journey of a trader

[oilman5]

some testing idea
..........Some idea of trade science
………………………………..
you have to work on them to use effectly …

1]market model is like river…….trend model+ cycle mode

ma…basically lagging. Ema improves…

momentum. …..it helps to define turning pt

I] continues….rare..
Ii]step up …may seen
Iii] jerk element….normally seen in volatile Indian market..

5bar momentum. Has shown some predictiveness

COMPLEX VARIABLE
………………………..
measuring cycle period……..phase..

noise[randomness]


sinewave…

trendline [instantaneous ]

remember marketmode = trend + cycle


DESIGN AUTO SYSTEM [MECHANICAL ]

1]MONEY MANAGEMENT STOP

2] GROSS PROFIT – { COMMISION + TAX} = NET PROFIT

3]LARGEST LOSS….AV. LOSS
4]LARGEST PROFIT AV PROFIT..

5] NO OF WINNING CALL…

THIS U HAVE TO TAKE FROM PAST…

NEXT ELEMENTS…
LOGIC OR PREMISES…
FILTER [ FINITE CONCEPT]…WORK IN A RESTRICTION
Improvement from lagging indicator…TO ZERO LAG INDICATOR
ZEMA = EMA + MOMENTUM

ADAPTIVE MA…WORKS IN NOISY MARKET…

MESA + ADAPTIVE MA = MAMA

Simple signal…ema up as filter..
15 ema/ 18 ema…good…

CONCEPT OF MARKET SPECTRA/MESA
…………………………………………………..


trend



detrend




Reverse trend


Phase change….forward shift…optimization of this develop predictive mode…
Detrend +45 o
Help advance study…
Dema ,smoothening ema..throw out error of ma..

Visualization by technical indicator helps…

Or u may study independently TREND MODE…CYCLE MODE..
AT WHAT LEVEL MARKET/INDIVIDUAL STOCK @ PRESENT…

RSI..STOCKASTIC….HELPS TO INTERPRET FURTHER[ provided u know how to use them on case basis]

Ref…system element and modern ta..

................olman5

 

[oilman5]

those who enjoy trading/ hobby pl read...
wiley trading
FINANCIAL RISK TRADING
AN INTRODUCTION TO THE
PSYCHOLOGY OF TRADING AND BEHAVIORIAL FINANCE

author..mike elvin...

oilman5

 

[oilman5]

here i am doing some compilation from great CV...WE all learn a lot from this high callibre PRO



Here is a piece by Bo Yoder on the same subject

Stages of a Trader

This is where the neophyte trader begins. He has little or no understanding of market structure. He has no concept of the interrelationship among markets, much less between markets and the economy. Price charts are a meaningless mish-mash of colored lines and squiggles that look more like a painting from the MOMA than anything that contains information. Anyone who can make even a guess about price direction based on this tangle must be using black magic, or voodoo.

Stage Two: The Hot Pot Stage

You scan the markets every day. After a while (sometimes a good long while), you notice a particular phenomenon which pops up regularly and seems to "work" pretty well. You focus on this pattern. You begin to find more and more instances of it and all of them work! Your confidence in the pattern grows and you decide to take it the very next time it appears. You take it, and almost immediately your stop is hit, and you're underwater for the total amount of your stoploss.

So you back off and study this pattern further. And the very next time it appears, it works. And again. And yet again. So you decide to try again. And you take the full hit on your stoploss.

Practically everyone goes through this, but few understand that this is all part of the win-lose cycle. They do not yet understand that loss is an inevitable part of any system/strategy/method/whathaveyou, that is, there is no such thing as a 100% win approach. When they gauge the success of a particular pattern or setup, they get caught up in the win cycle. They don't wait for the "lose" cycle to see how long it lasts or what the win/lose pattern is. Instead, they keep touching the pot and getting burned, never understanding that it's not the pot (pattern/setup) that's the problem, but a failure on their part to understand that it's the heat from the stove (the market) that they're paying no attention to whatsoever. So instead of trying to understand the nature of thermal transfer (the market), they avoid the pot (the pattern), moving on to another pattern/setup without bothering to find out whether or not the stove is on.

Stage Three: The Cynical Skepticism Stage

You've studied so hard and put so much effort into your trading and this universal failure in the patterns only when you take them causes you to feel betrayed by the market, the books and materials and gurus you tried to learn from. Everybody claims their ideas lead to profitability, but every time you take a trade, it's a loser, even though the setups all worked perfectly before you played them. And since one of the most painful experiences is to fail when success looks easy, this embarrassment is transformed into anger: anger at the gurus, anger at the vendors, anger at the writers, the seminars, the courses, the brokers, the market makers, the specialists, the "manipulators". What's the point in trying to analyze and improve your own trading when there are so many dark forces out to get you?

This excuse-driven blame game is a dead-end viewpoint, and explains a lot of what you find on message boards. Those who can't pull themselves out of it will quit.

Stage Four: The Squiggle Trader Stage

If you don't quit, you'll move into the "squiggle trader" phase. Since you failed with patterns and so on, you figure there's some "secret weapon", a "holy grail" that's known to the select few, something that will help you filter out all those bad trades. Once you find this magical key, your profits will explode and you'll achieve every dream you ever had.

You begin an obsessive study of every method and every indicator that is new to you. You buy every book, attend every course, sign up for every newsletter and advisory service, register for every trading website and every chat room. You buy more elaborate software. You buy off-the-shelf systems. You spend whatever it takes to buy success.

Unfortunately, you stack so much onto your charts that you become paralyzed. With so many inputs, you can't make a decision, particularly since they rarely agree. So you focus on those which agree with the direction of the trade you've taken (or, if you're the fearful sort, you look only for those which will prove to you how much of a loser you think you are).



This is all characteristic of scared money. Without a genuine acceptance of the fact of loss and of the risks involved in trading, you flit around like a butterfly in search of anything or anybody who will tell you that you know what you're doing. This serves two purposes: (1) it transfers to others the responsibility for the trade and (2) it shakes you out of trades as your indicators begin to conflict. The MACD says buy, the sto says sell. The ADX says the market is trending, the OBV says it's overbought. By the end of the day, your brain is jelly.

This process can be useful if the trader learns from it what is popular, i.e., what other traders are doing, and, if he lasts, how to trade traps and panic/euphoria. And even though he may decide that much of it is crap, he will, if he doesn't slip back into the Cynical Skepticism Stage, have a more profound appreciation -- achieved through personal experience -- of what is sensible and logical and what is nonsense. He might also learn something more about the kind of trader he is, what "style" suits him best, learn to distinguish between what is desirable and what is practical.

But the vast majority of traders never leave this stage. They spend their "careers" searching for the answer, and even though they may eventually achieve piddling profits (if they don't, they will of course eventually no longer be trading), they never become truly successful, and this has its own insidious consequences.

Stage Five: The Inwardly-Bound Stage

The trader who is able to pry himself out of Stage Four uses his experiences there productively. The trader learns, as stated earlier, what styles, techniques, tactics are popular. But instead of focusing entirely on what's "out there", he begins to ask himself some questions:

What exactly does he want? What is he trying to accomplish?

What sort of trading makes the most sense to him? Long or intermediate-term trading? Short-term trading? Day-trading? Trend-trading? Scalping? Which is most comfortable?

What instrument -- futures, stocks, ETFs, bonds, options -- provides the range and volatility he requires but is not outside his risk tolerance? Did he learn anything at all about indicators in Stage Four that he might be able to use?


CreditViolet
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And so he "auditions" all of this in order to determine what suits him, taking all that he has learned so far and experimenting with it.

He begins to incorporate the "scientific method" into his efforts in order to develop a trading plan, including risk management and trade management. He learns the value of curiosity, of detached interest, of persistence and perseverance, of taking bits and pieces from here and there in order to fashion a trading plan and strategy that are uniquely his, one in which he has complete confidence because he has tested it thoroughly and knows from his own experience that it is consistently profitable.

He accepts fully the responsibility for his trades, including the losses, which is to say that he understands that losses are inevitable and unavoidable. Rather than be thrown by them, he accepts them for what they are, a part of the natural course of business. He examines them, of course, in order to determine whether or not some error was made, particularly one that can be corrected, though true trading errors are rare. But, if not, he simply shrugs off the loss and goes on about his business. He understands, after all, that he is in control of his risk in the market.

