Tiger Yacht

Managing Information Overload

What we are actually experiencing is not an information explosion. It is an explosion of data. Data provide neither enlightenment nor knowledge. What we are really experiencing may be access to excess. The mere fact that there is more data available does not mean that people either want it or can use it meaningfully.Patricia Glass Schuman

A Day-Trading Worksheet - will better organize your visual observations and ideas from the ever-changing flow of market data. A worksheet can be constructed to include various long and short set-up opportunities within its own columns to manage its evolutionary changes.

At any given time, the ability to decipher which stock is exhibiting a particular set-up pattern based upon your ¼ hour analysis, will prove invaluable to executing trading decisions, in a timely, organized, stress-free, and non-emotional manner.

Dream Machine

07-27 Rise n Fall

Rudy said...

Short: Reasons

Type of Set-up: Gap-Fade

Positives:
1) Strong bullish OR and rising 5ema

Negatives:
1) Prior day hugh break-down on massive volume
2) Gap-up is below prior day's high
3) Long upper tail on 2nd bar
4) Volume on 3rd bar is greatest spike in consolidation pattern
5) Descending flag configuration (lower highs)
6) Flattening 5ema
7) Bearish candlestick bar prior to nr7 short entry and is an offsetting bar (inverted hammer-like)
8) Lots of upper tails = distribution
9) NR7 c/stick on the 6th bar (entry bar)

Stock is exhibiting major bearish overall pattern = "short till the cows come home""Be careful about betting too much on a sure thing, particularly one with a strong logical argument". Ed Seykota

My 2 cents. Rudy

The Meaning of Success

I trade because I want to be financially independent, self-reliant on my own cognizant efforts, and free from the drudgery of pandering to "The Man".

I trade because I want to be free to indulge my kids, on my time, at my convenience, and for my own altruistic pleasures.

I trade because I wish to be a success on my terms and not at the whims and fancies of another.

Success as I define it is the freedom to do as I choose, when I choose to, and since I don't have the talent to be a rock star, I am condemned to trading for a living.

"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do". Bob Dylan

The Principles For Trend Trading By Ed Seykota

The principles for Trend Trading seem to apply to all areas of life.

1. Go With the Trend
2. Stick with Winners
3. Cut Losses
4. Manage Risk

While the principles are simple, few people seem willing to engage them consistently, particularly when they hold them as advice or rules.

Ed Seykota

A Lesson From The Great Gretzky

Flatwallet, great insight.

To add to your conclusion, I am reminded of the following quote by the great hockey player Gretzky, "Go to where the puck is going, not where it has been".

This piece of advice is as relevant and an important piece of observation to the stock market as it is to hockey.

The real goal during intraday trading is to "anticipate" what the "possible" completion pattern is going to be, thereby giving you the "edge" that most books revel about.

In-other-words, knowing that I am expecting a particular pattern, such as a H&S (i.e, where it should be), can I now "anticipate" if the pattern will fully materialize (i.e, "where it is going"), and if so, I must act quickly and not hesitate to pull the trigger.

In the stock market if you wait for a classic pattern to fully develop (i.e, "where it has been"), most likely, the market has already discounted it, and, as such, you are already too late for the party.

In the stock market as in hockey and almost everything else in life, timing is of the uttermost importance, and anticipation being the key to defining your expectations and ultimate destination.

(from the above chart, had you waited for a complete H&S pattern to reveal itself before entering, you would have missed a substantial price movement. Thanks OONR7 for the chart posted 06/14/07)

Definitely something to think about. My 2 cents. Rudy

Dummy Charts.com - A Great Way To Self-Diagnose

"Remember, grasshopper, boards don't hit back!"

Flatwallet, thanks for the comments. As regards the feedback on the daily chart analysis, I prefer to pass on this for now. Too consumed by personal workload and family matters. However, on my blog site, I have a link to "Dummy Charts" (filed under electronic library), which is a great way to self-diagnose candlestick pattern recognition. I often peruse the blog on a weekly basis to test my mental agility. Hope you and avid readers find the exercise enlightening and revealing. Thanks, Rudy.

Wall Street, The Great Swindle

Flatwallet, brilliantly said!.

The Holy Grail comment was something I wanted for me to write and read over and over again.

Not so long ago, I searched in vain for the holy grail system. When I think of all the time I wasted and money spent on black box systems, books, and newsletters, I feel like giving myself a good ass whipping.

I am too ashamed to say how much money I lost over the years. Thanks to Trader X, Max, and blogs like yours, I am only now beginning to be a better trader.

My story is nothing unique. I am positive many of your readers have experienced the great swindle that is wall street. The sad part is too many good people lost their fortune before they ever had a chance to learn how to trade stocks successfully.

The road to wall street is plagued with highway robbers, dressed in pin-stripped suits and savvy talk, who will convince you that their mother is a better trader than you, but for a discerning fee, you too can learn the secret.

That is why a guy like Trader X, who gave so unselfishly, should have a statute dedicated in his honor ... from money stolen from us.

