Best Channel Breakout Entry

...continued from yesterday...

Jeffery Owen Katz and Donna L. McCormick published the results of tests they did on variations of the Breakout Trade. Based on their tests with historical data, Katz and McCormick reported in The Encyclopedia of Trading Strategies that the Limit Order On Retracement entry made the most significant overall improvement in the profits of a breakout model.

On holidays until July 9, 2007

Copyright 2007 Raymond T. Lee. All rights reserved.
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Limit Order on retracement

...continued from yesterday...

Limit Order On Retracement. You enter a new position only if price experiences both a breakout followed immediately by a retracement of a certain amount in the opposite direction. In the given example, this requires that price first goes above 1200 and second falls below 1200 by an arbitrary amount selected by you (e.g. 33% of the day’s price range) at which point you enter on limit at that price.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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On-close & On-Open Entry

...continued from yesterday...

On-close breakout. You enter a new position only if price within the last few minutes of the trading day go beyond the breakout price trigger. In the given example, the on-close breakout would involve an order to “buy on close at market” if price within minutes of the close is above 1200. Or you could manually enter a market order within minutes of the close.

On-open breakout. You enter a new position only if price yesterday exceeded the breakout price trigger, regardless of whether it closed above or below that number. In the given example, the on-open breakout would involve an order to buy the next day at market at the open.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Channel Intraday Breakouts

...continued from yesterday...

Intra-day breakout. You enter a new position the moment price crosses a specific trigger number. In the given example, the intra-day breakout would involve an order to buy at 1200 plus the smallest price increment above 1200.

Intra-day breakout past cushion. You enter a new position the moment price crosses a certain distance past the upper range of the channel. In the given example, the intra-day breakout past cushion would involve an order to buy at some arbitrary amount past the 1200 price instead of the smallest price increment. So instead of buying at 1200.25 stop, you could set the arbitrary cushion at 2 points and buy at 1202.25 stop.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Channel Breakout Trades

A very popular component of trading systems is the “channel breakout entry”.

A channel breakout entry is one where you enter into a new position when price exceed a recent range of prices. For example, let’s say that price of the S&P futures over the past 20 days has been between 1175 and 1200. If you buy when prices exceed 1200 you are buying a breakout past the high of the range. If you sell short when prices drop below 1175 you are shorting a breakout below the low of the range.

There’s many variations of the channel breakout entry. For the following examples, assume that the upper range is1200 so that if price goes above 1200 you have an upside channel breakout.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Turtle video interview

...continued from yesterday...

Here’s another website where you can get the Original Turtle Trading Rules.
http://bigpicture.typepad.com/comments/files/turtlerules.pdf

Here’s a video of Curtis Faith, one of the original Turtles
http://video.aol.com/video-search/id/19588632

If you feel like it, you can make a donation to Curtis Faith's blog for providing access to the Original Turtle Trading Rules to enable him to continue paying for the infrastructure that makes the free stuff possible.
http://www.tradingblox.com/originalturtles/system.htm

...back next week...

Copyright 2007 Raymond T. Lee. All rights reserved.
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More free turtles

...continued from yesterday...

Want more free Turtles stuff? Here’s the Turtles Trading System rules for entry, exit and other matters. Use them at your own risk!
http://www.elitetrader.com/vb/attachment.php?s=02f81c5f65ee34a32551ee381e2bf3c3&postid=928713

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Free turtles

...continued from yesterday...

Don't want to pay $5,000 for the Turtles seminar?

About about something for free. Here's two chapters from the book The Way of The Turtle. It’s free on the internet.

http://www.wayoftheturtle.com/2007/04/13/way-of-the-turtle-two-free-sections/

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Expensive Turtles

...continued from yesterday...

Yesterday I mentioned two books about the Turtle traders.

If you want to pay 100 times or greater for information about their trading system, then try these.

$5,000 to buy Russell Sands product:
http://www.russellsandsoriginalturtle.com/productcatalog.htm
also at
http://www.tradewins.com/TradeWins_Publishing_Books/Turtle_Trading_Mentor_Cou.aspx

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Turtle Buzz

The Turtle Traders have been a curiosity ever since Richard Dennis’ 1984 newspaper advertisement seeking apprentices.

Richard Dennis gave his apprentices a two week seminar on trading and put each of them to work trading various amounts of his money. The results were mixed. Some were super successful and some moderately successful. Others were told “you’re fired!”

Recently, Curtis Faith, one of the Turtle Traders released a book entitled The Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders.

And Amazon has another book available for pre-publication purchase entitled The Complete TurtleTrader: The Legend, the Lessons, the Results by Michael W. Covel. Amazon says the book is scheduled for release in October 2007.

New vocabulary list

...continued from yesterday...

Here are some applications of Transformational Vocabulary in trading.

“Losing trade” = “account debit."

“Winning trades” = “account credit.”