He doesn't rant about his broker or the specialist or the market maker or that vast conspiracy of everyone who's trying to cheat him out of his money. He doesn't attempt revenge against the market. He doesn't fret. He doesn't fume. He doesn't succumb to hope, fear, greed. Impulsive, emotional trades are gone. Instead, he just trades.
At this level, the trader achieves an almost Zen-like trading state. Planning, analysis, research are the focus of his time and his effort. When the trading day opens, he's ready for it. He's calm, he's relaxed, he's centered.

Trading becomes effortless. He is thoroughly familiar with his plan. He knows exactly what he will do in any given situation, even if the doing means exiting immediately upon a completely unexpected development. He understands the inevitability of loss and accepts it as a natural part of the business of trading. No one can hurt him because he's protected by his rules and his discipline.

He is sensitive to and in tune with the ebb and flow of market behavior and the natural actions and reactions to it that his research has taught him will optimize his edge*. He is "available". He doesn't have to know what the market will do next because he knows how he will react to anything the market does and is confident in his ability to react correctly.

He understands and practices "active inaction", knowing exactly what it is he wants, exactly what it is he's looking for, and waiting, patiently, for exactly the right opportunity. If and when that opportunity presents itself, he acts decisively and without hesitation, then waits, patiently, again, for the next opportunity.

He does not convince himself that he is right. He watches price movement and draws his conclusions. When market behavior changes, so do his tactics. He acknowledges that market movement is the ultimate truth. He doesn't try to outsmart or outguess it.

He is, in a sense, outside himself, acting as his own coach, asking himself questions and explaining to himself without rationalization what he's waiting for, what he's doing, reminding himself of this or that, keeping himself centered and focused, taking distractions in stride. He doesn't get overexcited about winning trades; he doesn't get depressed about losing trades. He accepts that price does what it does and the market is what it is. His performance has nothing to do with his self-worth.

It is during this stage that the "intuitive" sense begins to manifest itself. As infrequent as it may be, he learns to experiment with it and to build trust in it.

And at the end of the day, he reviews his work, makes whatever adjustments are necessary, if any, and begins his preparation for the following day, satisfied with himself for having traded well.

 

[oilman5]

CV contd
...You have to put indicators in context. They’re background information — never the primary reason for a trade.

............Figuratively speaking, . . . the small trader should imagine himself as a hitch-hiker in the market. For the ordinary hitch-hiker, someone else supplies the car, chauffeur, oil and gas. When he thinks the car is about to go in his direction, he jumps aboard and rides as far as he thinks the car will go. When he notices the machine has been stopped by a red light, or is about to turn a corner and go in some other direction, or that the car is running out of gas, or the brakes failing to work properly, he steps off and figures he has secured about as long a ride as he may expect. All he has supplied in this transaction is a modest commission and whatever brains were necessary to observe and recognize the opportunity when to get on and off.



. . . the experience of the past few years has emphasized the value of disregarding all considerations except those which relate to price movement, volume and time. If one is endeavoring to realize profits from the principal swings in prices of stocks, it is my opinion that he should disregard fundamental as well as corporate statistics relating to the stocks in which he is trading, stick closely to a study of the action of the market and become deaf and blind to everything else.



Your judgment will become poorer from the very time when you decide that you know more about the market than the market is telling you. From that moment your results will be unsatisfactory, for in this trading business the tape is the boss. You must learn to obey its orders, doing exactly what it tells you. When you can accomplish this, you are on the high road to success in your stock trading.
By Brett Steenbarger

1) Situation-focused talk vs. Emotion-focused talk - Traders who talk trading situations out loud--shifts in prices, looming exits, etc.--perform much better than traders whose conversations are ventings of emotion (positive or negative). From the vantage point of cognitive neuroscience, this makes sense: when we're problem-focused, we're activating frontal regions of the brain associated with the executive functions of planning, judgment, and decision-making. When we're in the throes of emotion, those same regions, key to trading behavior, are deactivated. Gladwell, in Blink!, points out that our access to the brain's frontal regions decreases dramatically as our heart rate elevates. Emotion-focused talk sustains physiological arousal, which impairs cognitive functioning.

2) "I" talk vs. "Me" talk - I'm convinced that this subtle measure may be the best gauge of trader self-priming of all. Traders who are more likely to be successful talk about "I". Traders in trouble refer to "me". The reason for this is that "I" reflects an active tense: "I" do things in relationships, in markets, in life. But things happen to "me". When I'm in the "me" mode, I'm the passive recipient of events; circumstances influence me. When I'm in first-person mode, I am the author of life's events. Successful traders experience themselves as efficacious; they prime themselves to feel in control. Unsuccessful traders exhibit an external locus of control. They are primed to feel that situations control them.

3) On-task talk vs. off-task talk - Successful traders, I've found, display tenacity and a superior capacity for concentration. They can focus on markets from opening bell to the close. Unsuccessful traders lack this intense focus. Much of their talk is off-task: it has nothing to do with markets. Less successful traders IM during the trading day, surf the Web, chat with buddies on bulletin boards, e-mail, and engage in a host of activities that take them away from the flow of market activity. Successful traders talk the market: who is in the market, how the market is trading, how they're adapting their strategy, etc. They are primed for trading and competition; the less successful traders are primed for avoidance.
There is only one way to achieve success in speculation—through hard work, persistently hard work. If there is any easy money lying around, no one is going to try and give it to me—this I know. My satisfaction always came from beating the market, solving the puzzle. The money was the reward, but it was not the main reason I loved the market. The stock market is the greatest, most complex puzzle ever invented, and it pays the biggest jackpot - Jesse Livermore
You will always be your worst enemy in futures trading, not your luck, not other traders, not unexpected news events and not the "markets." But this is actually more good news. Because you cannot do anything about luck, other traders, the news or market behavior; but you can do a great deal about yourself. - Chick Goslin
Futures trading can be a very brutal business. If you let it, futures trading has the potential to destroy you. Fortunes far, far greater than yours have been lost in this business by individuals at least as clever as you. Never, ever underestimate the dangers of trading the futures markets. They are populated by people and organizations who will not flinch in the slightest as they take everything they can from you. Futures trading is for consenting adults only. A passion for the truth is the essential element of a sound approach to trading. - Chick Goslin
The average trader focuses too much on big payoffs. This is a stock market mentality, i.e., buy it and ride it to the sky, or sell it before the crash. Trading is not about predicting and catching the "big" moves. This is "fantasy" trading. It is the "lottery" approach to trading which, in the end, pays off only for a very, very few. Trading is about "seeing" momentum and positioning with it, "seeing" trend and following it.

The average trader relies too much on feel, on intuition. The possibility that any one of us is a natural market genius is realistically somewhere between zero and none. Accept that you will never be a world class athlete, sing a perfect musical note, or find a theory beyond relativity; and neither will you ever reliably predict the future. But be aware that you can know the past and see the present.

If you're going to trade futures, you might as well do it correctly; and doing it correctly means doing it intelligently. Look at reality. Futures trading is a competition. It is financial warfare. You are trading against thousands of smart, aggressive, extremely well-informed, very well financed, extensively experienced professionals. Look at the facts! Over eighty percent lose; so by definition the average trader (even the well above average trader) is going to lose--eventually. - Chick Goslin
Every trader will be tested emotionally, mentally and monetarily to varying degrees in his career. Most times, it’ll be extremely unpleasant and you’d most likely want to quit right there and then. Only those who can endure this kind of hardship, learn from their mistakes and persevere on will make it.
I’ve experienced big losses, but have always been able to come back with a winning streak. So, I am no longer that sensitive about losses. I know that I can make them back. Because of this, I am more willing to stop trading on bad days and take small or medium losses.

One of my strengths is the ability to become more aggressive during winning streaks and to do the opposite during a losing streak. This goes against what most people do. You should have a person who has nothing to do with trading who will turn off the trading terminal after a certain amount of losses and send you home; that would save traders thousands.

I am constantly adjusting my trading style to match specific market conditions. For example, on volatile days I generally put fewer orders into the market and execute more directional trades, although I mostly hold them for only a few seconds.

