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Found 9 results

  1. Good Morning All; Last week I began discussing a definition of trading. Today we are going to discuss how newer traders often define trading, and the process they go through to get there. What is Trading? Part 2 of 2 Many people 'invest' in the market by placing a 'bet' on the future of the stock market as a whole (usually the bet is that the market is going up). For those who decide to make income by actively trading, they usually feel the market is easy. They have been inspired by a great (or not so great) book, free seminar, or 'infomercial'. They have heard of great success, been introduced to a strategy that worked one time, and feel that since they are clearly above average in both intellect and perseverance, this stock market game will just be another conquest. Their definition of trading is likely along the lines of 'buy low and sell high, over and over again to produce a profit'. Soon after trying the concept that they learned which had introduced them to the market, they become frustrated. It is not working. They have probably justified many reasons why it is not working, and have concluded that to truly master the markets, they need more information. Therefore, they go on the crusade to become experts at everything. They read Barron's, IBD, Fortune, and Money. They study all terms learned on CNBC. They become an expert on all news and economic numbers. Suddenly the party conversation becomes analyzing the last 'book to bill number' or how foolish Greenspan was or Bernanke is. The quest now becomes to find stocks that they have determined to be 'undervalued', based on the superior knowledge they now have. Their definition of trading is now likely along the lines of 'looking for obvious overvalued and undervalued situations to capitalize on'. Soon they discover that 'undervalued' does not mean the price has to rally. If it does rally, their timing may be so far off, being 'right' did not matter. They also find they are not 'right' very much. They also discover that 'undervalued' goes hand in hand with 'really weak' and they are now starting to think that they are still missing something. They are also getting frustrated. This was supposed to be easy. Most still view it as easy at this point. They simply have had some bad breaks, rotten timing, poor luck, and naturally needed to overcome some growing pains. Unfortunately, it is at this time that they become most susceptible to the prey of the 'Holy Grail' vendors. Those who are selling products that are 'guaranteed' to make you money by following a simple 'how to' manual. When this crosses that, buy; when this changes color, sell, etc. Their definition of trading is now becoming blurred, and they start to think about many in depth questions about 'fundamental versus technical', about using 'technical indicators'. Desperation and lack of confidence often sets in and the definition of trading is sounding more like 'buy whatever the newsletter or market guru says'. If this flow sounds shockingly familiar, do not be surprised. At some point, a few will wipe the slate clean and seek out an 'education'. To learn to think for themselves and evaluate what is happening, not what they are being told. They come to understand that trading is a complex ever-changing environment that requires understanding as only derived in a total learning process. Below is the definition we gave you for 'trading'. If you read over it lightly yesterday, take another look today. "Using technical analysis to find a moment in time when the odds are in your favor. Then it becomes a matter of entry and management. In other words, it is having the KNOWLEDGE to know when the odds are in your favor, having the PATIENCE to wait for that moment, then having the DISCIPLINE to handle the trade properly when it goes in your favor and properly when it goes against you." Paul Lange Vice President of Services Pristine Capital Holdings, Inc.
  2. Good Morning All; Webster defines trading as: "to engage in frequent buying and selling of (as stocks or commodities) usually in search of quick profits". Notice the key words that even Webster knew to include, "...in search of..." making an implication to the fact that 'quick profits' are ever so illusive. This definition works fine if you are learning English as a second language. It gives you a notion of what the word means. It does not do justice to the process. I am going to take this article to share some ideas regarding what makes up the essence of trading. This is MY definition, you do not have to agree with it, but perhaps if you read it closely, it may open up some ideas. As a matter of fact, if you get any 'light bulbs', please email me. What is Trading? Part One of Two. Here is a definition to consider. Trading is "Using technical analysis to find a moment in time when the odds are in your favor. Then trading becomes a matter of your entry and management." In other words, it is having the KNOWLEDGE to know when the odds are in your favor, having the PATIENCE to wait for that moment, and then having the DISCIPLINE to handle the trade properly when it goes in your favor and properly when it goes against you." Now let us dissect a little. The opening words are 'using technical analysis'. Now, I know Webster's definition would let you trade with fundamentals, but not ours. At Pristine we feel there can be no argument that the opening words are not a misprint. We begin our search on the charts. This is the only place where we find truth and useful information in the markets. We do not find useful information from analysts, not from brokers, and not from accountants. Next comes 'a moment in time'. How long is a moment in time? It depends on your timeframe. For a core trader, that moment may be a day, for a swing trader several minutes, for a day or scalp trader, perhaps only a few seconds. The point is that there is only ONE moment when that exact trade is proper. Anything past that moment, and that trade is gone. Note, there may be other similar trades that occur later (such as buying the first pullback), but these are separate trades, each one of them will have their 'moment'. Next, when are 'the odds in your favor'? Well, that comes down to a matter of knowledge of technical patterns. Every so often, a stock will 'show its hand' and give away a key secret. It will let you in when a pattern develops that appears to be something other than just random noise. "Then it becomes a matter of entry and management". In other words, here is where the psychology comes into play. Once you learn how, the intelligence actually required to enter and manage a trade is minimal. The ability to do so is rare. This is where you become your own worst enemy, and this is the level that even the most astute traders seldom pass. Then notice the three capitalized words in the last part. KNOWLEDGE to know; PATIENCE to wait; and DISCIPLINE to handle. It sounds like the beginning of the Boy Scout Creed, but is a sentence you may want to cut out and put on your monitor. Next Monday we will examine some of the finer points, such as how many traders arrive at their own definitions. Paul Lange Vice President of Services Pristine Capital Holdings, Inc