“Bull markets” = “uptrends” or “upward price series.”

“Bear markets” = “downtrends” or “downward price series.”

Copyright 2007 Raymond T. Lee. All rights reserved.
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Transform vocabulary like Jesse Livermore

...continued from yesterday...

One hundred years ago, Jesse Livermore made $3 Million in a single day during the 1907 Stock Market Crash. Twenty two years later, he made over $100 Million during the 1929 Crash, although not in a single day. He understood and used the power of Transformational Vocabulary.

Jesse did not have a university degree. But he did take courses in psychology.

He understood and applied the power of Transformational Vocabulary.

He replaced industry standard phrases like “bull market” with “upward trend” and replaced “bear market” with “downward trend”. His reasoning was that using “bull” or “bear” froze oneself into a commitment about market direction while “upward/downward trend” allowed for agility and flexibility to allow the market to deliver profits to his account instead of trying to tell the market which way to go.

You can read more about Jesse Livermore’s trading style in Richard Smitten’s book Trade Like Jesse Livermore

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Transformational vocabulary

...continued from yesterday...

Instead, try using Transformational Vocabulary.

Success Guru Tony Robbins devoted an entire chapter on the concept of Transformational Vocabulary in his book Awaken The Giant Within Awaken The Giant Within.

One hundred years ago, the legendary trader Jesse Livermore used the power of Transformational Vocabulary before Tony Robbins was born.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Unnecessary debilitating pain

...continued from yesterday...

If in your trading you use the word “loss” to describe your current experience with a trade, you are unwittingly importing the intense painful emotional impact from your past experience associated with the word “loss” (i.e. death) to your current experience of trading.

That’s unnecessary pain.

If you get a non-winning trade, all you’ve done is gotten a reduction in your brokerage account balance. There’s no death involved. Surely, an emotional intensity on the scale experienced when you have the “loss of a loved one” is inappropriate when all you’ve experienced is a reduction in your brokerage account.

Besides being unnecessary pain, It’s also debilitating if it prevents you from quickly exiting the trade because you want to spare yourself the intensely painful emotional experience of “loss”.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Words as emotional anchors

Words can become emotional anchors.

An anchor is something that triggers a response from you.

For example, if you’ve experienced the “loss of a loved one” through death, you know the intensely painful emotional impact of that loss. If you continuously use the word “loss” to describe that and other intensely painful emotional experiences, then that word can trigger intensely painful emotions in you whenever you use that word.

What if you use the word “loss” to describe non-winning trades?

...continued tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Sixteen Items of Social Proof

...continued from yesterday...

With sixteen different traders featured in the book, each with different personal circumstances and each with slightly different trading styles, you’re likely to find one with a personal circumstance or trading style similar to yourself. That will serve as your social proof that you’re not abnormal, that there’s someone out there like yourself, and that you’re not alone.

Copyright 2007 Raymond T. Lee. All rights reserved.
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Here's Your Proof!

...continued from yesterday...

Where the value lies in Alexander Elder’s Entries & Exits book is in the social proof available in it. More than half of the sixteen traders featured in the book are private individuals who trade their own money (instead of trading money in some sort of fund). Yet every one of them is trading full time and making enough money doing so to financially support themselves.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Thirty Two Trades

... continued from yesterday

Social proof that trading your own money as a full time private individual trader is provided by Alexander Elder in his book Entries & Exits.

I took a look at Alexander Elder’s book Entries & Exits after reading extremely favorable reviews of his book at Amazon.com.

The book describe two memorable trades by each of 16 different traders for a total of 32 trades. There was no evidence that any of those trades were typical, average, or outliers.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Get Social Proof

...continued from yesterday.

What you need is social proof.

Social proof is a concept from the field of social psychology. It’s the name for the phenomenon that people tend look to others for answers as to what is appropriate behavior. Sort of like “monkey see, monkey do”

Robert Caldini devoted a chapter on this in his book Influence: The Psychology of Persuasion.

Wikipedia also has an article about it, based on another book by that author.
URL http://en.wikipedia.org/wiki/Social_proof

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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Discouraged in not having a real job?

If you’re a private individual trader, you surely sometimes feel that what you’re doing is abnormal. You don’t have a “real job”. And that can be discouraging.

Feelings of discouragement can adversely affect your trading profits.

To counteract such discouragement, you need assurance that other people can and do trade for a living, just like you do. You need assurance that you’re not abnormal, albeit admittedly just a bit different.

Most of the popular literature about other traders feature superstars who work for funds that trade money they get from the public. Titles that come to mind include the Market Wizards series by Jack Schwager. That's not what you need.

What you need are stories about people just like you. People who trade their own money. People who experience drawdowns that last weeks and months...and people who survive and prosper after such drawdowns.

...cont'd tomorrow...

Copyright 2007 Raymond T. Lee. All rights reserved.
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