fence, both long and short. If you "have been so burned by buying," then perhaps there is a lesson there you are not heeding? The market is telling you something. Whenever a particular strategy stops working, the thoughtful trader must consider whether there are bigger issues than their own trading mechanics.
Every law student goes through moot court, where you had to be ready to switch teams and argue either side of a case. I learned that you never truly knew a case until you could argue both for and against it.
The corollary moot court rule for trading is is that you should never own a stock unless you comprehend what might make it an attractive short. Each buy and sell decision should be an argument pro and con.
Likewise, you need to be able to play the downside when its appropriate.
The market is cyclical; You can count on a bear market every 4 years or so. Unless you plan on sitting out for 18 - 24 months twice or so each decade -- up to 4 years put of 10 -- you better learn to short.
10. Stock selection matters less than sector and market direction. This will be the only stock specific rule I will share: I have been convinced by several studies that demonstrate only 30% or so of a stock's progress is determined by the stock itself; The stock's sector is at least equal to another 30% (if not more). The overall direction of the market is the biggest factor of all, counting for at least 40%.
You can own the very best company in the wrong sector, or buy the greatest stock when the broader market is going the other way --- both will still be losers.
Thats my ten, and I hope those of you looking for specific trading ideas aren't too disappointed. I have lots of other rules, but since we limited this list to just 10, I went with the broadest ansd most important.
Some other strategies are natural derivations of these: being patient, using risk management, position sizing, not forcing trades, resource allocation, diversification, etc. These are all specific trading mechanics, and "Happyfeet" is not quite ready for them yet.
Merely whacking bids is not trading; Without understanding the philosophy behind investing, without any sort of plan in place, you are destined to fail.
- Ignore TheRumpledOne
|1/25/2007 9:48:58 AM
Zen Trading- Even when you have taken a position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands.
- Ignore TheRumpledOne
|1/25/2007 11:03:54 AM
NEW TO TRADING & TECHNICAL ANALYSIS?
PULLING THE TRIGGER Q&A
Do you have trouble pulling the trigger? If so, you're not alone. Greed and fear exert a powerful influence when the time comes to enter the trade. This is especially true for newbies who have great difficulty visualizing the rewards or risks they're about to incur.
Effective trade entry requires skill, confidence and a strong stomach. Most of the time it should be an uncomfortable experience; no one likes to lose money. But the ability to follow a disciplined entry plan, even when it hurts, separates profitable traders from the hordes of losers who take up the game.
I receive dozens of questions each year from frustrated traders who aren't sure when to be in or out of positions. I've compiled the best ones here today, along with advice about helpful ways to enter the market with confidence.
Q - I get confused about the elements needed to make a trade. How can I tell when to pull the trigger?
A - What you really need is experience so you can correlate your decision to pull the trigger with the final outcome of the trade. Keep in mind that trade entry isn't an all-or-nothing affair. You can size your positions on the basis of levels of confidence and experience. Small lots do a great job in this regard.
Concentrate on aggressive trade management after entry, and you won't get hurt too badly. After all, it's just an odds game. Nothing more and nothing less.
Q - I have a good vision of the trade and where it's likely to go, but then I second-guess myself and miss the entry. How do I overcome this?
A - This is a common dilemma, and nothing I can say will really help. Either you'll find the discipline to act or you won't. Part of the problem comes from not trusting yourself, while the rest is a lack of confidence. Most new traders can't find the discipline to act when they need to act, and that's one reason the failure rate is so high.
If you haven't done so already, take the psychology route and read Mark Douglas' excellent book The Disciplined Trader.
Q - I'm a new trader. I watched a stock go to my entry price and take off, but I didn't buy it. So I entered it at higher price but it reversed and I lost money. What should I do next time?
A - Unfortunately, you're not going to believe me when I say chasing stocks will probably be your downfall. Sooner or later you'll kick yourself for missing a trade that would have worked if you'd just chased it. So you'll do it anyway and get caught in a reversing market once again.
Q - I've decided to enter positions only (1) in congestion before a breakout or breakdown, or (2) on a pullback. My stops are very tight. Is this too timid or am I finally learning how to trade?