I always set strict daily targets and limits for my profit and loss. The most important element is the stop limit, or simply the size of the loss, which will cause me to turn off my trading screen. I try to liquidate my positions as soon as they start going against me.

A guru or analyst might have to stick to his opinion, but a trader should not have an opinion at all. The stronger your opinion is, the more problems one has when it’s time to close a losing position.

We trade only price. We do not trade information. We do not trade knowledge (of the asset being traded). Nor do we trade computing power or expertise. We do not trade anything at all other than price: ie: the number. Therefore since the only factor that counts in this game is the price, it is only smart to focus all, or almost all, our attention on this number on the pice and its movement; in other words, what the price has done in the past and is doing in the present. Approach the game/business of trading in this manner - an up down number game where the focus is on what the price does and not why - and you will be on the right path to succss as a trader

You are trading against the wealthiest and most knowledgeable people and organizations in the world.Do not delude yourself, you cannot compete on their terms: information, knowledge, experience, staying power, and so on.Do not spend time and energy trying to figure out why a price moves.Focus all your attention and energy solely on what the price is doing.You are a trader. A trader does not get paid to understand or explain why something has happened. The question "why?" deals with the past. The question "what?" deals with the present and provides the best clues to the future. And never forget that you are trading "futures," not "pasts." Discovering the supposed "why" of a price move will provide you with little more than temporary intellectual comfort. Whereas observing and focusing on what the price has done and is doing will help you anticipate what the price will do in the future. Leave the intellectualizing to those paid for their words not their deeds, i.e., journalists and brokerage house analysts

Predictions tend to lock you into a preconceived scenario of the future making it more difficult for you to adapt to unforeseen events.Futures trading is not like betting on a horse race. In futures trading you can change your bet as the race progresses. In trading, as soon as you make a specific prediction about where a market is going, you sacrifice your freedom. A trader must always feel free to change trading positions on very short notice. And most importantly, you do not need to be good at predicting to do well at trading. If making predictions can be quite harmful and you do not need to be good at predicting in order to be successful, why bother with predicting at all? - Chick Goslin
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A young basketball player is fascinated with The Shot. He doesn’t think about the footwork he needs to get to the shot. He’s not aware of position on the court or even body position in the constant tactical encounters at each end of the court. These fundamentals can make for easy buckets or, alternatively, the continual need to pull a great shot out of nowhere time after time. (As a trader, which mode would you prefer?)
Neither is the young player aware of the substitution pattern, game pace, or matchups except as he faces them momentarily on the court or while sitting on the bench. The game plan is completely subordinate to hitting the shot and not getting beaten to the hoop.
It is the same in trading. - John Sweeney
The problems to which traders have set their faces have developed because their aspirations are infinitely expansible; the solutions lie in the hope that their knowledge and behavior are infinitely perfectible. In between the recognition of the problems and the acquisition of the quantitative and qualitative skills needed for their solutions lies a series of searches athat must,many times, include the experience of failure.Indeed, no successful traders I have known can follow their paths backward very far without running into failure.Its is not the act of failure, however, that differentiates the ultimately successful or unsuccessful traders.Rather, it is that the successful traders get up, spend a few days healing, reaffirm what they know, and go about the business of adding to their store of wisdom. In such a growth process the quality of persistence looms large and is virtually irreplaceable.
In the high-risk areas of the world of finance, the cold facts of probabilities cannot be changed by wishful thinking or by bemoaning the cruel realities of life.Some people win frequently and accumulate large sums.Others are destined to lose frequently and at least as a group, lose the large sums that are won by the smaller group of winners.The chance of success may be helped by thinking straight, negotiating low execution costs, dealing with a broker who observes high standards of performance, and setting reasonable goals. Regardless of their intellectual capacity and the strength of their personal discipline, however, most players in the futures game are destined to lose to the few.Those who cannot accept this truism are well advised to turn their attention elsewhere.
The person involved responsibly, both intellectually and behaviorally, with the experience of trading may, to paraphrase Theodre Roosevelt, know at his best the triumph of high achievement, but if he fails, he will have failed while daring greatly, and so his place will never be with those timid souls who know neither victory nor defeat. Perhaps, then, in the final analysis, it may be as rewarding to travel as it is to arrive. -------------- Richard TewelesThat's the problem with amateurs, they only have half a plan, the easy half. They know how much of a profit they're willing to take, but they don't have the foggiest idea how much they're willing to lose. They're like deer in the headlights, they just freeze and wait to get run over. Their plan for a position that goes south is, "Please God, let me out of this and I'll never do it again" but that's bullshit, because if by chance the position turns around, they'll soon forget about God. They'll go back to thinking that they're geniuses, and they'll always do it again, which means that they're sure to get caught, and get caught bad. What most people fail to understand is that while you're losing your money, you're also losing your objectivity. It's like being at the craps table in Vegas, and the fat bleached blonde in the sequined dress is rolling the dice, and you're losing, and you're determined that you're not going to let her beat you. What you've forgotten is that she doesn't care about you, she's just rolling the dice. Whenever you have jealousy as an emotion, or greed, or envy, it distorts your judgment. The market's like the bleached blonde in Vegas, it doesn't care about you. That's why you have to put aside your ego and get out. If you have trouble doing that, as most people do, be like Odysseus: tie yourself to the mast with an automatic stop and take your emotions out of play ---------------------------------------------------------------------------------
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The typical trader will do most anything to avoid creating definition and rules because he does not want to take responsibility for the results of his trading. If he knows exactly what he is going to do and under what conditions, then he would have something by which to measure his performance, thus making himself accountable to himself. This is exactly what most traders don't want to do, preferring instead to keep their relationship with the market somewhat mysterious.

This creates a real psychological paradox for traders, because the only way to learn how to trade effectively is to make oneself accountable by creating structure: but, with accountability comes responsibility.

The crowd neither wants nor seeks knowledge, and the leaders of the crowd, in their own interests, try to strengthen its fear and dislike of everything new and unknown. The slavery in which mankind lives is based upon this fear-----------------------------------G. I. Gurdjieff
Speculators and investors who simply guess, follow tips,rumors, newspaper talk and so-called “inside information"have no chance of ever making a success - WD Gann
No man can learn all their is to know about the forecasting of trends of stocks in 3,5,10 or 20 years,but if he is a deep student and a hard worker,he learns more and knowledge comes easier after years of experience"--- W D GANN in the "New stock trend Detector:
To make a success in speculation you cannot expect to buy low and sell high. You will make money when you do just the opposite of what the average man or woman tries to do and makes a failure and loses as a result of what they are trying to do. You will make profits when you learn to buy high and sell low. You must learn to follow the trend in progress. . .
Racers are always looking for the quick and easy way to win. They're looking for the magic spring or the secret camshaft. Those things might exist, but I couldn't begin to tell you where to go and find them. If those things do exist. they won't make you a consistent winner. The people who win consistently aren't wasting their time looking for those things; they spend their time refining the basics and making sure they are prepared
Everyone is looking for a multibagger,For the next Infosys,For the next .......!!Get rich quick.
Truth is their is'nt any such stock,and even if their is one you would not know of it or maybe had it and sold it.
Don't see only the rainbows,just WALK.
1) Focus on being profitable for the week - Individual trades may go against you and individual trading days can offer little opportunity. As a senior trader once explained to me, for the active trader, however, there are enough fresh opportunities in a week to make it reasonable to set a goal of being profitable for the week. You won't reach your goal every single week, but the mere act of setting the goal keeps you focused. For example, you don't want to lose so much money in a single day that you can't make it back during the other days of the week. You also don't want to lose so much money on a single trade that you can't come back during the remainder of the day. When you really push yourself to be profitable every week, you don't let individual days get away from you. And when you don't let individual days get away from you, you start managing each trade carefully to ensure that your largest loss won't exceed your largest gain. Time and again I've seen a consistent sign of progress among developing traders: they stop digging themselves into holes.

