I've long been a fan of Candlesticks and recently i've started rereading Steve Nison's great books on them. Again an old lesson has resurfaced. Seemingly simple knowledge, yet profound in how it can really change the way you see prices.
Any advances in whichever direction should be 'healthy'. Captured neatly in the saying, '2 steps forward, 1 step back', it implies that in a healthy bull market, prices SHOULD encounter resistance, and you will see this in the candles. If there was nothing but buying going on, at one point there won't be any left and it won't take much effort on the sellers part to push prices down. The faster it rises, the more dramatic the fall.
Saturday, February 28, 2009
Thursday, February 26, 2009
Overload
I was thinking and browsing through a truckload of books lately and an old lesson reemerged. Right at the start of this whole journey, i read The New Market Wizards, by Jack Schwager. One of the best books i've read in this genre.
Being inundated with information, most of which proclaiming their superior efficacy, i remembered that there is not only 1 path that can lead to success. Jack has done traders all around a favour by distilling the key elements of our heroes. Get a decent system yes, but always remember psychology and money management.
Being inundated with information, most of which proclaiming their superior efficacy, i remembered that there is not only 1 path that can lead to success. Jack has done traders all around a favour by distilling the key elements of our heroes. Get a decent system yes, but always remember psychology and money management.
Tuesday, February 24, 2009
Learnings
Here are some key thoughts/ ideas/ point of views of the market that i've picked up since i started this journey.
1) You're wrong till the market proves you right.
- Coming from the Phantom of the Markets book written awhile ago, it creates the rule that if the markets aren't showing you the expected price action, you're wrong and should be out of the position.
2) The biggest players buy weakness and sell strengths / Trade with the prevailing trend (of Indices)
- The trick is identifying which is happening when. Coupled with the belief that markets do trend and that events/prices will have a tendency to conform to the long term trend, i should learn to identify 'key points' where i should be buying/selling.
3) Confluence.
- Nothing unique about having multiple indicators point you in one direction. Confluence is expanding that view onto the larger field. Right now, I love seeing 3 or more aspects come together.
- Ie; For a 'buy', i'd like to see an oversold RSI, a good weekly support, a chart pattern, and/or a candlestick pattern.
4) The more defined your system, the better.
- The fewer 'loose' variables you have in your system, the less chance of you sabotaging your own trade by making bad judgment calls.
1) You're wrong till the market proves you right.
- Coming from the Phantom of the Markets book written awhile ago, it creates the rule that if the markets aren't showing you the expected price action, you're wrong and should be out of the position.
2) The biggest players buy weakness and sell strengths / Trade with the prevailing trend (of Indices)
- The trick is identifying which is happening when. Coupled with the belief that markets do trend and that events/prices will have a tendency to conform to the long term trend, i should learn to identify 'key points' where i should be buying/selling.
3) Confluence.
- Nothing unique about having multiple indicators point you in one direction. Confluence is expanding that view onto the larger field. Right now, I love seeing 3 or more aspects come together.
- Ie; For a 'buy', i'd like to see an oversold RSI, a good weekly support, a chart pattern, and/or a candlestick pattern.
4) The more defined your system, the better.
- The fewer 'loose' variables you have in your system, the less chance of you sabotaging your own trade by making bad judgment calls.
Tuesday 24/2/09
I woke up at 7.30 this morning, with another 30 minutes till closing bell. I had no positions on.
The market was rallying as expected, with the SPX eventually closing 4% up. Overall, it was still on a downtrend, but i am expecting a few days of rallying towards the resistance line around 811 or 830ish.
My system requires me to look for only short setups because the prevailing major trend is still down, and overall sentiment is still negative. The rationale for this thinking has its roots in the thoughts of Jesse Livermoore/ Edwin Leferve of how events tend to fall in line with the prevailing trend. I determine the trend by using simple trendlines on the weekly charts.
I could feel my emotions tempting me to make a trade. I flipped through a few bullish charts that i identified and despite the fact that technically they seem decent trades, i will maintain my discipline to stick to that philosophy.
The market was rallying as expected, with the SPX eventually closing 4% up. Overall, it was still on a downtrend, but i am expecting a few days of rallying towards the resistance line around 811 or 830ish.
