Jakew

That may partly explain why in July '07 a record high - for years - short sold stocks number has been recorded. Some misquided market analysts expected another bull rally following such a display of pessimism. A big change in my opinion - aren't markets driven by (unreasonable and reasonable) perceptions?

The text perpetrates the same risky psychic attitude it would like to teach to avoid. It says "mistake", "error", "being wrong" = losing on a trade. It is hard to teach the ego to not be so bitter about a properly taken loss on a properly taken trade when... Mistake, error is something else than trading properly.

I like the author's wording: "you are trading your hypothesis". In general, he has a knack to formulate old trading terms in a new way. Today I traded my hypothesis that the market will provide opportunity on the long side (despite the -5% of Nikkei and Hang Seng for a good morning). There is a trading maxim that says "trade what you see, not what you think". Perhaps too simplistic. Perhaps one should first think over his hypothesis and only then see if during the trading day some evidence supporting it unfolds. So I didn't trade from the short side even though I could see quite clearly the sell signals that occured during the day. Not in my hypothesis for today. The long side proved better today, although the short side also had some merits -before Fed abruptly stepped in (probably actively opposing the hypothesis of markets' inherent bearishness). No, I did not think even for a moment where the other guy is going to quit - that will always remain a secret to me. Once again, a thought provoking book, although the title would suggest a more classic approach - suggesting that every trader needs to master this particular, in fact somewhat idiosyncratic, approach. Cheers, enjoy!

Can anyone agree with this author that bull markets are an aberration? That all markets are inherently bearish? This sounds just crazy if you can take a look at - for a more conclusive proof - 100 year charts of stocks and commodities. His writing is interesting but boy too unusual for its own, or a reader's, good.

Well, that's definitely something else. You do not see too many Anglosaxons acting like that:)

Yes, same here. I could also alternatively say or - to avoid stirring an unneccessary discussion - think to myself that a hammer is "a case of not fully realized gravestone or dragonfly". By the way "hammer" says relatively little compared to my favorite candle name "gravestone", which says it all and for a reason... I am not a big fan of dragonfly name (http://en.wikipedia.org/wiki/Dragonfly) - what this microscopic creature has to do with the candle's powerful implications (not just look) - for my personal use I call dragonfly "bulltail" or perhaps might imagine a dragon that has just slapped unprepared bears on their heads with its muscular tail:)

brown, obviously we need to define terms first of all a/ frequency of occurance of a pattern or signal if you like will not count for its strength (it will definitely count for its usefulness since the more trials with an edge, the better); there are much more hammers than grave/dragon for obvious reasons b/ strength of signal will mean its reliability because reliability is purely subjective i.e. dependent on a trader (his stop loss versus his exit placement) and not an objective feature of an entry signal - you will understand that my experience will bring different results than yours, because our setups are different cheers

Dragonfly doji and Gravestone doji seem most useful. They are like corresponding hammers but even stronger than the latter.

Good metaphor with many many possibilities. It wouldn't hurt if I was more fidel. Looks like I leave my loyal and beautiful partner in an early stage of a fruitful relationship all to often. No problems with stop losses though.

Excellent article from start to finish! Scaling out as a psychological tool, and not just a purely technical/mathematical device - very insightful.

Essential. It is somehow surprising that in 2005 one can still write a book on trading that stands tall among all the earlier trading literature. It probably has something to do with J.Carter's passion in sharing his view on trading, that makes his lecture uniquely powerful.

True, most likely. In any case, we need more of those "egoistic altruists" rather than "egoistic egoists" in our world. It is beautiful when people derive satisfaction form helping rather than hindering. Along these lines - who like stoics draw satisfaction from behaving like their noble code they embraced dictates them, with no regard of the outcome (of the trade, one might say)

My take on the subject is that both automated and discretional trading can be valid. However very short term trading is probably better served by discretional decision making, especially as to entry and the type of setup to use (because of the "market climate" prevailing), though not the exit decision. Exit must be automated even in discretional trading just because human nature will statistically do more harm than good in the realm of exits. I other words I belive in intuition at entries but not exits. It is so because when thinking/feeling (whole brain) about entry you are not in the trade yet, and the condition of being in the trade changes your intuitive capabilities for the worse. For entries at least I can use emotional triggers with considerable benefit, it doesn't work with exits in my case. Emotional input cannot be really automated, or in a way it can be (say 1 for I feel this looking at the chart/tape, 0 for I don't feel this) but would it be still... well... automated trading, with emotion of an individual coded in?. Perhaps, but not a black box for sale, just your own one of its kind wholistic system?. For relatively longer term trades I suppose automation can work better than for very short term trading because of the logic of the R-multiples of these trades: it is not as important if the entry suceeds (and it is very important in very short term trading) becuase the opportunity cost of not taking a systemic entry is way too high to even think of not taking an entry - just because you risk very liitle with your stop loss compared to the much more formidable risk of missing a high R-multiple win.

