common man financial success would be being able to educate your children, plus have home and shelter/utilities food secured for the rest of his lifespan. Cant forget health insurance. that is success, and the average person can obtain that just collecting paychecks living a very modest lifestyle with a decent job. the common man doesnt need to drive around in 300K cars. Speculation in financial markets is a luxury not for the common man unless the man has a direct link with it. Clerks, floor runners, and Professional Daytraders. This offers the preeducation. The average person does not have the preeducation to entertain thoughts of quantifying his risk exposure. It takes atleast 10 years of preeducation in the markets. Watching ticks jumps. Plus the common man doesn't have time in the day to grab 10 points on the spoos, as it falls through yesterdays low. Buy and hold is the closest thing that the common man can do to obtain results of magnitude. As long as the macro scenario works out.
The market tells you what is possible. You put that in a compound interest formula. You put that in a business plan. You have to escape the convnetional orthodoxy to become very wealthy in a short time. You have to understand that this conventional stuff will never leave your mind. you have to agree with yourself to do the process of surrounding what you not believe with what is really the potential of the markets. The potential is the elephant in the room all measurable and very evident if you allow yourself to begin to take the measure. One the elphant appears, you have the incentive to become very wealthy in a short time. You can do the process over time any way you want. People who move to Tucson have a break. People who come to IBD MeetUp have a break. People who print the transcripts of the camtasias have a break. people who view the camtasias have a break. People who do the jounals and print the references have a break. People who participate in the chat room have a break. People who read print and review the post on page 130 of the first month's journal in a written editied indexed and illustrated document get a break. Look at Spydertrader. He is a person who is in the phae of PVT and SCT where he is one of about 20 people in ET passing it forward. Eric is a senior in college who edits and packages the the futures journal monthly (page 130). These people, among others, around the world are doing this for real and very successfully. They are in a world where capital has a different meaning than it does to most. They also are working on local concerns and other more broad concerns with what it takes to help out. What they do NOT get is any more of the conventional orthodoxy which gives a 90% failure rate to those who adopt it and learn what they learn through repeated failure.
If a function is linear (that is, if the graph of the function is a straight line), then the function can be written f(x) = m x + b, where . This gives an exact value for the slope of a straight line. If the function is not a straight line, however then the change in y divided by the change in x varies, and we need calculus to find an exact value at a given point. The slope, or rise over run, can be expressed as: To determine the instantaneous rate of change we use the limit: http://en.wikipedia.org/wiki/Calculus The slope of the squaring function at the point (3, 9) is 6, that is to say, it is going up six times as fast as it is going to the right. some of the more important math, in trading.
calculating the slope of the moving average of price on a long term timeframe will enable you to spot the rate of acceleration of price change.
1) price bias/direction 2) price instability/direction 3) price gaps/direction 4) long term trend/direction 5) daily trend/direction 6) intraday trend/direction 7) retracement 8) acceleration in price change lin ong term chart/direction 9) cyclical waves (average) some of the things to increase reward/risk ratio in a trade.
the aim of all the above is to gauge moneyflows, since moneyflows combines with liquidity dictate magnitude of price change and direction.
# lots is dependent upon, lot size, size of cyclical waves, direction of trend, capital available to invest. If you have a large amount of capital the daily perturbations in price, will not matter much, if the number of lots invested is relatively minimal. Thus, 1% of capital onhand, is your cyclical wave on the long term trend. If the derivative price oscillates 30 points, and 1 point is 250 dollars, then a cyclical wave is worth 7500 dollars. You would need 750K of capital onhand to trade it. And time alone is the only dependent factor to mature the trade. 1200 was the first resistance level on the sp500. A few points above 1300 was the second resistance level. Cash is presently at 1450. 150 points = 37,500. 5% return on equity in about 4 months. http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=SP500&sid=3377 1600 on cash would represent 100% gain in 3 years from 800 in 2003. If one derivative exposure oscillates your capital by 1% on cyclical waves, then entering 4 other markets would oscillate your capital by a total of 5%. Using noncorrellated instruments smooths out capital oscillation over long term timeframes. Or just increase lot size to 5 for greater risk tolerance capital.
100 point oscillations were not uncommon on the sp500 runup to blowup. 1500 would represent a major resistance level, and some fundies may look to take profit at this level hoping to knock it down to 1400. Given this a intermediate term cyclical drawdown of 100 points need to occur to offer a better reward to risk ratio for new participants trading a longer term timeframe. http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=SP500&sid=3377
if 1500 or above is a major resistance level, we didnt come all the way from 800 to stop here at 1460. That means another 40 points to the upside is almost assured. A short term risk to reward trade implies a 30 point retracement needs to be awaited before going long. And if you look at the trading pattern for the market, thats what the market has been doing. It retraces about 20-30 points, then makes a move up for further price progression. And this pattern is reinforcing itself. So would I short at 1500?, maybe. But 1544 is more attractive since a 100 point retrace would bring it to 1444(magic number). A 100 point retrace on 1500 point index equals about 6.66%.