LeisurelyCashFlow

Searching for stuff

2010-04-29T12:47:00.001-04:00

You can search for articles in this blog as follows.

Add the name of the topic you want to find to the following phrase and hit Enter

Site:http://leisurelycashflow.blogspot.com

If you want to narrow your search, add words preceded with +

For example, let's say you want to find articles in the site about "thin-slice".You would need to type the following into the Search Window of Google's Search Bar

Site:http://leisurelycashflow.blogspot.com +"thin-slice"

If you want to exclude a subtopic from your search, add the subtopic word preceded with -

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Intermittent unscheduled posting for now

2010-02-28T14:46:00.001-05:00

Articles for this blog will be posted on an unscheduled intermittent basis after March 1, 2010.

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Gone til March 2010

2009-12-11T18:03:00.000-05:00

I'm taking a leave of absence until after the Chinese New Year in 2010.

I estimate that I'll be back March 1, 2010 or sooner.

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Sell these, buy those

2009-12-10T18:09:00.000-05:00

Cont'd discussion about Jim Cramer's Real Money: Sane Investing in an Insane World, amended and updated in Jim Cramer's Mad Money: Watch TV, Get Rich.

FED RAISES INTEREST RATES OVER 5%.
GDP growth 2% and falling.
Big Money expected to Sell metals and minerals.
Big Money expected to Sell BRIC smokestakes (machinery and equipment). E.g. CAT.
Big Money expected to Buy high-multiple tech stocks. E.g. GOOG.

GDP growth 1.5% and falling.
Big Money expected to Buy banks and financials

...cont'd tomorrow...

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When the Fed Tightens

2009-12-09T17:37:00.001-05:00

Cont'd discussion about Jim Cramer's Real Money: Sane Investing in an Insane World, amended and updated in Jim Cramer's Mad Money: Watch TV, Get Rich.

FIRST FED TIGHTENING
GDP Growth 3% and rising.
Big Money expected to Buy smokestacks (machinery and equipment).

SECOND FED TIGHTENING
GDP Growth 3.5% and rising.
Big Money expected to Sell financials, housing, retailers, and auto.

GDP Growth 4% and rising.
Big Money expected to Buy metals and minerals.

GDP 5% and FALLING
Big Money expected to Sell paper and chemicals.

THIRD FED TIGHTENING
GDP growth 3.5% and falling
Big Money expected to Buy medicine and supermarkets.
Big Money expected to Sell techs.

FOURTH FED TIGHTENING
GDP growth 2.5% and falling.
Big Money expected to Sell non-BRIC (Brazil, Russia, India, China) smokestakes (machinery and equipment). E.g. MMM.

...cont'd tomorrow...

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Expectations From First to Fourth Fed Easing

2009-12-08T16:51:00.002-05:00

Cont'd discussion about Jim Cramer's Real Money: Sane Investing in an Insane World, amended and updated in Jim Cramer's Mad Money: Watch TV, Get Rich.

FIRST FED EASING after series of Tightenings.
GDP Growth 1% and falling.
Big Money expected to Buy retailers.

GDP Growth 0.5% and falling.
Big Money expected to Buy housing.

GDP Growth 0% and falling.
Big Money expected to Buy auto.

SECOND FED EASING.
GDP Growth -0.5% and falling.

THIRD FED EASING.
GDP Growth -1% and falling.

FOURTH FED EASING.
GDP Growth -1% or less.
Big Money expected to Buy low-multiple tech.

GDP Growth 1% and rising
Big Money expected to Buy paper and chemicals.

GDP Growth 2% and rising.
Big Money expected to Sell medicine and supermarkets.

...cont'd tomorrow...

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Interesting Interest Rate Cycle

2009-12-07T22:14:00.002-05:00

Outrageous TV-stock market guru Jim Cramer describes the stock market fashion cycle in Jim Cramer's Real Money: Sane Investing in an Insane World, amended and updated in Jim Cramer's Mad Money: Watch TV, Get Rich.

This week I’ll be writing about that stock market fashion cycle, sometimes called Sector Rotation.

You can recognize what stage of the cycle we are in by the Fed easing/tightening activity and secondarily by the annual growth rate of the Gross Domestic Product.

...cont'd tomorrow...

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Amateur's AK47

2009-12-04T21:54:00.000-05:00

Cont'd discussion about Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals

Start buying immediately upon seeing the following pattern:

1. A stock trades in a small price range for about six months or more.

2. During the preceding time, when price goes up, so does price and when volume goes down so does price.

3. Then, suddenly, huge volume is traded on the upside as price breaks out of its range.

4. Volume drops as the stock continues going up but on up moves, volume is greater than on down moves.

...back next week...

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Invest where you have an advantage over professionals

2009-12-03T17:55:00.001-05:00

Cont'd discussion about Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals

Here are some areas where the amateur investor has an advantage over the professional investors.

1. Small cap stocks and stocks ignored by analysts

2. Buy and hold.

3. Change market directions before the professionals are able to change theirs.

4. Wait until the professionals all go in the same direction and then take the opposite position. Look in the Investors' Business Daily at the Sentiment Indicator. A bearish signal occurs when more than 55% of investment advisors are bullish or fewer than 20% bearish. A bullish signal occurs when fewer than 35% are bullish or more than 50% are bearish. Also, look at analyst ratings of a stock. If all of them are bullish, then you have a short selling opportunity. If all of them are bearish, then you have a buying opportunity.

5. Take advantage of the professionals' need for short term performance. On the last day of any quarter, professionals sometimes bid the price up on stocks they already own to make their performance look better. So look at public information to see what stocks professionals already own and buy along with them as they bid up the price near the end of any quarter. At the same time, look at public information to see what stocks professionals already own which have been poor performers and short sell while they start to sell those to eliminate them from their portfolio at end-of-quarter.

...cont'd tomorrow...

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Designing a Guerilla Strategy: Avoiding the enemy’s strengths

2009-12-02T18:33:00.001-05:00

Cont'd discussion about Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals

Guerilla Investing advises amateur investors to avoid being involved in activities where professional investors have an advantage over amateur investors. Therefore, says Gureilla Investing:

1. Avoid timing the market.
2. Avoid aggressive trading.
3. Avoid trading on earnings announcements.
4. Avoid trading big cap stocks
5. Avoid options.

6. Avoid mergers and acquisition strategies.
7. Avoid IPO's.
8. Avoid businesses that you do not understand.
9. Avoid emerging markets.
10. Avoid anything too good to be true.

...cont'd tomorrow...

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Design a guerilla strategy

2009-12-01T20:56:00.003-05:00

Cont'd discussion about Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals

Consider four key questions when assessing your own strengths and weaknesses as an investor with a view towards designing a guerilla investing strategy.

1. How much money do you have and want to use for investing? If you don't have much money, then you must take smaller positions each time you invest.

2. How much time do you have and want to use? Save time by investing only when you have an advantage and not investing when you do not have any advantage.

3. How much risk do you want to take?

4. What resources do you have that can help you in investing?

...cont'd tomorrow...

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Guerilla Investing

2009-11-30T17:08:00.001-05:00

Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals is a book intended to help amateur investors survive and thrive against the professionals in the financial markets.

The main ideas in the book are:

1. attack the professionals' weaknesses,

2. avoid their strengths,

3. fight on terrain where you have the advantage over the professionals,

4. finding niches that the professionals miss, and

5. using your smaller size as an asset where the professionals' larger size is a liability.

This week, I’ll highlight some of the ideas from that book.

...cont'd tomorrow...

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Skipping out this week

2009-11-23T19:05:00.000-05:00

I will not be posting any articles to this blog until next week because of the holiday this week.

I'll be back next week.

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Enter at 10am, add at 2pm, exit next day at open

2009-11-20T17:47:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Jonathan Petak Interview

At 10 o’clock NY, he starts building a position in a stock.

If at around 2pm it is profitable, he adds to the position.

If by the close the position is still profitable, he holds it overnight, but if it is not profitable, he exits the trade.

