Trading Techniques

[Spaf]

A DOZEN OR SO BEST TRADING TECHNIQUES RE: Trading (Griffis/Epstein)

1. HAVE A TRADING TOOL CHEST.... Trading software, hardware, and internet access.

2. USE BOTH FUNDAMENTALS & TECHNICALS.... The state of the economy and market is critical.

3. CHOOSE AND USE TOOLS WISELY.... Pick 2 - 3 top trading tools. Too many will drive you crazy.

4. COUNT ON THE AVERAGES TO MAKE MOVES.... Use moving averages along with other indicators.

5. DEVELOP A SYSTEM.... The system should fit your personality and objectives.

6. KNOW THE COST.... Figure the slippage; ask (buy), bid (sell), and current value.

7. KNOW WHEN TO HOLD OR FOLD.... The hardest lesson. If you make a mistake, sell.

8. DON'T ANTICIPATE SIGNALS.... Enter when the signal is triggered.

9. BUY STRENGTH, SELL WEAKNESS.... Buy on uptrends. When falling in a weak period; sell.

10. KEEP A TRADING JOURNAL.... Information on what went right or wrong. Not repeating mistakes.

11. WAIT PATIENTLY FOR WINNING PATTERNS.... Avoiding bad trade signals is more important.

12. (your favorate)

[robo]

For 20 years on the day after Thanksgiving, Denis Gartman has been publishing his “Rules of Trading”. This year was no exception. Reading his rules reminds me of a quote from a man called Donal Deeney from Monaghan, Ireland, who has now passed away; he sums it up nicely, “It takes a wise man to learn from his own mistakes, but a smarter man to learn from the mistakes of others”.

There are lessons to be learnt here:

Never, Ever, Ever, Under Any Circumstance, Add To A Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; It is trading’s driving-while intoxicated. It will lead to ruin. Count on it.

Trade Like A Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

Mental Capital Trumps Real Capital: Capital comes in two types: mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

This Is Not A Business of Buying Low and Selling High: It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

In Bull Markets One Can Only Be Long or Neutral, and in a bear markets, once can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.

“Markets Can Remain Illogical Far Longer Than You Or I Can Remain Solvent.” These are Keynes’ words and illogic does often reign, despite what the academics would have us believe.

Buy Markets That Show The Greatest Strength; Sell Markets That Show The Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to said the strongest winds, for they carry the farthest.

Think Like A Fundamentalist; Trade Like A Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technical and fundamentals, as you understand, them run in tandem.

Trading Runs in Cycles; Some Good; Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well research trade will go awry. This is the mature of trading; accept it and move on.

Keep your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve know have the simplest methods of trading. There is a correlation here!

In Trading/Investing, An Understanding of Mass Psychology is Often More Important Than An Understanding of Economics: Simply put, “When they are cryin’ you should be buyin’! and when they are yellin’, you should be sellin’!

Bear Market Corrections Are More Violent and Far Swifter Than Bull Market
Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and move on.

There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions

Be Patient With Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year… and our profits grow accordingly

Do More Of That Which Is Working and Less Of That Which Is Not: The works in life as well as trading. Do the tings that have been proven of merit. Add to winning traders; Cut back, or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.

All Rules Are Meant To Be Broken… but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

http://timetotrade.eu/blog/2006/11/27/dennis-gartmans-not-so-simple-but-materially-fewer-rules-of-trading/

[James48843]

Well, thanks to SPAF's publishing the leader's board moves for 07, I think it's prety clear that the majority opinion of the 07 leaders is to the sidelines today. (See the SPAF note in the market talk thread).


THAT is a short-term strategy that is clear.

We'll see how good a move that was in the next few days.

[Birchtree]

What's best capital appreciation or capital preservation. Only the Shadow knows for sure.

[350zCommTech]

Do More Of That Which Is Working and Less Of That Which Is Not: The works in life as well as trading. Do the tings that have been proven of merit. Add to winning traders; Cut back, or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.