Well it seems that in the actual fact a trader cannot really help another trader, on a deep level. Trading just like life in general isn't so much about knowing what to do, but about being able to do what needs to be done. It isn't a secret what needs to be done.

Excellent quatation from Linda Raschke experience, Dogpile. It dwarfs the classic saying about not repeating the same mistake twice. Certainly there are areas in life when one mistake teaches the whole lesson, but trading is not one of them. If only, because this is a probabilistic field where nothing works all the time, and therefore ... nothing fails all the time either. One needs a decent sample of his - suspected - mistakes to draw a conculsion

Walter, I just wonder why a daily target rather than a target per one trade? ( I am not a scalper). I mean if a setup occurs the trader takes it and exits at the target if the latter is reached. As a result there are days with no setups and therefore no money won or lost, and there are days with above average number of trades. So, what precisely is the role of a daily target in one's trading - how does it help? Cheers

Great book. Slow first read because it is so good. I mean you can read and immediately re-read it again and again because "the plot" is still there - like an unsolved detective story of who will make the next killing, bulls or bears. Unique.

The question of trading in momentum vs. non-momentum conditions, also known as trading in trending vs. sideways/whipsaw markets seems quite central to improving trading results. However there are few satisfying answers to this question. As mentioned above - indicators lag. Eye observations lag as well because only after some passage of time a trader is able to discern that he is in a whipsaw market... and still will not know when non-momentum conditions change into momentum conditions until after the fact. Channel breakouts are supposed to free those who use them from participating in a whipsaw market, but then again - there are false breakouts. Livermore and Seykota both advise to avoid whipsaw markets, but when I asked Seykota how it is posible to discern that a trend signal is not to be taken because there are whipsaw conditions now, he did not clarify the issue. John Carter in his book states that he is able to classify days of trading (and appriopriate methods to follow on such days) as trending and sideways, but I am not sure if he is really able to that before the open or only after some market action - or inaction. I would say that trends and whispaws are largely unpredictable, but some gut feel based on experience and concentration may improve the odds in that matter a bit.

Location, location, location - as they say in real estate. Great view of Machu Picchu, Boca. Interesting how many people, if anyone, live in that stunning area of Peru. I'm a Pole. I have the Canadian citizenship as well and used to live in beautiful Vancouver, BC but later returned to Warsaw.

It might be so, however: 1. We know from Market Profile that those short covering moves don't last, there is no real demand behind them. 2. We also know that it is precisely 80-90% of market movements and trades that don't amount to anything better than a total of zero, while the whole positive impact comes from the remaining 10-20%.....so.....

Just an example from my latest session. A very clearly defined value area from 2 days before (not 1 day before which created a considerably less accentuated VA at around 3575) was 3545-3555 (the market spent hours in this range). 1 day before market closed at 3584 after a failed rally. As China broke down and international markets opened considerably lower, before my open I decided to enter a buy order at 3545 which was the low of a strong VA and more than 1% below last close. Safe point of entry. It was a very good decision but not a perfect one...the market opened 3549, reached 3546 and rallied fast to 3565. I did not get a fill. From this lesson I gathered that next time I will place my entry order closer to the middle of VA. Let's see what happened next - the market after reaching 3565 started a slow descent that finally broke the low of VA and I could see increased selling interest by those who perceived the situation as breakdown. But they acted too early - 3543 was the lowest the price got. Then it re-entered VA and, exactly as PivotProfiler writes above, started soon an agressive climb to 3584 (day close was 3579). I took part in this move although I entered a bit late - I did not know about the 80%! - waiting for momentum to occur. Cheers.

Great review of terms and a great chart. I wonder if the opening balance couldn't be defined based on the first 30 minutes of trading, just like TPOs. Isn't it true that S&P tends to choose it's direction for a couple of next hours of trading around 30 minutes after open? (the last hour of trading might change the direction again)

Rock, his trading is highly automated once an entry is made, and also before a possible entry he hears, yes hears, from his computers. So apparently he doesn't watch the screens as much as others, especially midday. More in the book.

"General, don't take advice of your fears" (author unknown, could be Clausewitz). This pertains to entries and exits, not PSize. "Don't be a sucker" (Jessie Livermore). This is, I presume, about people who know all the rules of good trading with one painful exception - "apply the rules". Jim Rogers quoted above. George Soros " It doesn't matter if you are right or wrong, but how much you win when you are right, and how little you lose when wrong"

ps. I do watch RATM gigs and other hard hitting bands on weekends, for full balance, not without a few cans of lager.