The next day, at the open, he exits his long positions as prices are moving up and exits his short positions as prices are moving down.

...back next week...

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Trade stocks that are unusually active

2009-11-19T16:59:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Brad Fredricks

Trade stocks that are more active than they normally are.

If you follow the top 10 abnormally active stocks (not merely the “most active”) everyday watching how they move throughout the day, you are going to make money in the long run after you learn how to trade them (from watching their intraday pattern).

...cont'd tomorrow...

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Make a little and leave

2009-11-18T18:08:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Jim Shaw Interview

The biggest turning point in his career as a day trader was when he decided not to try to make a lot of money, just make a little money and walk out.

...cont'd tomorrow...

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Crowd psychology

2009-11-17T20:33:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

James Crane-Baker Interview

Day trading stocks is all about crowd psychology.

Don’t try to get big profits everyday, just small profits consistently.

...cont'd tomorrow...

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Buy on dips with stop-loss, let winners run

2009-11-16T17:44:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Tom Hendrickson Interview

Let winners run; cut your losses. Bet only a set amount on any one idea.

If a stock is in an uptrend, buy it on the bid on a price dip with a stop-loss in place and let it ride until the trend changes.

...cont'd tomorrow...

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When you get profits, don't give much back

2009-11-13T17:51:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Steve Girden Interview

If you give back 20% of what you’re up for the day, cut down your position size. If you give back half of your profits for the day, cut down even more.

There are 20 trading days in a month. On about 17 of them, you play for singles and doubles. Then on 3 of those days you might get a triple or a home run. Don’t look for a home run every day because it won’t happen.

...cont'd next week...

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Start your daytrading day by looking at a day bar chart

2009-11-11T16:22:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Marc McCord Interview

Start the day with a chart showing daily bars of the last 3 to 6 months of a stock you are interested in trading. Notice the tops, bottoms, support and resistance prices. Look for same sector sympathy and same sector divergence.

Follow the one-minute chart of the stock index futures and the bond futures. Together, they indicate the direction of the overall market.

The correct time to bid is when the stock is making a higher low, buying on the bid into a pullback that is in an uptrend.

Decide how much money you are willing to risk losing in any trade and stick to it. Never let a profit turn into a loss.

Be quick to take losses and slow to take profits.

...cont'd tomorrow...

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Buy on pullback to support

2009-11-10T14:44:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Eric Froman Interview

Knowing the levels (the support and resistance prices) is of the utmost importance.

When a stock is going up, wait for it to pullback to a support level and buy it there. Then after buying it, sell when it goes up to take profits.

...cont'd tomorrow...

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Focus, then take and protect profits

2009-11-09T11:30:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Marc Sperling Interview

Focus on just a few stocks, the most active ones of the day.

Consistently take profits when you have them, and don’t let losers go against you by much. When you have a profits part way through a day, don’t give back more than 20% of those profits.

...cont'd tomorrow...

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Buy low, sell high

2009-11-06T20:40:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Roy Sidikman Interview

When everybody is panicking out, he is looking to buy on lowballs and when everybody is chasing price, he is offering to short sell at highball prices.

He buys strong stocks on pullbacks and sells them on rallies.

Another method he uses is to dollar-cost average into a position. For example, if Dell is strong but now pulling back, he’ll bid 1000 at one level and another 1000 at another level. When it stops falling and starts going up, he’ll try to buy 2000 or 3000 more. When the stock runs up, he sells half the position right away and ride the other half up to see how high it can go.

...cont'd next week...

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Buy stocks holding steady when stock index futures are falling

2009-11-05T23:25:00.000-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Serge Milman Interview

Watch the stock index futures. When they are down, but your target stock is not going down, start building a position in it because when the futures index turns up, your target stock will go up. Vice versa, when the stock index futures are going up, but your stock is not going down, start building a short position in it because when the futures index turns down, your target stock will go down.

Be confident. When you’re confident, you try to hit home runs and succeed in building a big position and nailing at big price move. When you’re not confident, it’s like driving with your foot on the brake.

Look for news to trade: stock splits, earnings reports; upgrades and downgrades.

...cont'd tomorrow...

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Lowball longs, highball shorts

2009-11-04T21:33:00.003-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Randy Guttenberg Interview

If a stock is in motion, don’t jump on it. Instead, lowball it by entering a buy order below the current bid price so that if the price pulls back you buy it. Do not take the ask price. This will allow you room to hold onto the stock if it first moves adversely before going profitable. Also, it allows you to have a bigger profit. Don’t be afraid of missing out on a profitable trade.

Before trading, prepare a list of stocks you are interested in buying and that you are interested in selling. Then watch the stock index futures. As the stock index futures go up, enter lowball orders to buy below the current bid price on stocks you are interested in buying. As the futures go down, enter highball oders to sell short above the current ask price on stocks you are interested in shorting..

...cont'd tomorrow...

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Best point to enter a trade

2009-11-03T21:36:00.001-05:00

Cont'd discussion about Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders.

Andrew Friis’ Interview

The best point to enter a trade is when price action comes to a crescendo at a point where the buying and selling action has leveled off.

...cont'd tomorrow...

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Day Traders' Secrets

2009-11-02T20:48:00.000-05:00

Here’s a book with an interesting title. Electronic Day Traders' Secrets: Learn From the Best of the Best DayTraders. This week I’ll be discussing that book.

The book is comprised of thirteen interviews. The interviewee’s are all either students of Tradersedge.net or customers of Broadway Trading, LLC. The interviewees were making money day trading stocks at the time of the interviews.

...cont'd tomorrow...

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Gone until November 2009

2009-09-25T13:43:00.001-04:00

Gone until November, 2009.

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Magic words

2009-09-25T13:34:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

Here are the seven Magic Words (Sutra’s):

Aham Brahmasmi (ah-HUM brah-MAHS-mee).

Tat Tvan Asi (that t’vahm AH-see).

Sat Chit Ananda (saht chit ah-NAN-dah).

San Kalpa (sahn KAL-pah).

Moksha (MOKE-shah).

Shiva-Shakti (SHE-vah SHOCK-tee).

Titam (Ree-tahm).

The second half of the subject book contains exercises to enable you to create a neural association between the Magic Words and the meaning of the Magic Words. However, even if you don’t understand the Magic Words, the nonlocal domain does.

Next week, I will begin a four week holiday and will be back in November, 2009.

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Magic words coming soon

2009-09-24T20:45:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

The second half of the subject book describes the Sutras, the magic words for placing intention into the nonlocal domain so that you can become empowered to manifest your desires.

...cont'd tomorrow...

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Sending your orders into the nonlocal domain

2009-09-24T20:43:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

Additionally, after you finish meditating, you can use more sounds (called Sutras) to place an intention into the nonlocal domain which will surface later into the physical domain.

These Sutras are magic words in the sense that you don’t have to know what they mean. They are words in the Sanskrit language.

My understanding of Deepak is that since these magic words have been used for a longer period of time than their English translation for communicating intention to the nonlocal domain, you are better off using them instead of their English translation as their age makes them more easily understood by the nonlocal domain.

...cont'd tomorrow...

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So-hum Meditation

2009-09-22T17:37:00.000-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

The type of meditation Deepak recommends is a simple one where you sit quietly and pay attention to your breathing. If your attention strays from your breathing, gently return to it. Do that for 20 minutes twice daily.

Later, when you feel comfortable doing that, add the sound of “so” on the in-breath and the sound “hum” to the outbreath. You can do the so-hum sound either outloud or merely imagine hearing it. The so-hum sound, a mantra, sets up a vibration (whether you do it outloud or silently) that results in an environment that allows you to experience the nonlocal domain.

...cont'd tomorrow...

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Cut the crap

2009-09-21T19:05:00.002-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

To see the connective patterns in the universe and make miracles out of your desires, Deepak recommends using meditation.

Although the connective patterns in the universe are always present, you don’t notice them because of the fog caused by your everyday thoughts.

Such everyday thoughts get shut off when you meditate. Then you can glimpse the connective patterns and make miracles out of your desires.