2) Take what the market gives you - Today I peeled out of several short positions after a spate of very negative TICK readings in the afternoon. I've learned that such concentrated selling often precedes nasty short-covering rallies. My S&P position hadn't made as much profit as my NASDAQ and Russell positions, but the market doesn't care about that. I took what the market gave me and started the week green. Did the market go down even further after I exited? Absolutely. As one experienced trader explained to me, when the market rewards your position right off the bat, you want to take something off the table. You might let a piece of your position ride if you have a longer-term opinion, but never give green a chance to become red. A winner that turns into a loser is a double loss.

3) Always have something to "lean on" - Scalpers will notice heavy and persistent selling at a certain tick, accompanied by large offers in the order book. They'll lean on that information to find a good entry to sell the market. If the offers disappear from the book or if new buyers start lifting those offers in size, they can get out quickly. Knowing you have something to lean on, however, allows you to ride out the noise between entry and exit. As long as what you're leaning on doesn't vanish, you stay with your idea. Today I leaned on the inability of the Russell to make new highs on Friday. When we got some morning buying, but could not break above the early AM highs (and also above Friday's highs), I added to my shorts and vowed to stay short unless we broke the highs with expanded buying. Leaning on the pattern of Russell weakness enabled me to stick with a good trade idea during a choppy morning.

So let's restate the pieces of wisdom in reverse order:

1) Before you put your capital at risk, have a well-formed trade idea;
2) When your idea pays you out quickly, take some profits;
3) Don't get caught up in individual trades; focus on profitability over a series of trades and days.

I know, I know. These things sound ridiculously simple. But it's only been in the last couple of years that I can look myself in the mirror and say that I'm doing all three consistently. The spinning reverse dunks get the attention in basketball; the long touchdown pass makes the evening replays; and the big winning trades are the ones we like to talk about. The greater part of success, however, boils down to Xs and Os on the basketball court; blocking and tackling on the football field; and following basic fundamentals about framing and managing trades. It may not be sexy to execute on the fundamentals, but it gets the job done day after day and builds a career.
My review of expert performers in such fields as chess, military, athletics, and performing arts--as well as my research review of exemplary performers--suggests that success is not simply a function of qualities of the individual. Rather, it is the fit between the talents (inborn abilities), skills (acquired competencies), interests, and opportunities afforded by a field that creates accelerated development and eventual mastery.

What does this mean for trading?

It means that success will not be found in better indicators, improved self-help techniques, or any of the endless parade of chart patterns, wave formations, numerology schemes, or moving average arrays.

Rather, success is achieved when we find markets and styles of trading that take maximum advantage of our skills and talents. That keeps us focused on markets and absorbed in them, enabling us--over time--to internalize their patterns.

Many, many times, traders do not live up to their potential simply because they are trading markets and methods that do not draw upon their strengths. Without that fit, they are not absorbed in what they do; frustration replaces focus and learning suffers.

If my book accomplishes nothing else, I hope that it assists you in thinking about where your niche might lie, not just in trading, but in life. The days pass by quickly; life is too short to waste on anything that you're not passionate about and good at.
Rich people don't make big bets. Really rich-and smart-people don't make big bets. First they are not out to "prove" anything, they are out to make more money, and second, they know that risk control is as important as the other two legs of speculation, selection and timing. That is all this business of commodity trading gets down to, selection, timing, and risk control. - Larry Williams
Spotting the next Infosys et al is not a get rich quick scheme.

It takes courage, conviction, dilligence & above all patience.

Dilligence is needed to spot the company & then constantly monitor it's performance to see if it's living upto expectation.
Courage as an equivalent of risk appetite 'coz you can always go wrong. The company might just fizzle out after that initial promise; or produce that occasional spark but not consistenly enough to raise itself to the big league.
Conviction to hold on through the numerous ups & downs of the mkts.
And, above all patience, as it doesn't happen overnight.
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A Trader's Morning Prayer -

May my assessment of today's price action be based upon the facts, all of the facts and nothing but the facts. May I not be influenced by fear, greed or the ill-advised comments of others, which may be made in their interests and not my own. May I take into account the past history laid before me on this chart and make my assessment based on my knowledge, and logic, and not my emotions.
philosophy of lifeEverything happens. All that appears in the life of a man, all that is done through him, all that comes from him; all this happens. Man is a machine. All that he does, all his actions, his words, thoughts, feelings, convictions, opinions, habits are the result of exterior influences ... popular movements, wars, revolutions, change of governments, everything happens. Man does not love, does not desire, does not hate -everything happens.

It always seems to people that others invariably do things wrongly, not in the way they should be done. Everybody always thinks he could do it better. They do not understand, and do not want to understand, that what is being done, and particularly what has already been done in one way, cannot be, and could not have been, done in another way.

Scientific or not scientific is all the same to me. I want you to understand what I am saying. Look, all those people you see, (he pointed along the street), are simply machines—nothing more. - G.I Gurdjieff
"Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities." Reminiscences of a Stock Operator
1) You must know your own weaknesses. Each of us brings strengths and weaknesses to our own trading. Some find it exceedingly difficult not to tinker or play around with the markets when trading and in the process we don't follow our systems; some find it difficult to pull the trigger; some find it difficult to endure drawdowns of any size. Unless you know how you react to the markets and the pressures and elations of trading, you cannot compensate for your weaknesses.

2) You must understand statistics well enough to understand the limitations of trading using only history as our guide. I am constantly surprised by how many people get this wrong. Even the so-called "experts" in trading.

3) You must learn about trading systems, many of them, many different kinds of systems. In this process, you will learn that there are many answers, many paths to profits, but none of them are as neat and palatable as we might wish.

4) You must learn about brokers, markets, execution, risk, slippage, and other operational issues that affect trading profits. The best way to learn these issues is to start trading somewhere using a small account. It needs to be big enough that the losses matter but not so big that you will bankrupt yourself if you lose the entire account.

5) You must learn about yourself and how you react to all the items 1 to 4 above. This is perhaps the most important knowledge. How to fit your own personality, weaknesses and strengths, into the trading ecosystem. You might find you are bored with long-term system, or that you can't stand looking at screens, or that you need a robobroker to execute since you won't follow your systems closely enough. You will only learn this by being honest with yourself and by reflecting on what works and doesn't.

The best possible way to learn is to sit side by side with someone who knows what they are doing, but this is not possible for most, so you will likely need to find another way.

As far as a specific course of action, which is what you have asked for, I will offer one way that I think works pretty well. If you persevere and if you reflect on your own condition honestly, you have a good chance at success if you follow this course.

1) Buy some testing software and learn some of the well-known systems that work. There are many examples of systems that work out there. Play around with them, change them and see what happens. I'm obviously biased in my opinion of what software you should buy but I leave that decision to you.

2) Read and Study Trading. Initially, I suggest buying the Modus course. It is a very good foundation for people who don't know where to begin.

3) Start trading as soon as you think you are ready. Start small and don't worry about the profits, worry about what you learn about the markets and yourself. Consider your initial losses as tuition that all traders pay.

4) Honestly assess yourself on a regular basis. What did you learn? what are you having trouble with? What do you need to compensate for?

5) Repeat starting at 1).

One thing that troubles many people is the high cost of software and courses. Consider however, the high cost of trading incorretly as the alternative. If you can't afford software, save up until you can. If you can't afford money for a course, you likely can't afford to lose as much money as you will if you start trading without understanding what you are doing.

Last of all, don't be afraid to ask for the advice of others, even to pay for it where appropriate.

Keep one thing in mind, however, sometimes even successful traders are wrong about the reasons for their success. Trader A might think his success is due to his fancy computers and sophisticated algorithms when in reality his success is due to his having a solid foundation and good operational execution.

Trading well is not easy, but it is something you can learn if you have the perseverance combined with the humility to be realistic about your own strengths and weaknesses. - Curtis Faith ( Turtle Trader )


CreditViolet

 

[oilman5]

People, unless they are naturally well disciplined, are extremely open to suggestion. Folks like to be given, tips, listen to the news stories, seek out rumours in internet chat rooms, or maybe subscribe to secret information leaked from unknown sources.
For the most part, professional traders, syndicate traders, and the specialists, do not look at these things. They simply do not have the time. Professionals have to act swiftly, as soon as market conditions change, because they are up against other professionals who will act immediately against their interests if they are too slow in reacting to the market. The only way they can respond that fast is to understand and react, almost instinctively, to what the market is telling them. They read the market through volume and its relationship to price action. - Tom Williams
“Know the enemy and know yourself; in a hundred battles you will never be in peril. When you are ignorant of the enemy, but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and yourself, you are certain in every battle to be in peril.”