A - The market environment dictates the trade entry process. New traders develop great discipline by doing exactly what you're doing. But there will also be times to get aggressive because the market is offering low-hanging fruit.
Successful trading is all about executing strategies that take advantage of current conditions. The trick is to pay attention to what the market is telling you on a given day, and then act accordingly.
Q - Many books recommend not buying or selling during the first hour. What's your opinion on this topic?
A - It's more fun to play the piano with all 10 fingers. I like to trade the first hour, but only if the opportunity is right. I agree on avoiding the open most of time, but there are two strategic problems. First, amateurs should avoid the open, but experienced traders can overcome the increased risk through specific entry techniques.
Second, there is a big difference between the opening and the entire first hour. The longer period often produces a buy or sell signal that marks a profitable opportunity to enter the market.
Q - Should I avoid buying a stock that hits my entry price when the market is about to close and the stock is near its lows?
A - It's a bad idea to buy stocks near their lows during the last hour. The primary trend often kicks in with full force during this time, and you don't want to fight it. Closing at or near the lows is also a prelude to gap downs or breakdowns from support levels the next morning.
Q - What's a better entry: buying the breakout or waiting for a pullback?
A - Neither is better. The pullback has lower risk, but you may not get filled. Entering the breakout has high risk, but you can make money when it works. One common mental error is to get upset because you miss a move. If you get caught up in this, you'll have trouble developing good timing in general.
The best method for new traders is to wait for pullbacks unless the broad market is very dynamic. If you don't get filled, it's no big deal and you don't lose money.
Q - What strategy will overcome unfilled orders because there aren't good pullbacks on breakouts?
A - The problem is, as soon as you get more aggressive, that's the exact moment the stock will reverse. You can use continuation patterns like triangles on lower-time-frame charts to enter positions, but even these require assuming more risk. So the real answer most of the time is that you miss the trade and move on to the next one.
Q - Is an intraday move sufficient to enter a breakout, or should I wait for the closing price?
A - There is no right or wrong answer about intraday vs. closing breakouts. You need to work with trading signals that fit your lifestyle. These may be closing or intraday triggers; it depends on your risk tolerance and ability to watch the markets. Short-term traders can't wait for too many end-of-day signals. Alternatively, long-term traders need to apply good intraday filters to avoid whipsaws and protect themselves from sudden losses.
Q - How do you keep from getting shaken out by whipsaws?
A - You're really asking the ultimate Zen trading question: How do I know I'm right? Zen answer: There is no right and no wrong. You manage risk. Do that well, and you're right.
Breakouts and breakdowns either go or they don't go. Most of the time you can't tell the difference. Some patterns are easier than others to interpret, and certain kinds of setups have a gut feel that tells you the coast is clear. Just control risk the rest of the time and take the trade to its logical conclusion.
Remember the input you have on the position's outcome. First, you can choose a small position instead of a large one. This keeps your risk small if you're wrong, but you can still make money if you're right. Second, you can take your best shot and keep a tight stop-loss. You take the loss and move on if you're wrong. You add to your position if you're right.
Q - Do you implement a turnaround strategy? For example, do you reverse your position after stopping out in one direction, or do you simply get out?
A - I operate under the premise that each setup, long or short, needs to stand on its own merits. Hitting a stop loss doesn't automatically make it a good trade in the opposite direction. In fact, getting the direction right is the easy part. The hard part is finding the reward-risk equation that's favorable for the new setup.
Q - How can I trade a breakout and not get stuck in the crowd?
A - Timing is everything with breakouts. You're trading with the crowd when you see a breakout and hit the entry key. You're ahead of the crowd if you're already positioned when the stock breaks out, and you're behind the crowd if you're waiting for a pullback to enter the trade. Both of these methods make more money over time than chasing the breakout.
Q - What should traders think about before committing to a position?
A - Trade setups have trigger prices called execution targets. The trigger points are reached within price levels called execution zones. Traders should stop what they're doing and pay close attention when price approaches one of these levels.
We track a variety of information on our trading screens, including quotes, charts and indicators. But our real job is to watch for ripples on a quiet lake. These are the numbers that are out of place or approaching levels where other traders will take action. The trick is to be aware of these levels and have an action plan before they take notice.