My system requires me to look for only short setups because the prevailing major trend is still down, and overall sentiment is still negative. The rationale for this thinking has its roots in the thoughts of Jesse Livermoore/ Edwin Leferve of how events tend to fall in line with the prevailing trend. I determine the trend by using simple trendlines on the weekly charts.
I could feel my emotions tempting me to make a trade. I flipped through a few bullish charts that i identified and despite the fact that technically they seem decent trades, i will maintain my discipline to stick to that philosophy.
Purpose
After more than a year of being away from the market's, i'm back. This blog is meant to journal any thoughts, ideas or emotions that cross my mind as i go through my trades. I hope that by getting it all in one place, i will avoid 'running around in circles'. In my short history of trading, that seems to be the case much too often.
A little bit of history, to myself and whomever reading this. I started looking at the markets in the year 2004. After returning from my studies in NZ, i was at a point of wondering how i could make more money. I had shortly started work already, and was looking at a bigger picture. It was there that i stumbled on an advertisement on options trading.
I'm not sure what exactly was it about the ad, or the 'introductory' seminar that got me, but i was willing to commit 5k of my cold hard cash to 'learn' more. I had no idea what i was getting into. On hindsight, it was the best and worst 5k i've spent. Best in a sense that it was my starting point of hunger in wanting to master this trade (no pun intended). Worst, as after all i've been through, i believe that guy was a hack.
In the next few years, i started an account with OptionsXpress with 5k USD. Lost 30% of that in my first year. Pumped in a similar amount in dollar terms and shifted my account to ThinkorSwim because of the commissions and i wanted to trade stocks. There, i lost 20% of that in 2007, and i took a step back from the markets in August 2007.
Today, i'm back in the game, and after a lucky first run. My beginners luck finally kicked in perhaps? I made back all i lost in 2007, and i'm raring to go in early 2009.
What has changed? What have i learnt that will make this attempt a more successful one?
1) Dozens of books later, i've learnt enough theory to understand that it's not the complexity of the trade method. It's a sound system that makes sense, psychology that helps you achieve consistency, and excellent money management.
2) I've learnt to not be too compulsive in selecting my trades. I had a tendency to chase too much action, and end up running in place. That said, i'm now more patient; an analogy of me and the markets akin to a hunter stalking his prey and laying traps/ trades.
3) I'm more self aware of how i feel. I recognise that i'm probably not gonna be able to eliminate being emotional completely, but i'm more able to control my actions/reactions from that. I watch for wanton fear and greed by trying my best to remain objective. What helps is that i make my trading decisions after market hours so that market hours are simply kept for executing orders.
A little bit of history, to myself and whomever reading this. I started looking at the markets in the year 2004. After returning from my studies in NZ, i was at a point of wondering how i could make more money. I had shortly started work already, and was looking at a bigger picture. It was there that i stumbled on an advertisement on options trading.
I'm not sure what exactly was it about the ad, or the 'introductory' seminar that got me, but i was willing to commit 5k of my cold hard cash to 'learn' more. I had no idea what i was getting into. On hindsight, it was the best and worst 5k i've spent. Best in a sense that it was my starting point of hunger in wanting to master this trade (no pun intended). Worst, as after all i've been through, i believe that guy was a hack.
In the next few years, i started an account with OptionsXpress with 5k USD. Lost 30% of that in my first year. Pumped in a similar amount in dollar terms and shifted my account to ThinkorSwim because of the commissions and i wanted to trade stocks. There, i lost 20% of that in 2007, and i took a step back from the markets in August 2007.
Today, i'm back in the game, and after a lucky first run. My beginners luck finally kicked in perhaps? I made back all i lost in 2007, and i'm raring to go in early 2009.
What has changed? What have i learnt that will make this attempt a more successful one?
1) Dozens of books later, i've learnt enough theory to understand that it's not the complexity of the trade method. It's a sound system that makes sense, psychology that helps you achieve consistency, and excellent money management.
2) I've learnt to not be too compulsive in selecting my trades. I had a tendency to chase too much action, and end up running in place. That said, i'm now more patient; an analogy of me and the markets akin to a hunter stalking his prey and laying traps/ trades.
3) I'm more self aware of how i feel. I recognise that i'm probably not gonna be able to eliminate being emotional completely, but i'm more able to control my actions/reactions from that. I watch for wanton fear and greed by trying my best to remain objective. What helps is that i make my trading decisions after market hours so that market hours are simply kept for executing orders.