“What is of the greatest importance in war is extraordinary speed: One cannot afford to neglect opportunity
The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot are traders, both in manner and spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder, or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtue, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the trader and held him in contempt, while honoring the beggars and the looters, have known the secret motive of the sneers: a trader is the entity they dread—a man of justice.

Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong

 

[oilman5]

now the famous DESIGN A SYSTEM
..................................................
First consideration - Time Frame
It is important to decide the timeframe that u are going to work towards in ur system. This really comes down to how much time u are prepared to spend trading and how active u require the system to be in terms of the number of trades. Broadly speaking there are four main timeframes:

Timeframe--------Period------------Data Used
Long-Term--------Months----------End of Day
Medium-Term------Weeks----------End of Day
Short-Term--------Days-----------Intra Day
Day-Trade------Up to 1 day-------Intra Day

Long Term trading systems will save on commission costs and have larger profits per trade. Shorter term trading systems will rack up the commission costs and generally make less per trade but the frequency of trading opportunities will make up for this. For example:

System 1 makes an average of 250 points per trade but only trades 4 times a year.

System 2 only makes an average of 10 points per trade but trades 200 times a year.

System 1 makes 1,000 pts a year but system 2 makes 2,000 points a year. However if we allow 5 pts per trade for commission and slippage then system 1 costs 20 pts/year whereas system 2 costs 1,000 pts/year.
System 2 only makes an average of 10 points per trade but trades 200 times a year.

System 1 makes 1,000 pts a year but system 2 makes 2,000 points a year. However if we allow 5 pts per trade for commission and slippage then system 1 costs 20 pts/year whereas system 2 costs 1,000 pts/year.

Both systems make a similar net profit over the course of a year however there are a number of points to bear in mind:

* With only 4 trades per year for system 1 every trade is important and must be taken. It is likely that the bulk of the profits will come from only one of the trades so this must not be missed. With system 2 producing a new signal every day it is not so reliant on individual trades.

* System 1 will require a larger capital base to trade as the trades will have to ride wider swings.

* System 2 will require a lot more work to trade as intra day data will have to be monitored.

* System 2 will be psychologically easier to trade as the equity draw down periods will be shorter. Well designed and robust day trading systems will rarely have losing months.

The frequency of trading is an essential element of any trading system and our choice of timeframe will help to determine it. There is no right answer it is very much a case of what suits the individual trader.
Choosing an Instrument to Trade
The next thing u need to do when designing a trading system is to decide what u are actually going to trade to match your objectives. There is a huge range of instruments available to traders from the underlying instruments such as stocks or currencies to derivatives such as futures or options

In order to develop a trading strategy it is extremely important to obtain historical data for the actual instrument that we intend to trade. Although derivatives based on the same underlying instrument will move generally in tandem with each other it will not be exact. The futures will move more quickly and to greater extremes than the underlying cash index. U cannot, therefore, develop a system using the cash index and expect it to perform to the same degree when trading futures or any other derivative.
Third step
This is the meaty part about trade setup.Will get back with this tomorrow.Meanwhile couple of important terms to remember

Expectation/Expectancy of a trade = (PW * AW) - (PL * AL)
Expectation of profit factor = (PW * AW) / (PL * AL)

where

PW = probability of a winning trade
AW = average size of winning trade
PL = probability of a loss
AL = average size of a loss

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Now coming to the next step we need a framework with precise entry and exit signals which is commonly called a setup.There are as many setups as there are traders,infact I have to keep them indexed to keep track of them.I would post couple of them having good risk to reward ratio.I had better start a new thread and link it here as this thread will become very difficult to read otherwise.There will be a lot of new terms introduced and it will be difficult for me to explain each and everyone of them in detail so I will provide links or suggest books regarding those.
Also one point I would mention here is that if you are serious enough to have your own system than there can be no half measures,every part right from setup to position management has to be written down and double checked so as to avoid any contradictions or errors.Those who dont have access to charting software can have tape based strategy as trade setup while keeping the other parts similar to those mentioned here.Minimum requirement will be access to excel and notepad.

Another important about setup selection bfore we go on to the next step is about mixing different non-correlated strategies.People who have trendfollowing systems will do better only if they add some sort of contra trend setups which may help them trade in markets which are moving sideways.By merely looking at a chart many can conclude that markets do move sideways for considerable period.My support for the theories of gann,fibonacci and elliott is precisely for that reason.They add a new dimension to market forecasting which is not possible with normal market indicators.Also a very important thing to consider is that these theories focus entirely on price itself unlike various other theories which derive their relationship from price without considering it in its entirety.Tony Plummer books are good read explaining them.

So lets get on with it with the setups
Inside bar - current bar's range is within the previous bar's range ie an inside bar has a low greater than the previous bar's low and a high less than the previous bar's high.

See the attached pic for various inside bar setups.These can also be done on OHLC bars as well.

After you see inside bar setup, a filter need to be added .Can be a momentum indicator like a stochastic.The thing for look will be a stochastic crossover as the insidebar unfolds.It can act as a confirmation to your entry signal.

Its a very good pattern to trade.Many reasons.For one, an inside bar means that there was just not enough interest in the stock to move it decisively one way or another. As sure as day follows night, so does an increase in volatility follow the restricted trading of an inside day.Whenever you have an IB the market is consolidating into a tight range of low volatility.A market will always explode out of a tight range. A market will not explode out of a market that has already run up. The natural market cycle is to go from low volatility to high volatility and back again.

Ok to sum it up one by one
Buy Setup
1.Wait for an IB to form
2.One you have identified the IB then you need to have a stochastic cross confirmation to the upside before you can enter.
3.To find confirmation look at the stochastic in the chart that you look for IB’sIf upward cross present than you can enter in the indicated direciton.

Sell Setup is exact opposite of this.


Will get back with couple more setups before proceeding to other parts
.What to buy
2.When to buy

Now comes the next step of how much to buy.
There are many different ways to vary the number of contracts or shares when trading. Some of the most commonly used methods are listed below.

1.Fixed number of contracts. The same number of contracts or shares is applied to each trade; e.g., two contracts per trade.
2.Fixed dollar amount per contract. A fixed dollar amount of account equity is needed for each contract or share; e.g.,5000Rs of account equity per contract.
3.Fixed fractional (also known as fixed risk). The number of contracts or shares is determined so that each trade risks a specified fraction of the account equity; e.g., 2% of account equity is risked on each trade.
4.Fixed ratio. The number of contracts or shares increases by one for each "delta" amount of profit earned per contract. For example, if the delta is 3000Rs, and the current number of contracts is two, you'll need 6000Rs of profit before increasing the number of contracts to three.

That goes for position sizing.Eventually it depends on the amount of capital in your account as some sizing rules require certain size for consistent account growth.
So in our inside bar setup,you can choose a sizing rule which suits you.For eg sake we will use the fixed fractional strategy fixed to 2% of account equity.
Note however this is different than setting stoploss which we will cover next.
Many people confuse stoplosses with moneymanagement.That part may well be callled position management.

For good system my suggestion is to watch as many charts as possible preferrably realtime, make note of your observations and then test them out in a controlled environment.

1)I have a doubt - "People who have trendfollowing systems will do better only if they add some sort of contra trend setups which may help them trade in markets which are moving sideways"?
We have two options
a) we use a trend following system, and also a contra trend system.

b) we use some conformatory market direction signals togetther with some price range to filter out the sideways movement of prices. That is if the mkt direction is + and STock direction is + then enter buy otherwise filter out as sideways.

Can be use the second option. Will that be better?


There is nothing like an anti-trend system
Even those methods that fade trends are actually betting on a trend in the opposite direction.
Systems can be broadly categorized into 2 categories
1. TrendFollowing ( MAs, Breakouts etc)
2. Mean Reversion ( Oscillators, PairTrading etc)

Also perhaps a few words on a 'premise' focussed trading system development vs a 'if it works it must be good' system development.