...cont'd tomorrow...

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Pay attention

2009-09-18T13:31:00.002-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

Paying attention to coincidences result in them showing up more often. And the more unlikely the coincidence, the more potent it is. Therefore, suggests the author of the subject book, you would benefit from keeping a written record of coincidences that you notice in both your waking state and in your dreams.

Furthermore, by applying your intention to the coincidences, you can discover the meaning of them. To do that, review your written record of coincidences, especially the unlikely ones, and ask yourself “what do they mean?” Then, don’t bother attempting to answer the question. Just let the question go and passively wait for the answer. Don’t use effort in trying to force an answer to manifest. You have to be passive in waiting or else the answer won't surface.

...cont'd next week...

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Action Required

2009-09-17T19:31:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

The author of that book explains how his model of existence works to create what exists in the physical domain.

In the author’s model, the genesis of everything in the physical domain is intention.

Every intention originates from the nonlocal domain.

Human have power to choose which intentions they desire to be fulfilled.

By making the same choice repeatedly as to which intention you choose to be fulfilled, you activate that intention in the nonlocal domain, but only if your choice of intnetion is one which is beneficial for the entire universe.

The nonlocal domain then creates coincidences (i..e. opportunities) for you to act upon to fulfill your desire.

Here’s a diagram depicting the foregoing.

Your Desire (universally beneficial + intended + repeated made) -->
Nonlocal Domain’s Intention -->
(Coincidences in Physical Domain, i.e. Opportunities + You Acting on the Opportunity )-->
Desire Fulfilled

...cont'd tomorrow...

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Communications from the nonlocal domain

2009-09-16T18:34:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

Communications from the nonlocal domain occur all the time everywhere, resulting in events in the quantum domain and the physical domain.

The model can be depicted diagramatically as this:

Nonlocal Domain communication --> Quantum Domain --> Physical Domain

An example of this is nonlocal communication to the quantum domain resulting in your heart beating in the physical domain.

That being so, to affect the results in the physical domain you need to affect the communications coming from the nonlocal domain.

...cont'd tomorrow...

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Physical, Quantum & Non-Local Domains

2009-09-16T13:08:00.001-04:00

Contination of discussion about The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

The author of that book says that the beginning point for harnessing the power of coincidences is to understand his model of the three levels of existence.

The first level is the physical domain. This is where you experience the world with you senses (visual, audio, kinesthetic, gustatory, and olfactory).

The second level is the quantum domain. This is the subatomic level where everything you experience in the first (physical) domain exists as information and energy.

The third level is the nonlocal domain. This is what organizes and directs the information and energy of the second (quantum) level. The nonlocal domain consists of consciousness and intelligence.

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Life-altering unlikely coincidences

2009-09-14T18:31:00.001-04:00

In retrospect, does it feel to you that what led up to your present day life is a set of unlikely coincidences?

What if you could recognize unlikely coincidences as being life-altering as those coincidences occur?

Even better, what if you could cause the occurrence of the unlikely coincidences that you need to make your life the way you intend it to be? That’s the topic of Deepak Chopra’s book The Spontaneous Fulfillment of Desire: Harnessing the Infinite Power of Coincidence

...cont'd tomorrow...

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Prays of thanks vs prayers of petition

2009-09-11T18:45:00.000-04:00

Maybe the manner in which prayer is done distinguishes the cases where prayer is effective from the cases where prayer is ineffective. According to literature on metaphysics:

a) Effective prayers (regardless of religion) are done in ways that gives thanks for what one wants as if it has already occurred

b) On the other hand, what does not work is praying as if one is asking for something to occur in the future.

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Praying in vain

2009-09-10T19:20:00.002-04:00

Other studies show that prayer has no effect.

For example, in 1872 Francis Galton studied the effects of having thousands of people praying for the British Royal family every Sunday. He found that such prayers did not improve the longevity of members of the British Royal family as compared with that of the general population.

...cont'd tomorrow...

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Mixed results from prayer

2009-09-09T21:59:00.001-04:00

Some of the studies show that prayer is effective.

For example, Leibovici’s study found that patients who are being prayed for had shorter hospital stays and shorter duration of illness. See Leibovici L. Effects of remote, retroactive intercessory prayer on outcomes in patients with bloodstream infection: randomized controlled trial. BMJ 2001;323:1450-1, cited in http://en.wikipedia.org/wiki/Efficacy_of_prayer

...cont'd tomorrow...

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Pray tell...

2009-09-08T17:45:00.000-04:00

Do you sometimes pray that your trading gets better? Or do you pray for it all the time? Haha.

There’s been studies on the effect of prayer, not on trading, but on health.

...cont'd tomorrow...

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On vacation in August 2009

2009-07-27T15:01:00.000-04:00

I had scheduled myself to take the month of August off for vacation. So instead of starting another series of articles, I'm going to get an early start on my August vacation. I'll be back in September 2009.

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Prerequisite to Think & Grow Rich

2009-07-24T15:16:00.001-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Fifteen: Six Ghosts of Fear

TARP says you need to releive yourself of the six ghosts of fear before you can effectively use the method described in it to Think and Grow Rich. The six ghosts of fear are faer of poverty, fear of criticism, fear of ill health, fear of loss of love, fear of old age and fear of death.

Applying this to trading, you might try using a release technique not mentioned in TARP, namely the
Sedona Method.

(If the link to the Sedona Method doesn't work, go to my Home Page mentioned below and click "Stress" on the menu at the left side of the page).

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Imagine/think and grow rich

2009-07-23T17:49:00.000-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chpater Fourteen: The Sixth Sense

Napoleon Hill says in TARP that he had used an MasterMind Group comprised of imaginary people, all experts in their field, and who are now deceased. He said he found the group was helpful to him.

Applying this to trading, you might try conscripting an imaginary MasterMind Group comprised of successful traders. Ask them for advice and act on their advice. That’s far less expensive than hiring a trading guru.

...cont'd tomorrow...

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Bidirectional brain

2009-07-22T17:44:00.000-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Thirteen: The Brain

TARP says that your brain can both send out thoughts and receive thoughts. TARP describes the brainstorming process. That is, gather three or more people together from your MasterMind Group. Sit at a table. Clearly identify the issue to be discussed. Then start discussing it harmoniously. TARP says the group will soon arrive at a solution to the issue that none of the MasterMind Group members knew about at the beginning of the process.

Applying this to trading, you might try meeting in person or on the phone with your MasterMind Group. Clearly identify an issue you are having with trading. Start discussing it and, voila, you’ll get a solution to the issue you didn’t have before.

...cont'd tomorrow...

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More emotional trading

2009-07-21T16:55:00.001-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Twelve: The Subconscious Mind

TAGR says that thoughts combined with certain emotions result in the Subconscious Mind delivering to you answers about actions you need to take to bring about that which you desire. The emotions that are effective for that include sex (as discussed in yesterday's blog article), desire, faith, love, romance, enthusiasm, and hope. Emotions which disable you from receiving guidance from the Subconscious Mind include fear, jealousy, hatred, revenge, greed, superstition, and anger.

Applying this to trading, you need to monitor your emotions throughout the day so that you avoid the disabling emotions and that you deliberately cause yourself to feel the enabling ones (i.e. desire, faith, sex, love, romance, entusiasm and hope) during the times that you are thinking about trading successfully.

...cont'd tomorrow...

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The Horny Trading Method

2009-07-20T18:26:00.001-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Eleven: Sex Transmutation

TAGR says that Sex Transmutation is the act of switching the mind from thoughts of sex to thoughts of something else. Thoughts of sex has a role in tapping into creative imagination. First, use thoughts of sex to stimulate the mind. Second, concentrate on the known factors of that which you wish to invent plus the finished product. Third, dismiss your thoughts leaving a blank mind and wait for an answer to flash into your mind.

Applying this to trading, you would (1) think about sex until you are horny; (2) switch your thoughts to concentrating on winning at trading; and (3) clear all thoughts from your mind and wait an answer to flash into your mind as to how you should win at trading.