I am glad that you are fortunate to know it is only a fool's game to believe in the "holy grail system".

Sorry for any misunderstanding. Rudy

An Exercise in Commitment

rudy said...

Hi flatwallet, got your e:mail. Glad to know your system is making sense.

Keeping readers interested in your blog is a great way to get feedback on thought provoking ideas. "The rub is how to keep em comming back for mo?".

As regards to the bullish and bearish bars, I strongly recommend you hand-chart, on a piece of paper, every chart-pattern that led to trader x entries and exits.

What I learned was bullish bars = (a) on the opening range = Hammer, Marabuzu, inverted hammer with real body filled.
(b) Subsequent bars = bullish-engulfing, piercing of OR, and kicker candles.
(c) higher lows, proximity to 5ema, and nrb/ib hammer-like candle prior to b/o (almost a flag-like pattern).

Of course, this is an exercise you have to undertake on your own to understand the true message of the "jademaster".

Hope this helps, Rudy

10:32 AM, July 15, 2007

In Search of the Holy Grail

Rudy said...

Flatwallet your recent article is wonderfully imaginative, probing, and creative.

I find that the biggest secret about the Holy Grail as it relates to trading is that there isn't any . The idea of searching for some secret for trading success misses the point.

For example, the "doing" part of trading is quite simple. You click a button and place the order.

The "being" part of trading, however, is much more subtle. It's like being an athlete. It takes commitment.

For example, some golfers play to spend time outdoors, hang around with knowledgeable friends, study the greens, reconnect with their muscles, drop into focused concentration, and, incidentally pick up a birdie or two.

For others, it's the futile exercise in finding some new "Holy Grail putter".

As such, to the committed, a world of support appears. All manner of unforeseen assistance materializes and propel the "committed" to meet grand destiny.

Nevertheless, you have to admit "different strokes for different folks"! Rudy

(excerpted from Ed Seykota)

11:02 PM, July 16, 2007

Words of Wisdom

Fundamentalists who say they are not going to pay any attention to the charts are like a doctor who says he’s not going to take a patient’s temperature.
-Bruce Kovner

Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.
-Bruce Kovner

Investing is like poker. You should only play the good hands, and drop out of the poor hands, forfeiting the ante.
-Gary Biefeldt

Fundamentals that you read about are typically useless as the market has already discounted the price.
-I call them "funny-mentals." However, if you catch on early, before others believe, then you might have valuable "surprise-a-mentals"”
-Ed Seykota

Pride is a great banana peel—as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.
-Ed Seykota

I learned that an opinion isn’t worth that much. It is more important to listen to the market.
-Brian Gelber

Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.
-Brian Gelber

The psychological factor for investing has 5 areas. These include a well-rounded personal life, a positive attitude, the motivation to make money, lack of conflict [such as psychological hang ups about success], and responsibility for results.
-Dr. Van K. Tharp

The composite of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in her/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient.
-Dr. Van K. Tharp

Many people actually want to lose on a subconscious level.
-Dr. Van K. Tharp

The realization that you are responsible for your results is the key to successful trading. Winners know they are responsible for their results; losers think they are not.
-Dr. Van K. Tharp

(excerpted The Market Wizards, Jack D Schwager)

Blogging is an Exchange of Ideas

rudy said...

Thanks, I may just take you up on that offer. You can count on me being a regular visitor to your blog, as I find maintaining a personal blog to be time consuming and laborious.

However, it is a necessary component to a trader's educational development. and the free exchange of ideas is a wonderful way to decipher the great stock market puzzle.

I applaud your gallant efforts and encourage you to keep up the good work. I know you will be a success, because, like me, you are also a diligent and serious student of the markets. Thanks again, Rudy

7:34 PM, July 15, 2007

The Jademaster

rudy said...

The Jademaster

One cold winter morning a young man walks five miles through the
snow. He knocks on the Jademaster's door. The Jademaster answers with a broom in his hand.

"Yes?"

"I want to learn about Jade."

"Very well then, come in out of the cold."

They sit by the fire sipping hot green tea. The Jademaster presses a green stone deeply into the young man's hand and begins to talk about tree frogs. After a few minutes, the young man interrupts.

"Excuse me, I am here to learn about Jade, not tree frogs."

The Jademaster takes the stone and tells the young man to go home and return in a week. The following week the young man returns. The Jademaster presses another green stone into the young man's hand and continues the story. Again, the young man interrupts. Again, the Jade-master sends him home.

Weeks pass. The young man interrupts less and less. The young man also learns to brew the hot green tea, clean up the kitchen and sweep the floors. Spring comes.

One day, the young man observes, "The stone I hold is not genuine Jade."

I lean back in my chair, savoring the story. My student interrupts.

"OK. OK. That's a great story. I don't see what it has to do with making money. I come to you to find out about the markets. I want to learn about the bulls and the bears, commodities, stocks, bonds, calls and options. I want to make big money. You tell me a fable about Jade. What is this? You ..."

"That's all for now. Leave those price charts on the table. Come back next week."

Months pass. My student interrupts less and less as I continue the story of The Trader's Window.