LBR's Turtle Soup is a good eg of a counter trend system.
Identifying market exhaustion is a tricky area.Intraday its actually much easier identifying exhaustion than looking for breakouts

the basic Turtle Methodology has no directional bias.When dealing with systems, the long-short thing takes a backseat..its all about pattern matching and proper betsizing around that opportunity.

Ok to sum it up one by one
Buy Setup
1.Wait for an IB to form
2.One you have identified the IB then you need to have a stochastic cross confirmation to the upside before you can enter.
3.To find confirmation look at the stochastic in the chart that you look for IB’s.
4.If upward cross present than you can enter in the indicated direciton.

Sell Setup is exact opposite of this.
When designing a trading system its wise to distribute the various functions like Entry, Exit, MM etc into different modules.Helps you in backtesting and to pinpoint the system efficiency.
Different modules could be--
Position Sizing Module
Filter Module (based on diff crieteria)
Entry Module
Trade Management Module (scaling in and out for eg)
Exit Module

Two or more modules can be combined together for eg the Trade Mgmt and Exit Modules.

So coming back to the system described earlier, entry on breakout of ID obviously comes under the Entry Module.Whether to hold it the next day or reverse is independent of the entry factor. To answer that question you will have to backtest on your chosen instrument.Options could be - End of Day Exit, Trailing stops, SAR ( stop and reverse ...

cv has done great job
oilman5

 

[oilman5]

Money management is the process of analyzing trades for risk and potential profits, determining how much risk, if any, is acceptable and managing a trade position (if taken) to control risk and maximize profitability.
Many traders pay lip service to money management while spending the bulk of their time and energy trying to find the perfect (read: imaginary) trading system or entry method. But traders ignore money management at their own peril.

The importance of money management can best be shown through drawdown analysis.
Drawdown
Drawdown is simply the amount of money you lose trading, expressed as a percentage of your total trading equity. If all your trades were profitable, you would never experience a drawdown. Drawdown does not measure overall performance, only the money lost while achieving that performance. Its calculation begins only with a losing trade and continues as long as the account hits new equity lows.


Suppose you begin with an account of 10,000 and lose 2,000. Your drawdown would be 20%. On the 8,000 that remains, if you subsequently make 1,000, then lose 2,000, you now have a drawdown of 30% (8,000 + 1,000 - 2,000 =7,000, a 30% loss on the original equity stake of 10,000). But, if you made 4,000 after the initial 2,000 loss (increasing your account equity to 12,000), then lost another 3,000, your drawdown would be 25% (12,000 - 3,000 = 9,000, a 25% drop from the new equity high of 12,000).

Maximum drawdown is the largest percentage drop in your account between equity peaks. In other words, it's how much money you lose until you get back to breakeven. If you began with 10,000 and lost 4,000 before getting back to breakeven, your maximum drawdown would be 40%. Keep in mind that no matter how much you are up in your account at any given time--100%, 200%, 300%--a 100% drawdown will wipe out your trading account. This leads us to our next topic: the difficulty of recovering from drawdowns.

Even worse is that as the drawdowns deepen, the recovery percentage begins to grow geometrically. For example, a 50% loss requires a 100% return just to get back to break even (see Table 1 and Figure 1 for details).

Professional traders and money mangers are well aware of how difficult it is to recover from drawdowns. Those who succeed long term have the utmost respect for risk. They get on top and stay on top, not by being gunslingers and taking huge risks, but by controlling risk through proper money management. Sure, we all like to read about famous traders who parlay small sums into fortunes, but what these stories fail to mention is that many such traders, through lack of respect for risk, are eventually wiped out.


Guidelines that should help your long-term trading success.
1. Risk only a small percentage of total equity on each trade, preferably no more than 2% of your portfolio value. I know of two traders who have been actively trading for over 15 years, both of whom have amassed small fortunes during this time. In fact, both have paid for their dream homes with cash out of their trading accounts. I was amazed to find out that one rarely trades over 1,000 shares of stock and the other rarely trades more than two or three futures contracts at a time. Both use extremely tight stops and risk less than 1% per trade.

2. Limit your total portfolio risk to 20%. In other words, if you were stopped out on every open position in your account at the same time, you would still retain 80% of your original trading capital.

3. Keep your reward-to-risk ratio at a minimum of 2:1, and preferably 3:1 or higher. In other words, if you are risking 1 point on each trade, you should be making, on average, at least 2 points. An S&P futures system I recently saw did just the opposite: It risked 3 points to make only 1. That is, for every losing trade, it took 3 winners make up for it. The first drawdown (string of losses) would wipe out all of the trader's money.

4. Be realistic about the amount of risk required to properly trade a given market. For instance, don't kid yourself by thinking you are only risking a small amount if you are position trading (holding overnight) in a high-flying technology stock or a highly leveraged and volatile market like the S&P futures.

5. Understand the volatility of the market you are trading and adjust position size accordingly. That is, take smaller positions in more volatile stocks and futures. Also, be aware that volatility is constantly changing as markets heat up and cool off.

6. Understand position correlation. If you are long heating oil, crude oil and unleaded gas, in reality you do not have three positions. Because these markets are so highly correlated (meaning their price moves are very similar), you really have one position in energy with three times the risk of a single position. It would essentially be the same as trading three crude, three heating oil, or three unleaded gas contracts.

7. Lock in at least a portion of windfall profits. If you are fortunate enough to catch a substantial move in a short amount of time, liquidate at least part of your position. This is especially true for short-term trading, for which large gains are few and far between.

8. The more active a trader you are, the less you should risk per trade. Obviously, if you are making dozens of trades a day you can't afford to risk even 2% per trade--one really bad day could virtually wipe you out. Longer-term traders who may make three to four trades per year could risk more, say 3-5% per trade. Regardless of how active you are, just limit total portfolio risk to 20% (rule #2).

9. Make sure you are adequately capitalized. There is no "Holy Grail" in trading. However, if there was one, I think it would be having enough money to trade and taking small risks. These principles help you survive long enough to prosper. I know of many successful traders who wiped out small accounts early in their careers. It was only until they became adequately capitalized and took reasonable risks that they survived as long term traders.

10. Never add to or "average down" a losing position. If you are wrong, admit it and get out. Two wrongs do not make a right.

11. Avoid pyramiding altogether or only pyramid properly. By "properly," I mean only adding to profitable positions and establishing the largest position first. In other words the position should look like an actual pyramid. For example, if your typical total position size in a stock is 1000 shares then you might initially buy 600 shares, add 300 (if the initial position is profitable), then 100 more as the position moves in your direction. In addition, if you do pyramid, make sure the total position risk is within the guidelines outlined earlier (i.e., 2% on the entire position, total portfolio risk no more that 20%, etc.).

12. Always have an actual stop in the market. "Mental stops" do not work.

13. Be willing to take money off the table as a position moves in your favor; "2-for-1 money management1" is a good start. Essentially, once your profits exceed your initial risk, exit half of your position and move your stop to breakeven on the remainder of your position. This way, barring overnight gaps, you are ensured, at worst, a breakeven trade, and you still have the potential for gains on the remainder of the position.

14. Understand the market you are trading. This is especially true in derivative trading (i.e. options, futures).

15. Strive to keep maximum drawdowns between 20 and 25%. Once drawdowns exceed this amount it becomes increasingly difficult, if not impossible, to completely recover. The importance of keeping drawdowns within reason was illustrated in the first installment of this series.

16. Be willing to stop trading and re-evaluate the markets and your methodology when you encounter a string of losses. The markets will always be there. Gann said it best in his book, How to Make Profits in Commodities, published over 50 years ago: "When you make one to three trades that show losses, whether they be large or small, something is wrong with you and not the market. Your trend may have changed. My rule is to get out and wait. Study the reason for your losses. Remember, you will never lose any money by being out of the market."

17. Consider the psychological impact of losing money. Unlike most of the other techniques discussed here, this one can't be quantified. Obviously, no one likes to lose money. However, each individual reacts differently. You must honestly ask yourself, What would happen if I lose X%? Would it have a material effect on my lifestyle, my family or my mental well being? You should be willing to accept the consequences of being stopped out on any or all of your trades. Emotionally, you should be completely comfortable with the risks you are taking.