...cont'd tomorrow...

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Master mind your way to wealth

2009-07-17T16:11:00.000-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Ten: Power of the Master Mind

TAGR advises you to work with people who can and will help you achieve your goal of attaining wealth.

Applying this to trading, it means all the people with whom you have to interact in order to trade successfully including but not limited to a broker and techicians for any equipment you will use such as a computer. Furthermore, a trading coach or mentor would be beneficial.

...cont'd next week...

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Persistently Think & Grow Rich

2009-07-16T16:35:00.001-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Nine: Persistence

TAGR lists four steps to developing the persistence you need to keep on keeping on after repeated failures.

First, keep in mind your definite purpose and focus on it in a way that gives you a burning desire for attaining it.

Second, have a definite plan that you continuously act on.

Third, stay away from people who criticize you.

Fourth, hang out with people who do encourage you.

Applied to trading, this means daily mentally imagining having already attained your goal. Second, read your trading plan daily and act on it. Third, stay away from people who criticize you. Fourth, hang out with people who encourage you.

...cont'd tomorrow...

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Keep your thoughts to yourself and grow rich

2009-07-15T18:10:00.001-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Eight: Decision

Napoleon Hill, author of TAGR, observed that people who accumulate large amounts of money make decisions promptly and are very slow in changing those decisions. That's in contrast to people who make decisions slowly and quickly changing them.

Also, the people who accumulate large amounts of money usually keep their mouths shut about what it is they intend to do, at least until after they have finished doing it.

Furthermore, they do not accept the opinions of other people (except those in their Mastermind Group).

Applying this to trading means you must promptly execute your trades according to your trading plan and not change such plans until after a reasonable fair trial (e.g. after 30 or emore trades).

Also, it means you must not tell anyone your opinion about the market or what your trading plan is (at least not until you're done with the market or your trading plan).

Furthermore, you must ignore other people’s opinions about the markets (except for your Mastermind Group).

...cont'd tomorrow...

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Planning to Think & Grow Rich

2009-07-14T18:18:00.000-04:00

cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised
hereinafter called "TAGR".

Chapter Seven: Organized Planning

TAGR says that in building a plan, decide on what kind of people you need to involve in your plan as well as identify what benefits you can give to the other people so that your participation is appreciated. Then meet with your group at least twice weekly to jointly plan how to get rich. After your group has created a plan, put it into action. If the plan does not work, revise it and act on the revised plan. Keep revising and acting on the revised plan until you get rich.

Applying that to trading, I would seek out a successful trader with whom I feel comfortable working. Then I would draft a trading plan involving input from such successful trader and implement the plan. If the plan doesn’t work after a reasonable number of trades (i.e. need 30 or more trades to be statistically significant), then I would revise the trading plan and try it out on another reasonable number of trades. I would keep revising and acting on the revised plan until I get rich from trading !!!

...cont'd tomorrow...

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Imagination in TAGR

2009-07-13T18:24:00.001-04:00

cont'd discussion about Think and Grow Rich!: The Original Version, Restored and Revised, hereinafter called "TAGR".

Chapter Six: Imagination

TAGR advises to write out a plan for making money. The plan will be created through the use of imagination, both synthetic imagination and creative imagination.

Synthetic Imagination is the combining of existing ideas into seemingly new ideas.

Creative Imagination is where one gets new ideas not based on anyone else’s ideas and not based on previous ideas one has had. This Creative Imagination works when it is stimulated by a strong emotion such as a burning desire.

Applying this to trading, I would use my imagination to create trading systems and methods. Such systems and methods might be based on published work of other traders, or they might be my own original ideas. I would carry around with me a notepad to capture any ideas coming to me through either synthetic imagination or creative imagination that I can use in my trading plan.

...cont'd tomorrow...

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Know this

2009-07-10T18:13:00.001-04:00

...cont'd discussion about
Think and Grow Rich!: The Original Version, Restored and Revised, herein referred to as "TAGR".

Chapter Five: Specialized Knowledge

TAGR in this chapter advises that “you will require specialized knowledge of the service, merchandise or profession which you intend to offer in return for fortune.” Furthermore, knowledge is only potential power and that “it becomes power only when, and if, it is organized into a definite plan of action and directed to a definite end.”

Applied to trading, this means you need to schedule time for learning about trading and you need to organize what you learned into a trading plan.

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Keep a lookout for inspiring plans

2009-07-09T18:26:00.002-04:00

cont'd discussion about Think and Grow Rich!: The Original Version, Restored and Revised, hereinafter referred to as "TAGR".

Chapter Four: Auto-suggestion

TAGR gives further instructions in this chapter on what you need to do when you imagine having that which you desire. In particular, you need to imagine yourself carrying out the steps related to getting that which you desire.

Furthermore, TAGR says to be alert for thoughts of plans entering your mind as to how to get that which you desire, and that when such plans enter your thoughts to act upon them immediately.

Here’s how I would apply this to trading. I would prepare a script to use in the twice-daily sessions of imagining already having the result of successful trading. Furthermore, I would carry around with me a pen and notepaper on which to capture thoughts of plans for successful trading. Then as soon as I get such thoughts, I would paper-trade the ideas from such thoughts to fine-tune and verify the ideas.

...cont'd tomorrow...

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Faithfully repeat

2009-07-08T16:10:00.000-04:00

cont'd discussion of Think and Grow Rich!: The Original Version, Restored and Revised, hereinafter called "TAGR".

Chapter Three: Faith

According to TAGR, the emotion of faith is one of the emotions that are effective when combined with dominant thoughts in converting your desires into reality.

You can attain faith in a thought by many repetitions of the same thought.

In applying this to trading, I would think about having already traded successfully and do so repeatedly day after day, twice a day as described in yesterday’s article.

...cont'd tomorrow...

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Six steps of Think and Grow Rich

2009-07-07T22:08:00.000-04:00

cont'd discussion about Think and Grow Rich!: The Original Version, Restored and Revised , hereinafter referred to as TAGR.

The most important message of Chapter two of TAGR is the six steps listed for turning desire for riches into their physical equivalent. Here are the steps and how I would apply this to trading.

First, describe an exact definite amount of money you desire. In applying this to trading I would use a dollar amount I want each week in daytrading, a dollar amount each month for swing trading, and a dollar amount each year for longer term investing.

Second, describe what you intend to give to get the money. In applying this to trading, I would state that I intend to give 2 hours of my time every day. One hour given to watching live prices and entering orders, 30 minutes to conditioning myself psychologically, and 30 minutes for debriefing the day’s results.

Third, describe the date by which you intend to possess the money. In applying this to trading, I would merely refer to a calendar.

Fourth, describe your plan for attaining the money and begin immediately putting it into action. In applying this to trading, I would write out a trading plan that includes entry criteria, exit criteria, position size algorithms, daily routines, and so on.

Fifth, put the foregoing information in writing.

Sixth, read the written statement out loud twice daily, once in the morning and once in the evening. As you read, see and feel and believe you already have the money. In applying this to trading, I would schedule an appointment with myself by marking off my calendar blocking off time to do this.

...cont'd tomorrow...

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Think and grow rich with little or no work

2009-07-06T17:47:00.001-04:00

Think and Grow Rich!: The Original Version, Restored and Revised is a popular book from the twentieth century.

The author, Napoleon Hill, says in the preface that “in every chapter of this book, mention has been made of the money-making secret which has made fortunes for hundreds of exceedingly wealthy men whom I have carefully analyzed over a long period of time”.

In the forthcoming days, I will examine each of the fifteen chapters in that book and describe how I would apply it to trading.

Hereinafter, “Think and Grow Rich” shall be referred to as the “TAGR book”.

Chapter One: Thoughts are Things

The main message in Chapter One of the TAGR book is that continuously dwelling on thoughts of success attracts success into your life. Doing so generates in you a burning desire for a definite outcome that persists despite rejection and past failure.