Most traders are programmed to react to breakouts and breakdowns. This is the Pavlov's dog syndrome, no more and no less. Traders see the market move, and they salivate. It's far better to train yourself to recognize price zones where a small wiggle will bring in the crowd. Then you're acting on the situation instead of reacting to it.
Q - Should I scale into and out of positions?
A - You can average up or down as part of position-building as long as you're using it as a strategy rather than an excuse for a bad trade. Keep your initial size down so you don't take too many shares at high-risk levels. You can also add to profitable positions, but keep in mind that the reward/risk equation changes as a position moves in your favor.
Scaling into profitable positions increases risk if you don't pick the right execution levels. The best plan is to wait for the position to clear an obvious barrier before adding to it. Then move in your stop to protect your growing profits.
I rarely scale out of positions, because I like to exit on wide-range bars and pass my shares to someone else. This is just a personal preference. Other folks probably do a better job scaling out and keeping a piece for a follow-up move.
Q - I'm trading 15-20 setups per day. Am I overtrading?
A - Only you can tell if you're overtrading. I don't know if your positions are 100-share scalps or 5,000-share bombs. There's a big difference between the two. Do as much as you can without getting confused about why you're in a particular trade.
Write a note to yourself each morning to sum up the day before it begins. It should say "The chips could break down," "Watch for a Dow selloff," "Keep an eye on banking stocks," or things like that. Use this document to decide on offense vs. defense going into the new trading day.
Q - How do you assess volume before making the trade?
A - I use volume only at certain points of pattern development. These tend to be near breakout or breakdown levels. Then I want to see if there are divergences between price and volume, or anything that will inhibit the expected move. I also examine volume on pullbacks and will pass on trades if I see something I don't like.
A good rule of thumb for volume is to ignore it unless it absolutely, positively captures your attention when you look at it.
Q - If I want to buy or sell 20,000 shares in a flat market, how do I keep from getting noticed?
A - With highly liquid stocks, just hit the button a few tiers away from the inside and get filled. With moderate-volume stocks, do the transaction over 30 minutes by picking an average entry or exit price. If possible, don't trade more than 1,000 to 2,000 shares at a time.
You need to be clever and patient when trading large lots on thin stocks. Pick very quiet periods and stretch the entry or exit out over a long time. And never show your real size to the public, specialists or market makers.
Q - Is it a problem to trade stocks that average below 50,000 shares per day?
A - If you're trading size that makes up 5% or 10% of the total daily volume, you become the market when you put in your order. So you must plan on massive slippage in your pre-entry calculations if you want to trade large size in thin markets. Also keep in mind there's no strategy to get you out of the market without massive slippage if you want out fast.
Q - What role do the futures play in entering trades?
A - There are three correlations between equities and the futures markets. There are stocks that trade with the futures, stocks that trade against the futures, and stocks that go their own way regardless of the futures. You have to determine the correlation for your stock before using the futures as an entry tool.
For example, tech stocks correlate well with Nasdaq 100 futures, and blue chips correlate well with SP-500 futures. Oil, gas and gold often trade against the short-term futures direction. Biotechs that trade on news releases can go their own way, regardless of the futures markets.
Trade execution always depends on limited information. Entry itself is secondary to effective management in determining whether you make a profit. Having said that, there is more correlation between equities and the futures markets now than at any time in the past.
- Ignore SFMc01
|8/7/2007 2:45:41 PM
Has anyone attempted to put this in a"clickable" format?
- Ignore TheRumpledOne
|11/9/2007 1:08:53 PM
*** W O R K - I N - P R O G R E S S ***
*** W O R K - I N - P R O G R E S S ***
- Ignore csalem
|12/19/2007 2:16:39 PM
Can you explain what the 3 Columns mean-- BlackBelt, Long and Short and what the numbers in those rows are?
Thanks for the help
- Ignore TheRumpledOne
|12/19/2007 8:08:25 PM
Haven't quite finished but...
BlackBelt will tell you if it is a trade or not.
Long and Short tell the number of "points" scored for that type of trade. So if you have Long = 3 and Short = 3, that wouldn't be a trade.
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