The main point is that money management doesn't have to be rocket science. It all boils down to understanding the risk of the investment, risking only a small percentage on any one trade (or trading approach) and keeping total exposure within reason. While the list above is not exhaustive, I believe it will help keep you out of the majority of trouble spots. Those who survive to become successful traders not only study methodologies for trading, but they also study the risks associated with them. I strongly urge you to do the same.
SO IS MM FROM CV

 

[oilman5]

HERE I AM PUTTING SOME COPY PASTE...WHICH I BELIEVE USEFUL
..Trading is unique in many ways. It is not by accident that many of the people who are drawn to trading are successful people from other walks of life. After all, to trade you need some free capital. Many obtain this from running or selling successful businesses, or from high paying professions. The problem is that trading is unique from most other businesses...

Most of your previous successes in life will likely not be able to help you in trading. The things you have learned are often not transferable to trading. Worse than that, they may be harmful. Take the successful doctor. Every time his stop hits, he decides to add more shares. Why? To the skilled trader, this is a crime. To the doctor, this is a way of life; it is bred into his system. What is he thinking? He is thinking about 'saving the patient'. He is taught that the object of his attention must be saved at all costs, at all measures. To trade he has to adopt the philosophy of 'killing the patient at the first signs of ill health'. This appalls him at some level.

Consider the skilled lawyer. Taught to make a case and an argument for any possible situation. As his stock begins to fall, he comes up with dozens of ways to justify the position. He is skilled at 'making the case' and he does so for the stock as it begins to fall. 'They just had good news, the fundamentals are excellent, this is just a shake out, the operators are playing games'. He will use a thousand different arguments to stay with a loser...........................................................................................
Consider any successful businessman. Often in the beginning, success came by simply working harder. Putting in more hours, taking on more personally. Doing whatever it takes. Unfortunately, 'trading harder' is not even a working concept.

Consider the accountant. The accountant is a perfectionist with numbers. The thought of having 'red ink' on a trade can be hard to take. It forms the need to not take small stops, hoping that the ledger can show all winners today.

Consider the professional athlete. Losing is not an option. Unfortunately, in trading, losing is mandatory. Losing the right way is what matters, small amount on appropriate trades. Once a trade has stopped, it is a loss and the trader moves on. The trader knows that what matters is process that delivers winners over a period of times, not what happens on one trade. To the athlete, losing is not acceptable. It must be avoided at all costs, at all levels.

So what is helpful? Learning the whole process of trading. Learning from those who have been through it, or having the ability to learn and adapt quickly as you go. Having the mindset of having a plan, being able to adjust that plan, and carrying out the plan until the results are reached. Then constantly evaluating the process, eliminating mistakes and being mindful of the need to change and be flexible.

"Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'press on' has solved and always will solve the problems of the human race."

-Calvin Coolidge, former President of USA

This is a good warning to all. Many talents you may have may not directly contribute to your trading. An open mind, coupled with persistence and determination in your goal are keys to trading.
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1.Trading with money you can’t afford to loose: One of the greatest obstacles to successful trading is using money that you really can’t afford to lose. Ultimately what happens is that when someone knows in the back of their mind that they are risking the money they can not afford to lose, they trade out of fear and emotion versus logic and no emotion. If you are in this situation It is highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks.

2.Lack Of Research Work: People just jump in. Without having the proper knowledge of the stock or don’t knows about chart or never cares to view chart in the right time frame. They don’t have time to do some research work. They follow tips blindly and then gaze at night sky!

3.No Trading Plan (don’t know entry, exit, stop loss, profit target): A trader with no trading plan is flying in the sky ready to crash any time. Successful traders always keep their Trading Plans ready before entering into any transactions.

4.Not Learning From Losses – take advantage of each loss to improve your knowledge of the market.

5.Lack Of Discipline- Never allow emotions to rule your trading decisions, which often lead to bad decisions and unacceptable trading losses.
6.Lack Of Money Management – Lack of proper money management is a major cause of failure among new traders.
(Out of 10 Trades, if 6 are loser with 5% loss & 4 are winner with 10% PROFIT, Net Results GAIN.)

7.Never Apply STOP LOSS – Most common mistakes made by traders is that they let their losses grow too large. Nobody likes to take a loss, but failing to take a small loss early will often result in being forced to take a large loss later.

8.Never Fall In LOVE With A Stock – Many traders fall in love with one or two stock and look opportunities to trade in those stocks only ignoring the other profitable trading opportunities.

9.Not Keeping RECORDS – Always keep records of your trading results and analyze the results.

10.Over-Trading – Trading in too many markets at one time is a mistake – espically if you are racking up losses.....................................................
11.Not Preserving Capital: It is the part of money management so as to enable one to live to trade another day.

12.Under funding-Not enough capital to invest (this can sink the ship) know well that there is a minimum amount to be invested.

13.Blaming the Market: Don’t blame the market for your losses. You are the sole reason for losses.

14.Adding to a losing Position - Never add to a losing position. It is a prescription for disaster.

15.Not getting a bigger view/perspective on Market – One can look at daily chart for short-term, but by looking at the weekly or monthly chart for longer-term can reveal great secrets of the market.
16.Trading with a high EGO– A person who do not expect that he would be wrong and refuse to get out of bad trades. This ego becomes the downfall.

17.Never use these things - HOPE, PRAYER THAT PRICE WILL MOVE UP

18. Ignoring the five basic pillars of trading :

•Trade with trend,
•Cut losses fast,
•Let profits run,
•Trade selectively,
•Trade in the major index direction.

19.The key to wealth in trading is simplicity. Avoid techniques you don't understand.

20.Big movements take time to develop. Stay always PATIENT.


That’s all I have for now, I will add more points which I feel important.

COURSEY..bullet

 

[oilman5]

like, "I used to be" or "not recently," then I want you to clearly realize one thing:

In all my years of performance consulting, I have NEVER seen a person in any field (athletic or business) who had a negative attitude AND ended up being successful.

We Have Choices
Everything we do involves making choices. As human beings, we have the freedom and ability to choose. Some things are easier to choose than others because they involve less effort, energy or resources; but easy choices are rarely the right choices. For example, if you want to get yourself into better physical shape then when your alarm goes off at 5:00am, you have a choice:

* Get up and go to the gym or
* Hit the snooze button and stay in bed for another 45 minutes

Hmm, which is the "easier" choice? And which do think is the right choice? Exactly!

Now, as traders, you sometimes make good trades or trading decisions and end up with a bad P & L. Once again, you have a choice:

* Lose your focus by getting mad at the market, ruminating, beating yourself up or
* Shift your attention to the PROCESS (things you CAN control) and re-establish your belief in your skills/talent/data points

Which is "easier" and which is the right choice?

What We Can Control
Elements outside of our control, are just that - OUTSIDE of our control and therefore, there is little point in wasting emotional capital on them. Trust me, I know how "easy" it is to get caught up in the noise - especially when times get tough - but you have to understand that it serves no positive value to you or you or your trading.

If the referee makes a bad call you can be angry for a few seconds, but GET OVER IT and MOVE ON. Why? Because the ref's call is OUT OF YOUR CONTROL.

Moving forward, I challenge you to start making the harder, right choices and use your emotional capital to focus on the PROCESS and things that are WITHIN your control.

Keep your eye on the ball and your head in the game!
Trading for a living requires a lot of discipline. It also requires a lot of streets smart if you trade discretionarily. One thing that many beginners missed is a basic concept of having multiple setups learned and practiced correctly.

Many beginners misunderstand that they can master a single setup and then can trade for a living. That is not likely the case. For each specific setup, you need to spend time to understand its reasoning behind, learn the chart pattern available in historical charts, and then practice in real-time or at least using simulation so that you know how to handle the setup in all possible situations.
stop loss is where u stop before losses stop u from trading ever (not a wise crack, think about it)...now modify this...
stop loss is at a % loss of my capital (on one trade or out of your total capital) where I stop before losses stop me from trading ever (becomes so big that it takes away a big chunk of your capital).
elder says 2% max on individual trade and 6% of ur capital in a month...there is a beautiful thread here on stop loss...search it


-- coursey many a good trader OF TRADERJI.COM
Stop Thinking

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Trading on the stock exchange is all about playing against the mind of the masses. The big guys and operators successfully will beat your mind by making you think, think and think. Is the right time to get in, will the market fall, and so many times people have asked me when the BIG correction is going to come?