Here’s my application of this to trading. Every day, imagine yourself trading successfully. Mark your calendar and block off 5 minutes every day at the same time of day to do that. Furthermore, throughout the day whenever you feel like it, repeatedly imagine yourself trading successfully. Write out a script for those sessions of imagining success and follow the script every time. Notice feelings you enjoy while you experience imagining success. Include the requirement of feeling those feelings in the script. That ought to generate the required “burning desire” that Napoleon Hill in TAGR says you need.

The rejection you need to overcome in trading include the negative image of traders sometimes appearing in the news and entertainment media.

The failures you need to overcome in trading include the past losses from being stopped out after a perfect entry, experiencing a loss due to not having a stop, and all other past losses.

In Chapter One of the TAGR book, the author says also that “when you begin to think and grow rich, you will observe that riches begin with a state of mind, with definiteness of purpose, with little or no hard work.

Amen to the “little or no hard work”. After all, trading today involves no more than pushing buttons on a keyboard and clicking a computer mouse. You’ll need to do some weight training to prevent your muscles from atrophying.

...cont'd tomorrow...

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Review of Mark Tier books - the final installment

2009-07-03T14:22:00.000-04:00

...cont'd from yesterday...

Continued discussion about Becoming Rich: The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros and The Winning Investment Habits of Warren Buffett & George Soros

16. Use what you have learned to reduce time spent on investing. Build past and recent knowledge into your trading system.

17. Never tell anyone what you are planning to invest in or what you are currently investing in.

18. Delegate investment tasks that someone else can easily and reliably perform.

19. Spend less than your income. Save money.

20. Think of investing as a vehicle for fun and self-fulfillment instead of an income source.

21. Loves the process of investing.

22. Always walk away from any investment that does not totally meet your criteria.

23. Be willing to put almost all of your net worth into your investing business.

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Mark Tier, more on Buffett, Soros and Icahn

2009-07-02T18:10:00.000-04:00

...cont'd from yesterday...

Continued discussion about Becoming Rich: The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros and The Winning Investment Habits of Warren Buffett & George Soros

11. Wait for investing opportunities that satisfy your own criteria.

12. Act fast when you find an investing opportunity that meets your criteria.

13. When you have an open position, keep it until an exit that meets your exti criteria manifests.

14. Immediately exit investments when you realize you entered by mistake; and immediately re-enter investments when you realize you made a mistake in exiting.

15. Regard mistakes as learning experiences.

...cont'd tomorrow...

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Don't listen to anyone else, etc.

2009-07-01T16:51:00.000-04:00

...cont'd from yesterday...

Continued discussion about Becoming Rich: The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros and The Winning Investment Habits of Warren Buffett & George Soros

6. Give your own trading system ample time to succeed before making any changes to it.

7. Focus and specialize, don’t diversify.

8. Only invest in what you can understand.

9. Refuse to invest in things that don’t meet your own criteria.

10. Eschew other people’s opinions about investing.

...cont'd tomorrow...

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Mark Tier beliefs 1 to 5

2009-06-30T21:09:00.001-04:00

...cont'd from yesterday...

Continued discussion about Becoming Rich: The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros and The Winning Investment Habits of Warren Buffett & George Soros

1. Preserving capital is the top priority in investing.

2. Always look for and adopt ways to reduce the risk of losing money.

3. Always Minimize taxes.

4. Always trade in a way that suits your personality, abilities, knowledge, preferences and objectives.

5. Always use your own trading system.

...cont'd tomorrow...

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Investment habits of Buffett, Soros and others

2009-06-29T15:22:00.000-04:00

Last week I wrote about Warren Buffett. This week, I am reviewing a book by Mark Tier about Warren Buffett. Mark’s book book that is sold under two different titles:

Becoming Rich: The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros

The Winning Investment Habits of Warren Buffett & George Soros

According to Mark Tier, do the same thing consistently is what you need to do to succeed in trading/investing. That is, doing the successful things consistently instead of only occasionally. Here’s the list of beliefs that you need to install in yourself so that you can have the habits.

...cont'd tomorrow...

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When to buy, bow much to pay, when to sell

2009-06-26T15:53:00.000-04:00

... cont'd from yesterday...

Continued discussion about Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Step Four: How Much to Pay for an ECDCA.

Price to Pay < (Pretax Earnings Per Share) / (Corporate Bond Interest Rate).

Provided that the Pretax Earnings Per Share has been consistently growing year-after-year and the prospects of continuing to do so is likely.

Step Five: When to Buy an ECDCA

After a market crash or after the price of the ECDCA has crashed due to a one-time solvable problem.

Step Six: When to Sell an ECDCA

One of three conditions:

1. When you need to raise cash to buy an even better ECDCA.
2. When it looks like the ECDCA is going to disqualify itself from being an ECDCA.
3. During a bull market when the P/E ratio of the ECDCA goes above 40.

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Cashflow clues

2009-06-25T18:25:00.003-04:00

... cont'd from yesterday...

Continued discussion about Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Step Three: Examine the Cash Flow Statement

1. Capital Expenditures. ECDCA’s use a smaller portion of its earnings for capital expenditure than others. Capital Expenditure per Earnings year-after-year under 25% is good although a number as high as 49% is acceptable.

2. Retirement of Stock. This refers to stock buy-backs by the company. Any amount year-after-year indicates an ECDCA.

...cont'd tomorrow...

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Assets and liabilities as clues

2009-06-24T20:56:00.001-04:00

... cont'd from yesterday...

Continued discussion about Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Step Two: Examine the Statement of Assets & Liabilities.

1. Cash. Look in the Notes to the Financial Statements or elsewhere to determine where the Cash came from. If it came from Sales, that’s good. If it came from borrowing money, issuing more shares, or selling off parts of the business (other than sale of the company’s products or services), that’s bad.

2. Inventory. Look at the Inventory figure for the last 10 years. An ECDCA’s Inventory figure would be consistently rising at the same time that the EPS has been consistently rising over the last 10 years. Erratic ups and downs in Inventory figures over a 10 year period means the subject company is not an ECDCA.

3. Net Receivables. An ECDCA, when compared to competitors in the same industry, has a consistently lower ratio of Net Receivables/Revenue.

4. Property/Plan/Equipment. An ECDCA’s figure, after adding back Accumulated Depreciation, would be consistently the same year after year.

5. Long-Term Investments. Look in the Notes to the Financial Statements for what is included in this figure. If it is comprised of investments in other ECDCA’s, then that’s good. If not, that’s bad.

6. Short Term Debt. Ratio of STD to Long Term Debt should be less than 1, unless the LTD is zero in which case your calculator will self-destruct in 10 seconds.

7. Long Term Debt. This should be zero or almost zero.

8. Total Liabilities to Shareholders Equity Ratio. Except for companies in the financial business, the debt to shareholder equity ratio should be less than 0.80 to qualify as an ECDCA.

9. Retained Earnings. This should be growing year-after-year to qualify as an ECDCA at a rate of over 6% per year.

10. Treasury Stock. Anything above zero is good.

11. Return on Shareholders Equity. This should be more than 20% per annum year-after-year.

...cont'd tomorrow...

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Income Statement clues

2009-06-23T17:43:00.003-04:00

... cont'd from yesterday...

Continued discussion about Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Step One: Start with the Statement of Income and Expenses.

1. Profit Income Ratio, namely (Gross Revenue – Cost of Goods Sold)/Gross Revenue. This ratio must year after year be over 40%.

2. Selling, General & Administration Expense (“SGA”). The lower the better, but best of all is a year after year consistent ratio of SGA/Gross Income.

3. Research & Development Expense. This needs to be zero or almost zero to qualify as an ECDCA.

4. Depreciation Expense. This needs to be less than 10% to qualify as an ECDCA.

5. Interest Expense. This needs to be zero or almost zero to qualify as an ECDCA. The subject company’s ratio of Interest/Gross Income should be the lowest in the industry to qualify as an ECDCA.

6. Gain or Loss from Sale of Assets. This number has to be removed from calculating the Net Income for the purposes of deciding if a company qualifies as an ECDCA.