I really like this one. My best fund is the I fund and my worst fund is the F fund. But, I just want to go back to the F fund to get my money back. Last year, my net loss in the F was 2%. This year, I've already lost .27%. I think I'll stay away from the F fund.

[mailmanusa]

(my favorate)

Decide what you think works best for your situation at any given point and look for information that supports your idea. If you cant find any, consider changing your mind.

[robo]

After yesterday's sell-off this is a good read.

Robo


The Desire For Immediate Success
While the desire to succeed in market timing is perfectly fine, the desire for immediate profits and winning trades is not.

The desires that motivate your trading could mean the difference between success and failure. We market time the financial markets to make money, not to satisfy our emotional needs.

Motivated By Immediate Rewards

Very simply, the market is unlikely to hand them to you. Although market timing is all about being profitable, it is not about satisfying our emotional needs. Rather, it is the following of a rational plan to create wealth over time.

A winning market timer must tirelessly execute a trading strategy that will often come into conflict with the timer's emotions. The outcome of any one buy or sell may not produce a profit. It's quite possible that the overall outcome of a series of buys or sells may not produce a profit. It's essential that these possibilities be acknowledged.

People are motivated by rewards and in modern society that usually means money.

The more money we are offered, the harder we work. Perhaps you were attracted to market timing because of the large potential profits you can make over time. It's natural to want to receive a reward for your hard work.

But if you expect an immediate reward for your effort and it isn't forthcoming, you'll be frustrated and disappointed. And when it comes to market timing, immediate rewards aren't always there.

For example, everyone expects to get paid on the date their paycheck is due, but have you observed what happens when a paycheck is late? Everyone is quite frustrated and some people can get very angry. People were expecting a hard earned reward but received no reward.

"It is essential for a market timer to think in terms of the big picture, and in terms of probabilities."
Unless one has the right perspective, market timing can feel that way also. One may put in an enormous effort and receive no "immediate" reward for it.

If one is "expecting" an immediate reward, it can be frustrating and disappointing when it does not appear. That is why it is important to take the proper perspective with market timing, and the proper perspective can only be based by looking at timing results over a long time frame.

The Big Picture And Laws Of Probability

It is essential for a market timer to think in terms of the big picture, and in terms of probabilities. You must realize that the outcome of any one buy or sell signal is not significant. It's the outcome over time that matters.

The more trades you make with a winning trading strategy, the more the law of averages will work in your favor, and across the series of trades, you'll be profitable.

Market conditions, as we all know, are not always conducive to our plans. This is a reality of market timing and it's necessary to prepare for it. If you are aware of this, you'll be less likely to react emotionally to losing trades, and also less likely to make bad decisions when they occur.

Seeing the big picture, and sticking to the trading plan, are the keys to timing success.

Conclusion

If you anticipate that you won't win on a single buy or sell signal, you will not feel disappointed when it happens.

If you acknowledge that you may not profit even after a series of buy or sell signals, you will similarly be able to deal with it, bounce back, and be ready to take the next trade.

But on the other hand, if you aren't prepared for these possibilities, you'll feel frustrated and disappointed. You may feel like giving up on timing.

Some market timers hit the jackpot and start timing right at the beginning of a profitable trend. Those who started in mid 2000 and took our short positions made immediate huge profits.

But typically, we start our market timing during difficult market conditions.

The right perspective goes a long way in coping with the inevitable hardballs that the market throws at us. Those who stay the course reap the rewards over time.

How do we post the excellent trading results that have been attained in our various timing strategies? Because the reports follow a disciplined plan. They follow the buy and sell signals without question. No if's, and's or but's. Accordingly, over time, they show the profitable results of sticking to the plan.

Over time, disciplined trading becomes easier. But be careful not to minimize the importance of self-control and discipline. The more disciplined you can be, the more profits you will realize.


http://timing.typepad.com/timer/2007/10/the-desire-for-.html