I just want to say that what the poster did I was guilty of myself 10 months ago. I read a few books (mostly on fundamental analysis... go figure) and a little on TA and boom - thought I knew how to fade momentum stocks. Well... all was fine here and there for a few months. Did not make too much money, but didn't lose a lot. One fine month I decided I was a lot better at trading than I really was. Went short on a little stock called ACOR... price went up... I shorted more... price went up... shorted more. At this point, I was short (not going to disclose exact amount ) but lets say it was more than 150% of my account on 1 biotech stock on the basic principle that what goes up must come down + my interpretation of their clinical results. LOL. Well, in the middle of a test my position had moved against me several thousand dollars. I sat in class watching the laptop, finished the test, and made the final decision: I would take my loss and learn from my mistake. I had a mentor who repeatedly told me not to fade these rallies... but I didn't listen of course (my personality has always been to find what works by yourself). That was the best money I have ever spent. I learned something about myself at the time - I wasn't ready to trade. I also learned the power of trend, which I use today. I buy the very same stocks I tried to short nearly a year ago. After the incidient, I lost faith in myself for a while. For 2 months I did nothing but read. Then, I came back slowly and found myself being a little more and more consistent. After being consistent for a few months, I still felt that I wasn't being disciplined enough. I went paper, again, and did nothing but study the market, jotting down observations regarding industries/indicies/their interactions with stocks. Once agian, I stepped up my study of the markets. Every book I read I take notes on, every time I see what could be a pattern I write it down, etc. Once again, a few months later, my trading journal gets a page worth of writing every 1-2 days. I study the markets 4-5 hrs a day on average as well as being a student and having a job, and I finally am making enough money to pay rent - but nothing impressive. All I can say is... its not easy and the only way most people will ever realize this is by failing. Failing was the BEST thing that happened to me. I still find it strange how I didn't really get serious until I realized this was a serious business. I guess a huge loss was enough to challenge me. I am glad I continued though (and my mentor was very hard on me - but I deserved it and I thank him for it). The trading that I do now is rediculously plain and boring - as many have said. But I still find studying the markets the most interesting thing I have ever done. I can't remember the exact adage right now... but in terms of money management - newbies attempt to maximize profit, pros minimize risk.
Hey Stealth Trader Thanks for your advice. I'm trying to get away from indicators myself and was wondering, would you care to comment further on your third step. How can you have reasonable assurance that a support or resistance area will hold or fail? I trade equities and assume the answer would apply across all markets? Thanks. Mark
If I may take a stab... you can use crossverification...IE many trend lines intersecting at one point, in a strong industry, in a strong market, near MAs, price expands with high volume pullsback with constricting volume (and doesn't reach previous highs). Pay attention to narrow range bars near support so that if you are wrong risk is small as well as risk vs reward (measured by entry to stop v profit target to entry). But in the end, you never really know - the best setup can fail. For the most part, if you are trading with the trend, if you have a logical entry level at a support area, it will hold more than it does not. Vice versa for shorts.
Trading is the direction of momentum is a high probability strategy that I've used now for many months now. Moving average crosses are also very useful. And btw, I hear nothing but bad things about IB...so what if they have low commissions?..thats the only thing they tout about on their commericals. Here are some things to read: * Is IB really that bad? http://elitetrader.com/vb/showthread.php?s=&threadid=87346&highlight=IB+terrible * IB Down http://elitetrader.com/vb/showthrea...&perpage=6&highlight=ib terrible&pagenumber=9 * shocking (NOT) IB down AGAIN @ night. help finding an alternative PLEASE... http://elitetrader.com/vb/showthread.php?s=&threadid=99747&highlight=IB+AND+down * IB slow P&L update http://elitetrader.com/vb/showthread.php?s=&threadid=99607&highlight=IB+AND+down * IB and tax advantaged distributions http://elitetrader.com/vb/showthread.php?s=&threadid=99531&highlight=IB+AND+down and paying for streaming data?..lol what bs. So you give them a couple grand, then you have to pay extra to see live data. HA!.
Cash..... You have a completely distorted view of Interactive Brokers. My opinion isn't from something that I've read.
Months??? It took me years to refine my current methods! Nonetheless, I would think the average person should be able to begin recognizing swing points to draw your trend lines on after a few days. It's perfecting the technique that brings most people to their knees. Keep in mind that reading price action is an art, not a science. This is why many discard it as being worthless. Thousands of hours of screen time will be required as well as printing out your charts each night and studying why you made the decisions you did during the day. Mark these charts with notes of what you now see and how it corresponds with a running journal of your trades, whether demo or live. You are training your brain to see the things that work and the things that don't, and then reducing the time it takes to recognize these setups forming from minutes to instantaneously. Truthfully, few people have the ambition and drive to see it through, and they begin seeking shortcuts. These are the people who typically claim how the MACD, RSI, CCI, etc. has "helped" their trading. It's referred to as denial. That's why I say to learn yourself before trying to learn to trade. You can BS yourself, you are not going to BS the markets. st
Ah shucks, but there is so much more!!!! What I've shared so far is just a peek. On another note, I'm surprised the "trend doesn't exist" crowd haven't shown up yet. They must all be over at the cnbc thread! st
First, allow me to piggyback on your post to clear up a couple things. The exercise I gave previously in establishing trend lines from identifying swing points was a means for those with no knowledge of how price reacts to previous price. It is a training aid more so than a stand alone trading method, which it isn't. Furthermore, being I am not a teacher by training, I may not be providing this information in a clear context, so my apologies if I am confusing anyone who is interested. In response to your question, the short answer is market internals and the strength of the support/resistance area. The long answer, assuming you already know the difference between minor and major support/resistance, I will typically fade my positions when reaching areas of strong major support/resistance, with emphasis on strong. As the saying goes, I would rather be out of the market wishing I were in than vice versa. If price continues through after I exit, so be it. I will simply re-enter on the next set up above that level only after that level proves itself. I do not trade breakouts, as I find they fail more often than not. In short, I basically assume all strong major support areas will hold and fade them accordingly until proven wrong. As for lessor major/minor areas, I monitor market internals for direction of strength and tighten stops to at least break even +1 as price closes in on the area. If market internals are strong in the direction of the trade, I stay in it. Keeping the stop away from the area of S/R gives it room to bounce and continue on, but not turn into a loss if it reverses suddenly. If it does reverse and takes my stop, it just became major support, and I will treat it as such until proven wrong. If market internals are weak to neutral on a low volume day, I typically fade all areas of support, whether major or minor. Yes, I use this method on all time frames, hold periods, and trading instruments. st
Well put. Read between the lines of what I have written, and you'll see that is the basis of my whole strategy. I am perfectly content taking a small slice out of the middle, I quit trying to pick the top or bottom of a run a long time ago. No future in it, as trying to hit home runs is a losing proposition. Slow and steady will make you rich beyond your wildest dreams. Another saying is "those who wish to pick bottoms usually end up with nothing but stinky fingers." Good post. st