  3. A breakout occurs when prices are able to clear a prior price area that has been a point of resistance in the past. But this doesn't mean all breakouts are the same. A breakout can occur after a decline that is followed by a period of whippy consolidation - that in time "tightens up." It can occur in one fast move from a low to and above a prior high. Not the ideal entry. It can also occur after a rally that is followed by a period of consolidation. Consolidations can happen in various forms, a base being the most widely used. Ideally, a tight base or a tightening in the last few bars occurs just prior to the breakout. Let's review some examples. In the above example, prices began to move up after a retest of the prior low and rallied all the way back up to the prior resistance area. The second to last candle that formed was a Topping Tail (TT) that signaled that sellers are focused on the prior high area - resistance. However, the next candle ignored the TT or in other words, buyers continued to step up regardless of the prior resistance area; a bullish sign. Prices could continue higher above the prior high and the supply of shares there. But without a small period of consolidation that would display buyers "absorbing" that supply, the likelihood of a retracement into the prior rally is high. Absorbing that supply reduces the possibility of a breakout failure. Some buyers that own shares from lower prices are going to sell at resistance after such a move. If prices move above the prior high without a stalling first, many more are going to cash in on the quick profit. Buying a breakout after a straight through rally above the prior high from a low can be done, but not without a stop-loss based on the move. The size of the stop and share-size must take into consideration the retracement that is more than likely to occur. In the above example, Prices rallied from a base after the signal bar formed. The initial move stalled for moment (shaded area) where the opens and closes of the three candles are overlapping. Pristine students know these overlapping opens and closes are a base on a lower time frame. This is where buyers will step up on a pullback, should that occur. That pullback did not occur here, rather buyers continued to step up above that level and form a new pivot low; a bullish sign. That low provided a new support reference point that was taken advantage of on the rested. The last bar engulfed the most recent candles, which is bullish and tells us that buyers are anticipating a breakout above the recent resistance. Large bullish engulfing bars like the one seen are typically followed by a smaller candle or candles. Typically does mean always, especially with this pattern since the bullish bar came after a period of consolidation and retest. In this example, prices broke out of a whippy consolidation and while there were clues that shares were being accumulated, there was no clear signal bar of the breakout occurring at that moment as there was in the prior example. This long period of uncertainty was followed by two Bullish Wide Range Bars (+WRB) signaled huge increase in buyers and higher prices. Fast, igniting moves like this create a void of price support below. However, this pattern (two +WRBs out of a consolidation) is less likely to correct by pulling back since the move began from a consolidation. It is also less likely for prices to base or consolidate for a long time for the same reason. The last candle in the pattern actually signals the low of the correction after the +WRBs and higher prices - a breakout - will follow soon. I have shown you the same stock Boeing (BA) in different time frames and explained how to interpret the price movement in those time frames. Traders using these time frames or others could potentially enter BA on signals that come together at the same time. This is what makes for explosive moves when they happen. However, each could also enter at different times depending how the patterns developed from here. For example, the traders using the weekly time frame could enter on the next candle's move above the high, which could happen immediately. To the trader on the hourly time frame that entry would not be ideal since there is no clear reference support level to use as stop-loss because of the straight up momentum move. Also, such a move would certainly setup other new entry points in the hourly time frame or other lower ones. All traders can have the same bias, but entering at very different times. All entries can be right for that trader in their time frame of choice with confirming price patterns. Pristine Tip: Intra-day traders use signals from higher time frames for a bias and then trade signals (price patterns) in a lower time frame in alignment with that bias. Greg Capra President & CEO Pristine Capital Holdings, Inc
  4. When Richard Arms introduced the TRIN (also called Arms Index) in 1967 through Barron's, it immediately got wide following by professional traders. The formula is quite simple yet a little bit intriguing - it is defined as a ratio of two ratios: TRIN = (Advancing Issues / Declining Issues) / (Advancing Volume / Declining Volume) Of course, initially the calculation was only done for all NYSE issues. As it started to gain popularity, other major stock exchanges started to report their own TRIN readings throughout the trading day. For this discussion, I am talking about the TRIN for NYSE only since most of S&P 500 stocks are trading in NYSE. Without closely watching the actual values of TRIN in conjunction with the market action, it is very hard to get an INTUITIVE feel of this index. Of course, you can find many introductory material in the web for a typical reading - TRIN is a market breadth indicator, it has an inverse correlation with market movement: when it is below 1, the market is bullish, when it is above 1, the market is bearish, etc, etc... Before I share my experience of using TRIN for ES intraday trading, I like to take an extra step to do a "zero" twist of this well-known index. Applying middle-school algebra, the TRIN can be expressed alternatively: TRIN = (Declining Volume / Declining Issues) / (Advancing Volume / Advancing Issues) or really it means: TRIN = Average Declining Volume / Average Advancing Volume WOW! Does that ring a bell? So intuitively, TRIN is not a typical breadth indicator, especially in an intraday basis. What it really try to measure is the TRADING FLOW - whether the average down volume is more dominant, or is the other way around. So in an extremely bearish day (gap down, one-way street throughout the day), TRIN can shoot up to 3-4, and stay at an elevated level. On the other hand, if it can hover below 0.5 in a big rally day. In a typical day when S&P 500 index can exhibit uneventful intraday reversal, TRIN would most likely hover around 0.8 to 1.25 range. More to come...
