by wallstreetbuddha on January 14, 2012
Speculating and taking part in the markets can be an exciting activity. Making money doing it is the greatest feeling in the world. Losing money takes you to emotional lows. Over time this can take its toll. The stress in itself can be a distraction to making profitable decisions.
There is one thing that I know master traders do to avoid the emotional trap of trading. THEY NO LONGER TRADE.
You might be thinking I’m starting to talk in riddles. I assure you, I’m not. The master trader let’s go of what he “thinks” will happen as well as what “wants” to happen. Execution is taken over by a SYSTEM. Often this system is composed of RULES that increase the mathematical probability of a successful outcome- profit.
The beauty of a developing a systematic way of trading is YOU CAN ADJUST your system. Many traders make blind desicions about executing a trade. Maybe they heard some news, or a friend just bought a boat load of Apple stock, so you follow along. You might even know a great trader and follow his trades. While this might be profitable for some, when the market starts to turn against you, and you start losing money, how do you adjust?
A master trader has a rule that detects a market turn. For example, I start to notice that I have had a string of 10 losing trades in a row, and all the breakouts have failed miserably. I also notice that during those trades the indexes are showing that the 50ema is below the 200ema a bearish technical indication. So from now on, anytime the indexes moving averages are showing the 50 below the 200, I will not buy breakouts. I will sell short stocks.
It doesn’t matter if you’re a trend trader, a day trader, or a swing trader. YOU NEED A SYSTEM. Let the system take over and based of performance make adjustments and test these theories over a series of simulated trades. Back testing your rules for performance is the reality of the outcome. I recommend manually back testing by hand. You will be much more involved in the simulated trade and the mechanics of the entry and exit. Do this with several stocks and soon you’ll realize the RULES do the trading for you. While computer backtesting is a powerful way to test strategies, this is a whole different specialty that requires rigorous study.
Some might argue that there are “discretionary” traders that don’t use computer black boxes. However, their trading is still SYSTEMATIC. They trade the same on every single trade. They risk is same for every single trade. Even for unusual circumstances, they have a system or technique to approach a trade.
by wallstreetbuddha on November 6, 2011
Gold had a recent correction, that have caused most traders to speculate that the Gold may continue to go lower. The opposing view says it may go higher as geopolitical concerns in ALL MAJOR CURRENCIES cause Gold to be a safe haven in the eyes of investors.
Gold is breaking out to new highs after a period of consolidation over the end of September through mid October. Moving Averages are turning bullish with higher price action. Although this is a technical breakout, it is has a lower probability of success. Breakouts into NEW HIGHS are the most robust and successful.
Taking this trade with this probability can still be sucessful, risk and position size will be minimal as this breakout could follow through into a potential trend.
by wallstreetbuddha on November 6, 2011
The volatility in the market has expanded in the last 2 months. Much new information has been revealed and the market is now digesting that information forming patterns that could unfold into a major trend whether it be up or down.
Below is some crucial events and fundamental information I have taken into account:
The Indexes have tested lows to rally in the past few weeks. As long as the moving averages are in a bullish state, we can expect prices to go higher and continue to be in a bullish mode. However, ALL TIME HIGHS are quite a distance. Considering the financial state of of the US Economy, reaching those bullish highs may be a rough ride.
Steve Jobs Dies- This is more serious than the markets perceive. The stock price remained stable despite his death. If history is an indication of future results……AAPL will crumble and have a slow death. Jobs was fired from Apple in the past, and the results were disastrous. Upon Jobs return to Apple, he was able to revive the company. Steve Jobs permanent exit will hurt Apple. —-Mr Jobs we will miss you. Thanks for everything.
Apple’s chart is stable for now. No heavy selling on the volume side. However, the price action is moving along the 200 EMA. The stock is starting to show signs of saturation as robust breakouts are harder to find. I would be very cautious if Apple stock breaks below the 200 day EMA. As soon as the averages go bearish, I will be looking for shorting opportunities at critical price levels. – Good luck.
Netflix (NFLX) just got destroyed in the last few months, coming from an all time high of $300 a share down to $90. The companies restructuring of services and fees have caused users to cancel subscription. The business model is great, however increasing competition has brought down future growth prospects in the financial state of the company. Streaming content is the future, and I will be searching for companies that are an alternate choice.
Greek Bailout Chaos- Greece says they will get bailed out. Then the morning news says, that it may default and leave the EU. From the looks of things, nobody know what to do. men in power lack the conviction to follow through on any solution. The markets will also be responding in uncertainty. I will just be watching the crucial price levels and trade from there.