7. Income Taxes Paid. The amount reported is used as an idication of whether the subject company has crooked accountants and therefore disqualified as an ECDCA. If the amount reported as Income Taxes Paid is far off from 35% of Before-Tax Income, then the company is disqualified as an ECDCA. Before-Tax Income is Gross Revenue minus all Expenses (except for Income Tax).

8. Net Earnings. Obvious ECDCA’s have Ratio of Net Earnings/Revenue over 20%. Obvious non-ECDCA have that ratio under 10%. In between 10% to 20% is an area where the Net Earnings/Revenue ratio is not decisive in determining ECDCA status.

9. Earnings Per Share. ECDCA’s have a consistently rising EPS over a 10 year period instead of an erratic up and down movement over a 10 year period.

...cont'd tomorrow...

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Warren Buffett's Stock Picks

2009-06-22T16:37:00.000-04:00

Interested in picking stocks the way Warren Buffett does it? Then here’s a “must-read”: Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

According to the authors, Warren Buffett (hereinafter referred to as “WB”) likes to buy Exceptional Companies with a Durable Competitive Advantage (hereinafter referred to as “ECDCA”). They say that WB likes ECDCA’s that sell one of three things:

1. Products with brand loyalty.
2. Services with brand loyalty.
3. Necessities sold at the cheapest prices by a company with the lowest costs.

Additionally, WB looks at a company’s Financial Statements to find a possible ECDCA in one of the foregoing businesses.

...cont'd tomorrow...

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Gone 'till mid-June 2009

2009-06-03T09:51:00.001-04:00

Taking time off to enjoy the weather.

Last but not least, the MACD method

2009-05-29T11:23:00.000-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

MACD.

Set MACD to the following parameters: First EMA at 0.213, second EMA at 0.108 and Difference between the foregoing EMA’s at 0.199. This results in a two line indicator.

When the fast line closes above the slow line, you have a buy signal.

When the fast line closes below the slow line, you have a sell or short signal.

Open positions are exited on the opposite signal although you could exit earlier on a trailing stop basis using price bars.

All the methods and systems from the book, when used for day trading, assume that you exit open positions before the close of trading each day unless stopped out earlier.

I'm taking a week or two off to enjoy the weather and will be back in mid-June/09.

...back in mid-June/09...

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MA Crossover

2009-05-28T17:51:00.000-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Moving Average Crossover.

This uses a 10 period Moving Average of highs (“MAH”) and an 8 period Moving Average of lows (“MAL”). Filter trades according to the following.

Buying only is permitted when you have 2 consecutive bars above the MAH.

Shorting only is permitted when you have 2 consecutive bars below the MAL.

Then, subject to those filters, when price hits the MAL, buy and when price hits MAH, short.

Exit open positions when you hit the opposite Moving Average.

...cont'd tomorrow...

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The 3 H-L Channel System

2009-05-27T18:37:00.002-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Three High-Low Channel System. This is the most complex one in the book.

This system uses a combination of the Momentum Indicator and two Moving Averages.

First, use a 28 period average of the Momentum Indicator. When the Momentum Indicator is above its 28 period Moving Average, assume the trend is up. Vice versa for downtrend.

Second use the following as a "trend filter". When the trend is up, take only the buy entries. When the trend is down, take only the sell short entries.

Then, subject to the trend filter, when price hits a Moving Average of the 3 period highs, sell short.

When price hits a Moving Average of the 3 period lows, buy.

Exit open positions when price hits the opposite Moving Average or on an adverse move equal to 1 ATR of the last 3 periods.

...cont'd tomorrow...

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Leisurely One Hour Bar Breaks

2009-05-26T18:45:00.000-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

One-Hour Breakout.

Plot the 5 minute bar’s closing price for the first hour of trading to establish a zone.

A breakout from that zone to the upside is a buy signal.

A breakout to the downside is a sell short signal.

Open positions are exited with a trailing stop based on the 5 minute closing price of the prior bar.

This seems quite leisurely..

...cont'd tomorrow...

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Open-Close Oscillator

2009-05-22T18:32:00.001-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Open-Close Oscillator. This is a moving average crossover system involving two moving averages.

One of the moving averages is an average of the closing price of each bar.

The second moving average is an average of the opening price of each bar and which covers a time period twice as large as the first average.

When the first average crosses above the second, you have a buy entry signal. When the first average crosses below the second, you have a sell entry signal.

Exits on open positions are taken on a signal in the opposite direction or with a trailing stop based on the prior bar’s countertrend extreme.

...cont'd next week on Tuesday...

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Stochastic Pop

2009-05-21T19:06:00.000-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

Stochastics Pop. This fades the trades indicated by traditional Stochastic readings. Traditionally, Stochastic readings of over 80 indicate overbought and imply a sell signal while readings under 20 indicate oversold and imply a buy signal. However, the author of that book does the opposite. He buys when Stochastics is over 80 and Shorts when under 20.

...cont'd tomorrow...

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Oops, a gap fade

2009-05-20T17:48:00.001-04:00

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

Gap Fade. This is actually Larry William’s Oops Pattern. If a stock’s price opens beyond yesterday’s range and works its way back into yesterday’s range, then enter in the direction opposite that of the gap. That is, if the gap is down, wait for price to work its way back into yesterday’s range and then buy. Vice versa if the gap is up.

...cont'd tomorrow...

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Compleat Guide to Day Trading Stocks, 1

2009-05-19T19:16:00.001-04:00

...cont'd from yesterday...

The second book I read duirng my week off was The Compleat Guide to Day Trading Stocks.

Unlike the book reviewed yesterday, this book actually does describe several strategies for trading together with performance statistics for each strategy. In fact, according to my count, the author presents seven trading strategies.

The following is my understanding of the seven strategies. For details, either get the book or play with the strategies on your backtesting software to discover robust parameters that work for you.

...cont'd tomorrow...

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Completely idiotic active trading

2009-05-18T19:14:00.000-04:00

I just came back from a week off to catch up on reading.

The first book that I read during that week was The Complete Idiot’s Guide to Active Trading.

This book is a worthwhile quick flip through for anyone new to trading. The best place to get this book is at your local public library for free.

Don’t bother looking for precise strategies for trading in that book because there are none despite the chapter headings indicating that there are such strategies described in the book. I believe that even the book’s bibliography would not be of any use for the purposes of creating any strategies for trading.

Instead, the book has a good explanation of the distinction among the different time frames active traders use, namely Short-Term Trading, Swing Trading, and Position Trading. For anyone new to trading, that could be a broad starting point for selecting a time frame for trading.

The feature of the book I like the best is the author’s emphasis, repeated over and over, that almost everyone who tries active trading loses money, but the odds are no worse than surviving in a new business.

The title for the book is very appropriate. It is for complete idiots. And it will guide them away from trying active trading. So much the better, and more money left in the markets for traders who are absolutely committed to succeeding at trading .

...cont'd tomorrow...

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Keep score daily

2009-05-09T10:56:00.001-04:00

...cont'd from yesterday...

Throughout the day, I keep a record of the tasks I want to perform so that I stay consistent in trading only the pattern I intend to trade and no other pattern. Those tasks include the things mentioned in this week’s blog articles. At the end of the day, I notice if I am doing those things as frequently as I want to do them, namely at least every hour.

Here’s an example of what the record looks like, in part.

Looked at picture of target pattern: ///// ///// /////
Read over checklist of target pattern: ///// ///// /////
Self-talk reminder to look at picture and checklist: ///// ///// /////

TOTAL SCORE FOR THE DAY: 45.

...back in ONE week, skipping out next week...

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Hourly reminder

2009-05-07T23:21:00.001-04:00

...cont'd from yesterday...

Just before starting to trade intraday, I remind myself that I will only trade the pattern shown in the picture and the checklist mentioned in the blog articles of this week. Throughout the day, at least once per hour, I remind myself about this.

...cont'd tomorrow...

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Use a checklist

2009-05-06T19:44:00.001-04:00

...cont'd from yesterday...