  5. "You must be rigid in your rules and flexible in your expectations. Most traders are flexible in their rules and rigid in their expectations". This is from Mark Douglas in his book, "Trading in the Zone". When I first read the above-mentioned book years ago, I did not highlight or remember this quote as anything special. It was not until recently when I saw it again that I had the experience to recognize the pure wisdom in the words. That is the reason I am devoting this commentary to this quote, so everyone reading can recognize its importance. The reason I feel this advice is so important is because two of the most common problems among new or struggling traders are addressed here. The first problem raised is that most traders are flexible in their rules. Actually, the truth is most traders do not even have a firm set of rules they trade by. Sure, if you ask most traders they will say that they follow stops, and set targets. But very few have the rules that are generated by a quality trading plan. Those that do, usually view them as optional, which really defeats the purpose of having rules. The second problem is that traders are rigid in their expectations. They form or acquire a market bias, or a 'feeling' about a particular stock, and hold to that expectation regardless of what the chart (reality) is telling them. When good news is released, they go long the stock and stay steadfast in their bullish view; even though the chart (reality) is telling them the stock is falling. Some say that you can't follow rigid rules, because trading requires your expectations to be flexible and change as needed, as the second part of the quote implies. Obviously, I agree that trading requires you to be flexible. I just believe that all of the contemplated flexibility can be part of your plan and your rules. For example, you can decide ahead of time and define what a 'change in market direction' is and then define how you react to that new information. You could react by selling all of your position, selling half, raising the stop, etc. I hope that those of you that have not embraced these concepts take new look at the quote above and use it to help improve your trading. Jared Wesley Contributing Editor Interactive Trading Room Moderator Gap and Intra-Day Trading Specialist Instructor and Traders Coach
  6. Since currency pair often move is impulses of 5 or 10 , traders use the term Nickel to describe one of these smaller movements. This kind of terminology tends to be seen in short term trading situations as investors discuss intraday developments.
  7. Intraday traders are focused on short term events and generally look to capitalize on smaller price movements. Because of this, Intradaytraders tend to use higher levels of leverage to make gains.
  8. Hi All. I have been trading this system the last 6months with great success and feel like I should share it. I'm not taking credit for the system seeing as I didn't come up with the basic rules. It goes like this... On a daily chart add a 10 and 20 EMA to indicate daily trend. Be sure to only trade long when trend id up, and short when trend is down. On 60min chart ad 10/30EMA and a Will%R with period of 3. Place lines at overbought/sold levels(-20,-80). When the daily and hourly trend are in sync, meaning both are up or down, Gold is in play. In an up trending market, wait for Gold to sell off enough to get the Will%R oversold. As soon as candle closes with Will below -80 wait for a break of a previous candles high. This can take one hour, it can take 5. Enter on break of any high of a candle and set stop loss at that candles low(the one which high was broken). We will call this candle the signal candle. RULES:(for long entry, reverse for short) Never enter if the signal candle closed below 30EMA. Signal Candles range must be less than $5.(50 pips if geared 1:10) Take profit is double the range on top of your entry price. If EMA's cross before high is broken, THE TRADE IS NO LONGER VALID. As I said, I have personally traded this for a while and make great profits. NJOY!!!
  9. I was listening to an interview by Peter Reznicek today and found one of his comment particulary interesting. I am not a candlestick pattern trader but he mentions how day traders focus too much on trendline breaks, channel breaks, and candlestick patterns on too short of a timeframe. He mentions how these technical patterns are only valid on a 15 minute or more timeframe. I also agree with his comment. I am not particulary fond of price patterns when day trading. Any thoughts?
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