Many people have gone short in this Bull Run and felt the heat. 'Go short' that is what your mind will tell you when the NIFTY makes 3% over 2-4 days.

There are many traders who suffer from this mental gridlock. Chances are that you are one of them. Human beings excel at pattern recognition but when coupled with risking money, they fail miserably. Fear or greed gets in their way of thinking. It is your ability to recognize charts, without needing conviction from another trader or CNBC that will separate you from the rest.
Predicting is a curse that is thrust on a trader, because normal thinking tells you that to make money you have to be able to predict a movement in a certain direction.

This is where you take out the emotion and thinking from trading. Use the best charting software and setup a tri-state signaling system that should tell you when to long, short or be out of the markets. It doesn’t matter if you following a trend trading system or a breakout system. You will be probably fit into one of these categories of a trend trader or a breakout trader. It is for you to choose. The master can be both. Once the decision-making is handled by emotionless software, which work tirelessly for you, most of your time you can spend on money and risk management. Stop thinking about whether the buy/sell signal is valid or not. Just make sure that the difference between entry point and the stop loss is acceptable by your risk management system. Focus most of your on capital management. Things will become easier for you. Stick with your system and don’t keep changing it. Do as many as a test you would like before applying it to your trading style.

You will still not be successful if you don’t develop a good profit taking mechanism. You or your system be may be very good at generating 80-95% perfect buy or sell signals, but unless a good stop loss and profit taking strategy is not is place you will be out of the game maybe not soon enough but later. A sloppy stop loss is all that is needed to make things go against you accumulation. On the other hand your impatience will not let your ride the full Monty. There is no way to tell if this is a top or a bottom if you have made it on the right side of the trend. The best way is to change the stop loss of your first lot above your or below your entry point using time as a parameter. The rest you can exit when your decision system tell you to. The more time you allow your trade to flow more are the chances that it makes you a good bundle.

You will perfect your system by surviving in the market. Taking a small hit today is the best strategy. Learn and device your risk and money management techniques and leave alone making entry decisions, because there is no perfect signaling system and there will not be one. There are plenty of tools available out there that can do better than you. Making money in our markets or for that in any conventional market is the art of capital and risk management.

Remember
Neal Hughes is basically daytrader trading 60minute and 5 minute time frames etc. Now What about using his tactics on a long term basis specially when you trade long term on darvas box theory momentum trading?
The concept can still be applied. but you need to look at breakouts on weekly charts of the stock in question and then drop down to daily chart
to implement pullback buying as dilineated in the examples.
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If you want perfect trades, perfect your trading plan. Neal Hughes
"FibMaster
Thanks to an excellent video from NEAL-IT opens doors to new thinking.
Re-think breakout strategy.
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Generally breakout occurs and just above the breakout people place their buy orders, and short sellers place their sell orders.others have their covering orders.
So the breakout area is a high activity zone.More of a danger zone.
and by observation you will see most breakouts fail fast and the buyers get stuck. THis happens to the Darvas box theory followers more often.
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Small example
Look at what happened to breakout buyers on 29th or 30th october2006

As an example you may see the iNDIACEMENTS stock which made a breakout over 221 and reached 222+, (false breakout,then faded down all the way on 31october to 214.70

Look at what happened to clever buyers who bought after breakout failed.

BUT IF YOU LOOK AT THE PEOPLE WHO WAITED FOR THE BREAKOUT TO FAIL
they bought Indiacements at 214 to 216 rupees price.
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But we have a rescue mission here for those people failing in false breakouts.
Hint buy on pullback at fibonacci support

Want to know about it?
Why not!!!!!!!!!!!!!!!
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see the video

http://207.6.227.129:8080/lessons/Tr...roduction.html

what to do?

Normally over70% of breakouts fail and pullback
BECAUSE YOU HAVE FALSE BREAKOUTS.

You can filter out false breakouts using fibonacci techniques

DONT enter blindly on a breakout on impulsive thinking

Instead wait for beakout to prove itself
drop down to a lower timeframe
enter only on a pullback at a fibonacci support.

YOUR CHANCES OF FAILURE MAY GREATLY REDUCE.

rvlv
rethink your old action style!!!!!!!!!

Note
Trading Breakouts.
Breakouts can be highly rewarding, because they often indicate the start of a major move. However, most breakouts fail.
This Trader Tip will teach you how to avoid the losers, and bank the winners!
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Breakout Trading as they say is not for tech newbies. Here is my humble experience about trading them :

1) Whenever prices break a imp. s/r level its a breakout. So the important thing about picking them is to judge the importance of those levels. But more important is the pattern that suggests a breakout. There are many-many patterns and each of them has a specific set of criteria. Sometimes prices survive double tops, wedges or similarly others. Thus it requires experience of reading innumerous charts. Price targets are determined from the pattern how the s/r levels are breached. Volumes are equally important. And again retracements and extension levels are very impotant, but i condider them important in all trading decisions, momentum based or after completion of a pattern.
2) Once the risk factor is conceived they are the most profitable trades. Thus if one can identify a single out of 200 stocks, they are worth the trouble,that is.

In a day to day breakout trading, we go for buying on breakout of yesterdays high, and selling of a stock on break below yesterday low.
Now the prices cheat on us and do the exact reversals etc.
How can we find out that a certain breakout of a particular stock price is genuine and not a fake one -so that we trade on that?

shall I pick up the rising volume as a supporting thing?
shall I pick the crossing above a regular pivot level as a strong guidance?
OR SHALL I base my decision on stockhastics or roc?
IMHO, first things first: I do not suggest in anyways trading only on breakout, I dont practise that myself. I dont suggest buying simply on breakouts of yeasterday high, and selling of a stock on break below yesterday low. Things can never be that simple in the market.

At the time of breakout the volume goes high and prices move with great force. Momentum based strategies work here.
Yes, more important is what if prices cheat on us. If the risk element is well taken care of only rewards are left.Let me elaborate.

Prices have some amount of randomness, and the amount of randomness exactly at a point of time should be judged. Say if we are about to buy, the prices have some definite probability to move up, and a definite probability to move down. A picture says more than a thousand words.
http://www.traderji.com/57594-post48.html
I had suggested a long position on NALCO since it had been under a very clear accumulation. What shall an analyst have said about the probability of moving down? 0.5? then he is not an analyst. The prices had little chances of moving down from there, say less than 0.1. The breakout did not happen at that particular time. But they did not move with countertrend either. They make noise for sometime, and then start giving me profits. And so i won.

Next consider the chart of TITAN, I have been suggesting it tens of times in the chatroom the past week. What does one judge about its probability of moving up? Open for criticism, just like BOMBAYDYEIN.

Now about the rewards. Once a breakout-trade becomes successful it is suggested to start pyramiding up as much portfolio as risk/reward allows.Even if one one breakout can be identified in a month it is worth the efforts, that is.

Now more about picking up a possible candidate for breakout. IMHO, prices and volumes are the most important thing. Everything else follows. Thats why I said pattern study is most important. I do not use stochs or MACD or MAs. I use only Bollinger Bands, that too just because they help me visualize faster and easier. Please dont ask me to give my full system for public criticism.

Sir, I cant call myself an expert. Theese are my views only.

PS: http://www.traderji.com/63003-post80.html
COURSEY...LOHIYA AND RVLV

 

[oilman5]

ANY TRADER MUST SEE THESE Q ..ANSWERED..
..................................................................
How to know where to put your stop loss and when to move it

Learn the key to understanding & applying volume

How really understanding volume can deliver larger profits

Which indicators work best

How to properly combine indicators for outstanding reliability

Charting mistakes that can cause you to miss some of the best trades

Advanced support and resistance techniques

How to keep from getting whipsawed out of a trade
Stocks you should avoid like the plague

How to profit no matter which direction the market is going

The best way to stay in a profitable trade (swings & trends)

The logistics of opening and closing trades

The Achilles Heel of traders, "Money Management" including;

How improper capitalization can sink your ship

Proper position sizing

How to get the most out of your brokerage account

How record keeping can increase your profits

Demonstrates how simple successful trading can be

How the understanding of an indicator can produce superior profits

OILMAN5