I have a printed checklist of the features in the pattern that I intend to trade. Then, just before starting to trade intraday, I read the checklist over and compare it to the picture of the pattern that I intend to trade. Throughout the day, I look at that checklist and the picture to remind myself about the pattern that I intend to trade.

...cont'd tomorrow...

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Picture it

2009-05-05T19:00:00.001-04:00

...cont'd from yesterday...

Just before starting to trade intraday, I look at a picture of the pattern that I intend to trade. Then throughout the day, I look at that picture to remind myself about the pattern that I intend to trade.

...cont'd tomorrow...

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Consistently trade the same pattern

2009-05-04T23:51:00.003-04:00

A popular goal among traders is to aim to consistently trade the same pattern.

Generally, a good way to do that is to replace discipline with conditioned reflexes. See my article at http://LeisurelyCashFlow.Googlepages.com entitled Replace Discipline.

This week, I will be writing about some specific techniques that I use every day in addition to conditioning reflexes. Most of them are low-tech simple solutions that anyone can readily use.

...cont'd tomorrow...

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Market stages too confused

2009-05-01T17:54:00.000-04:00

...cont'd from yesterday...

Cont’d example of my application of Stan Weinstein’s Stan Weinstein's Secrets For Profiting in Bull and Bear Markets for the purpose of deciding whether to buy, sell or keep my money safely tucked away in my mattress.

WARNING: The contents hereof shall not be construed or relied upon as investment advice, and the contents herein shall not be relied upon to do anything or refrain from doing anything.

Yesterday, April 30, 2009, SPY showed the following at the end of the day after all trading had been completed yesterday.

Day Chart. Stage 2. Second bar since ricocheting upwards, closed lower than open.

Hourly Chart. Stage 2, closed near rising 21 Moving Average.

Half-Hourly Chart. Stage 4.

Quarter Hour Chart. Stage 4.

Inferences at the Open of today.
The Charts in the aforesaid time frames are mixed. Therefore, expect trading to be choppy until they all get into the same Stage.

Decision.
Wait until all the four time frames above are unanimous. If they all go to Stage 4, then short sell anywhere near the 21 Moving Average. If they all go to Stage 2, then buy anywhere near the 21 Moving Average.

Results.

SPY was in diverse stages among the different time frames throughout the day. Money was kept safely hidden in mattress pending unanimous condition among the market stages.

...back next week...

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Breakeven today

2009-04-30T19:57:00.001-04:00

...cont'd from yesterday...

Yesterday, April 29, 2009, SPY showed the following at the end of the day after all trading had been completed yesterday.

Day Chart. Stage 2. First bar since ricocheting upwards.

Hourly Chart. Stage 2.

Half-Hourly Chart. Stage 2.

Quarter Hour Chart. Stage 2, until 3:30 pm when price bars went to Stage 3.

Inferences at the Open of today.
The Charts in the aforesaid time frames are mixed. Therefore, expect trading to be choppy until they all get into the same Stage.

Decision.
Wait until the Quarter Hour Chart returns to Stage 2. Then go long. If that doesn’t happen, do nothing until the Hourly, Half-Hourly and Quarter Hour Charts are all in the same Stage. Then when all those charts are in the same Stage, go long if in Stage 2 but go short if in Stage 4.

Results.

SPY opened into Stage 2 today on a 15 minute chart. The opening price was 88.55. Using the 15 minute chart Prior Bar Countertrend Extreme, the long was stopped out 88.58 Thereafter, the 15 minute chart fell into Stage 4 but the Hourly Chart stayed in Stage 2. Therefore, nothing was done for the rest of the day. Both the 15 minute chart and the 30 minute chart closed in Stage 4 while the Hourly Chart closed in Stage 2.

...cont'd tomorrow...

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Sidestepping FOMC Whipsaw

2009-04-29T19:22:00.001-04:00

...cont'd from yesterday...

Cont’d example of my application of Stan Weinstein’s Stan Weinstein's Secrets For Profiting in Bull and Bear Markets for the purpose of deciding whether to buy, sell or keep my money safely tucked away in my mattress.

WARNING: The contents hereof shall not be construed or relied upon as investment advice, and the contents herein shall not be relied upon to do anything or refrain from doing anything.

Yesterday, April 28, 2009, SPY showed the following at the end of the day after all trading had been completed yesterday.

Day Chart. Stage 2. Prices have made two consecutive days of lower lows and lower highs.

Hourly Chart. Stage 4.

Half-Hourly Chart. Stage 3, prices both above and below the 20 Moving Average.

Quarter Hour Chart. Stage 3, prices in a sideways range.

Inferences.
Today, price likely to just go sideways in a range between about 86.50 on the upside and 85.50 on the downside. For the entire day today, stand aside because of the FOMC report coming out in the afternoon.

Decision.
Take today off from trading with real money.

Results. No trades today.

...cont'd tomorrow...

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Money stayed stuffed in mattress

2009-04-28T16:49:00.002-04:00

...cont'd from yesterday...

Cont’d example of application of Stan Weinstein's Secrets For Profiting in Bull and Bear Markets for the purpose of deciding whether to buy, sell or keep my money safely tucked away in my mattress.

WARNING: The contents hereof shall not be construed or relied upon as investment advice, and the contents herein shall not be relied upon to do anything or refrain from doing anything.

Yesterday, April 27, 2009, SPY showed the following at the end of the day after all trading had been completed yesterday.

Day Chart. Stage 2 with Gravestone Doji. Expectation today was downward price direction.

Hourly Chart. Stage 3, sideways price movement, but downwards if price breaks below 85.50. Targe is about 84.

Half-Hourly Chart. Stage 4, price definitely downwards, target below is 85, not 84 as suggested by Hourly Chart.

Quarter Hour Chart. Stage 3, sideways prices expected. Range bound between high of 87 and low of 85.50. But if price breaks below 85.50 then expect more downward movement.

Inferences. Price will be sideways until break down below 85.50, after which price will go down to 85 and possibly 84; alternatively, if price breaks to the upside, it could go to about 94.50 before taking a rest.

Decision. For today, wait for price to break out of the Range between a high of 87.00 and a low of 85.50, keeping my money safely tucked away in my mattress until that occurs. Meanwhile, look for stocks with similar pattern but greater volatility to short sell when and if SPY breaks below 85.50 or to go long above 87.00.

Results.

On Tuesday, April 28, 2009, SPY opened at around 85, gapping down below yesterday’s range. SPY then went up to about 86, then went sideways between about 86.30 upside and 85.70 downside. SPY briefly poked above the upside to about 86.60 and promptly fell back inside the range, continuing down to poke below the lower end of the range, going as far as 85.50 downside.

Throughout the day, SPY did not trigger the cue for going long so no long position taken.

SPY opened gap down triggering the cue for going short. But instead of going down some more, SPY went up from there back into yesterday’s range.

...cont'd tomorrow...

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How to Profit in Up and Down Markets

2009-04-27T17:52:00.001-04:00

One of the first and most insightful books I have ever read about trading and investing is Stan Weinstein’s book

The main idea in Stan Weinstein’s book is this. According to Stan, there are four stages in any market. Here’s my interpretation of Stan’s advice.

In Stage One, prices go sideways. That is the time to wait with cash safely tucked in your mattress.

In Stage Two, prices go up. That is the time to buy.

In Stage Three, prices go sideways. That is the time to exit longs and wait with cash in hand.

In Stage Four, prices go down. That is the time to short sell.

In this week’s blog, I’ll be writing out my thoughts each day about what the stock market is doing. For that purpose, I’ll use the Exchange Traded Fund SPY as a representative of the market for discussion purposes.

...cont'd tomorrow...

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Number of trades not relevant

2009-04-23T22:55:00.001-04:00

...cont'd from yesterday...

In answer to the criticism desceibed yesterday, I’ll demonstrate that, mathematically, the number of trades is not relevant to the outcome on a day-to-day basis.