-from The Trader's Window

How I Execute My Trading System

rudy
said...

I am glad that you have a defined method to a qualified watch list. The key is to analyze it after the market close and ask yourself "what trades did I miss, and why?" By undergoing this exercise every night, you will force yourself to reevaluate your trading system's effectiveness, based on your "set-ups" requirements.

When conducting your nightly analysis, consider the following set-ups:

(1) The initial open range breakout from NRB/IB.

(2) The first pullback/rally after open range break-out usually presents a second opportunity to re-enter. (I personally like to see a candlestick reversal bottom type pattern, followed by a consolidation and NRB/IB break-out).

(3) gap reversals that fill gap (great for those sideways type market). (I want to see gap is filled, a consolidation above/below opening range, and break-out from an NRB/IB hammer-like bar).

The main reason I like trading from a predefined "gapper" watch list is that I can gauge the market's direction and conviction, i.e, strong gap up/down day, or gap reversal day. By supplementing my "gap" watch list from quote.com, I am positioned to take advantage of any stocks moving on "news events".

Best of Luck. Rudy

10:29 PM, July 10, 2007

How I formulate my Day Trading System

rudy
said...

Flatwallet,
I like Mao set-ups, but trader x goes into open range analysis in much, much more detail. X system is time tested and as you can see from the successful bloggers, his system can make you money consistently, week in / week out (see 00nr7). I would not want to trade not knowing X methods.

The way I studied X was five fold:
(1) I hand-charted every one of his charts. I documented the "major" candlestick patterns that led to his decisions. In so doing, I was able to see an overall "method to his madness". I began to realize that his system was simple and can be executed with the minimal amount of energy. I particularly liked his gap strategy off of 15 min bars. This meant I had enough time intra-day to plan my war game and to let the trades "come to me".

I firmly believe that I am not going to get rich if I have to fight and struggle with the market each and every day. I must be able to trade in a non-emotional way and just "let the market tell its own story" When I am right, I make good money, when wrong I loose a little.

(2) I back-tested my conclusions based on nightly review of my watch-list. I also studied all the other bloggers trades to see if I was in harmony with their executions and trades.

(3) Once I felt I had a "trading plan", I began to paper trade my understanding of X system with real-time market data.

(4) At this point I felt I was ready to trade in small lots to test my system and to build my confidence before committing "the big money".

(5) Once I convinced myself that my system was viable, I then up the ante, and press the bet

I never stop learning. I always study other bloggers for their daily inputs and feedback. And am never too timid to say "I don't know". And above all else, like trader X, I believe in "good karma", in that what goes around comes around. As such, I am always willing to share my ideas and "lend my 2 cents". Rudy

2:35 PM, July 15, 2007

How I Develop A Simple Day Trading System

rudy
said...

This may help - a brief summary of "a simple daytrading system".

(1) Have a watch list: screen stocks > $50, with > 1mm 50d average volume, less than 10% from all time highs. If on the intraday daily chart it trades in < $1.00 increments, eliminate. Usually limit watch list to 30-50 stocks.

(2) From 9:30 - 10:00 review watch list and jot down on a worksheet the stocks that gap-up and gap-down. You're basically trying to isolate the morning gappers / movers. Note, many will fill, so they drop off the list. You want the ones that hold gap. Also note, that on gap reversal days, you may not have any gap oppertunities.

(3) From 15 min chart watch for the following basic candlestick formations, for LONG set-ups:

(1) OR (opening range = 1st 15 mins bar) The high is resistiance, the low support. These are your pivot points. Basically if the stock breaks OR high, go long, but only for stocks that gap-up.
(2) You then monitor the subsequent bars for
(a) testing of OR support (must hold above OR low)
(b) rallying to OR resistance (strong recovery), and
(c) consolidation above 50% OR range (a brief pause before the OR break-out)

(3) Before taking action, you must see
(a) a hammer (or hammer-like) bar formation near the OR high, and
(b) the stock must be above and near 5ema (this acts as support should the stock reverse sharpely after entry).

(4) In summary, from a shallow base, or a strong bottom reversal base, with a hammer-like bar and rising 5ema, do the following:
(1) Enter a market stop order +2 ticks above (a) hammer high, or (2) OR high
(2) Your initial stop is the previous bar low less 2 ticks. Usually keep risk less than -$.40 per share. I suggest, for now, risk < day =" a"> 50% win/loss rate will pay the rent. Your daily goal is to find 2 low risk, high probability trades per day!

The stock market game is like playing the lotto, "you got to be in it to win it", with the exception you're placing a bet only when you are convinced the odds are in your favor, Beyond that, you have no control, except how much you are willing to loose.

So spend a few nights studying all of trader x charts. Test yourself on everyone one of them as to his rational behind long and short entries.

And when you've convinced yourself that these trades in their simpliest form is nothing more than placing an educated guess on gaps, OR range break-outs, off of 15 mins chart, from a hammer-like formation, then "do the dang thing"

Hope this helps. Rudy

6:16 PM, July 02, 2007