Given the mathematical formula for Expectancy and that the Daily Profit/Loss is Expectancy multiplied by Number of Trades, then the factor of Number of Trades is neutralized and made irrelevant.

Expecancy per Trade
= [(Average Win x Percentage Win) – (Average Loss x Percentage Loss)]/Number of Trades

Daily Profit/Loss
=Expectancy Per Trade x Number of Trades

The factor of “Number of Trades” appears in both the Numerator and the Demoninator, which has the effect of cancelling each other out, thereby making that factor not relevant.

I'm taking tomorrow (Friday) off, so I'll be back next week.

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Get real about the number of trades

2009-04-22T20:43:00.001-04:00

...cont'd from yesterday...

Another criticism of the method is that it assumes six trades everyday. That’s not going to happen consistently in real time.

...cont'd tomorrow...

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No 3R's, No Problem

2009-04-21T22:18:00.000-04:00

...cont'd from yesterday...

Here’s some ideas for working around the problem described in yesterday’s blog article.

1. Repeat the same Level (“Day”) until you have accumulated the 3R profits and then use the same formula for calculating how much to increase today’s risk. This allows the model to work, albeit at a slower pace. The annual return will be lower, but will still be very high.

2. Use “Accumulated Profits To Date” since Day One as a substitute for “Yesterday’s Profits” in the formula for calculating how much to increase today’s risk. This allows the model to work at a slower pace, but does involve risking more of the profits.

3. Any day you lose all of yesterday’s profits (namely 3R), stop trading so that you don’t lose more than 3R. Then the next day, just repleat the same Level (“Day”).

...cont'd tomorrow...

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What if you don't get 3R profits everyday?

2009-04-20T23:17:00.000-04:00

Last week’s blog articles were about using the magic of compounding profits to turn a random 50% win-loss system into a huge winning system…all the while using very small risk. Profits were risked aggressively to achieve huge profits in that system, while starting capital was largely safeguarded from exposure to risk of loss.

This week, I’ll explore some of the shortcomings of the system as well as solutions to overcome them.

One shortcoming of the model described last week is that it system assumes that everyday you generate profits of 3 times risk. That in reality will not happen. Instead, what is likely is a random series of profits and losses. For example:
Day One: 3R profits.
Day Two: 1R profits.
Day Three: No profits/no losses.
Day Four: 1R loss.
Day Five: 3R loss.

...cont'd tomorrow...

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Figuring out 3000% per annum profits

2009-04-17T20:35:00.001-04:00

...cont'd from yesterday...

Day Five.

Risk 1D on each trade PLUS one third of yesterday’s profit. In this case that would be
= Risk 1D + (Yesterday’s Profit of 12D/3)
= 5D Risk

Then:

Trade One: lose 5D
Trade Two: lose 5D
Trade Three lose 5D
Trade Four: win 10D
Trade Five: win 10D
Trade Six: win 10D

Net profits for the six trades today is (10 + 10 + 10- 5 -5 -5)D = 15D

Total Net Profits For The Week
Day One + Day Two + Day Three + Day Four + Day Five
= (3 + 6 + 9 + 12 + 15)D
= 42D

Now if 1D is equal to 2% of your account balance, then your Net Profits Per Five Days
= 42 x 2%
= 84% in Five Days

There are about 52 “Five Trading Day Weeks” each year. To be conservative, allow for four day weeks and frequent lengthy holidays so as to round that 52 down to 40 such weeks. Then your annual net profits would be
= 84% x 40
= 3360%

In other words, in one year you have multiplied your starting account balance by more than 30 times. That’s 3000%.

Limitations and Shortcomings

In real time, the foregoing results are only one of many possible outcomes. Here are some reasons.

With any system, the order in which your wins and losses manifest are unknown. You could get six losers in a row or six winners in a row or some other combination of winners and losers instead of the 3 losers-followed-by-3 winners as illustrated.

Six trades is too small a sample to use in a scientific test. However, six trades per day is what was used in the examples. Therefore, the examples do not meet scientific standards.

The system would have to be altered to address for the foregoing and other issues. DO NOT USE the system exactly as given.

These limitations and shortcomings will be further discussed next week along with possible solutions.

...cont'd next week...

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Day four of risking yesterday's profits

2009-04-16T17:52:00.001-04:00

...cont'd from yesterday...

Day Four.

Risk 1D on each trade PLUS one third of yesterday’s profit. In this case that would be
= Risk 1D + (Yesterday’s Profit of 9D/3)
= 4D Risk

Then:

Trade One: lose 4D
Trade Two: lose 4D
Trade Three lose 4D
Trade Four: win 8D
Trade Five: win 8D
Trade Six: win 8D

Net profits for the six trades today is (8 + 8 + 8- 4 -4 -4)D = 12D

...cont'd tomorrow...

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Risk profits aggressively, risk capital conservatively

2009-04-15T21:08:00.001-04:00

...cont'd from yesterday...

Day Three.

Risk 1D on each trade PLUS one third of yesterday’s profit. In this case that would be
= Risk 1D + (Yesterday’s Profit of 6D/3)
= 3D Risk

Then:

Trade One: lose 3D
Trade Two: lose 3D
Trade Three lose 3D
Trade Four: win 6D
Trade Five: win 6D
Trade Six: win 6D

Net profits for the six trades today is (6 + 6 + 6- 3 -3 -3)D = 9D

...cont'd tomorrow...

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Risking yesterday's profits

2009-04-14T23:30:00.000-04:00

...cont'd from yesterday...

Day Two.

Risk 1D on each trade PLUS one third of yesterday’s profit. In this case that would be
= Risk 1D + (Yesterday’s Profit of 3D/3)
= 2D

Then:

Trade One: lose 2D
Trade Two: lose 2D
Trade Three lose 2D
Trade Four: win 4D
Trade Five: win 4D
Trade Six: win 4D

Net profits for the six trades today is (4 +4 + 4 - 2 -2 -2)D = 6D

...cont'd tomorrow...

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3000% per annum with very little risk plus some math

2009-04-13T22:57:00.003-04:00

Do you get advertisements about newsletters that get 100% per annum profits?

In this week’s series of blog articles, I will be writing about a way to get more than thirty times that (i.e. 3000% vs underacheiver's 100%) and with very little risk.

The philosophy behind the system is that you risk your profits aggressively but risk only a tiny portion of your original capital.

The example used involves intraday entries and exits, but you can adapt it to a longer holding period if that is the way you enjoy trading. The method involves a bit of math, but only high school algebra is a prerequisite to understanding the method.

Assume the following:

1. Assume you use a system for entries that gets 50% winners and 50% losers (i.e. a random 50% win/loss system).

2. Assume that of the winners you get 2 times the amount you lose on the losers (i.e. Reward-Risk Ratio is 2 to 1).

3. Assume you do six round trips each day (i.e. buy and sell 6 times each day).

Also, let D=Dollar amount you lose if your Initial Stop is hit on any single trade.

The following would be the results on each of the next five days.

Day One.

Risk 1D on each trade for six trades today.

Trade One: lose 1D
Trade Two: lose 1D
Trade Three lose 1D
Trade Four: win 2D
Trade Five: win 2D
Trade Six: win 2D

Net profits for the six trades today is (2 + 2 + 2 - 1 -1 -1)D = 3D

...cont'd tomorrow...

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Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
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Gone 'till mid-April 2009

2009-03-30T19:16:00.001-04:00

I'm taking a holiday from this blog until mid-April 2009.

Stress relieving holidays

2009-03-27T21:56:00.001-04:00

...cont'd from yesterday...

Taking holidays away from trading is a way to release stress built up from trading. Therefore, I’m taking the next two weeks off from writing about trading and will return mid-April.

...back in mid-April...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Stress vaccine

2009-03-26T22:18:00.001-04:00

...cont'd from yesterday...

Avoiding stressful events and circumstances is one way to avoid stress. But you still need a strategy to prevent your trading from being affected by those events and circumstances. One way is to take a daily does of antidote vaccine before facing the world. My favorite serum is the Sedona Method mentioned at my website.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments