Monday, November 15, 2010
Trading With A Plan....
So what are these elements of planning? The ideal trade identifies:
1) What you’re trading – Why are you selecting one instrument to trade (one stock, one index) versus others? Which instruments maximize reward relative to risk?
2) How much you’re trading – How much of your capital are you going to allocate to the trade idea versus other ideas?
3) Why you’re trading – What is the rationale for the trade? Why does the trade idea provide you with an “edge”?
4) What will take you out of the trade – What would lead you to determine that your trade idea is wrong? What would tell you that the trade has reached its profit potential?
5) Where you will enter the trade – Given the criteria that would take you out of the trade, where will you execute your idea to maximize the reward you’ll obtain relative to the risk you’ll be taking?
6) How you will manage the trade – What would have to happen to convince you to add to the trade, scale out of it, and/or tighten your stop loss?
A beginning trader will take time to answer these questions, much as a new driver will need time to properly steer and brake a car. With experience, however, planning can occur very quickly, as much of a trader’s homework is accomplished before the market opens. For instance, before the open, I already have identified the short- and intermediate-term trend of the market; pivot points that will serve as profit targets; and volatility that will guide my position sizing. From there, much of the trade is a function of pattern recognition and execution–seeing selling or buying dry up in a rising or falling market and entering the trade at a level in which I’ll make more by hitting my target than by hitting my stop.
A good trade is not necessarily a profitable one: even the best planning is fallible. Rather, good trading is defined in terms of intentionality: having a constructive, valid purpose and sticking to it. When emotional and physical factors–anxiety, frustration, fatigue–affect decision making, they generally do so by impairing intentionality. Under the sway of an altered cognitive, emotional, or physical state, we become more reactive, less intentional. One of the most effective steps we can take when we’re no longer in the “zone” of immersed concentration is to double down on trade planning, taking the next few trades only after writing down or talking aloud the elements listed above.
Training yourself to become more intentional during periods of heightened arousal or fatigue is an excellent strategy for building emotional resilience–and preventing trading losses from becoming trading slumps.
Personal strengths and Weakness...
We all have different personal strengths and weakness. Many people focus on transforming a weakness into a strength. While that is admirable, the reality is that it’s not always possible.
Although we can’t always build or change every weakness into strength, the good news is that we can always leverage our strengths, if we know how. And that is mighty powerful. It’s so powerful that if you leverage the right strengths in the right way they can do an excellent job of not just counter-balancing your weaknesses, but can propel you so far ahead that those weaknesses pale in comparison.
One of the most powerful things you can do for yourself is identifying your natural strengths and then work to see how you can build on them.
We all have different personal strengths, and knowing how to leverage them is an important part of successful trading. A major consideration here is that you try to identify and leverage your own personal strengths, and not simply copy someone else’s. All too often I see struggling traders running from one style to another style whenever they see someone else’s success. One of the primary reasons why copying someone else’s trading style doesn’t always pay off in trading is because of different personal strengths.
HnS How the EW theory confirms its success or failure...
I just came across this one page word document. It's a puzzle to me as I'm not at all familiar with EW and the counts. Those of you interested may provide the feedback so that novices like me can have EW feast.
As far as I could understand from these two attached pics below, for a proper HnS reversal pattern, wave 4 should be LS and wave 5 should be the H, then wave b of the correction fits in the correct context for a HnS reversal. In the second pic, wave b is taken as H and this fails the HnS pattern. But to differentiate between the wave 5 H and wave b H is out of my league.
Credit to the author who ever he/she is.
Cheers!
Babu Kothandaraman
Head and Shoulders How the EW theory confirms its success or failure
The famous "head and shoulders" pattern can be discerned in a normal Elliott top (see Figure 7-3), while a head and shoulders pattern that "doesn't work out" might involve an expanded flat correction under Elliott (see Figure 7-4). Note that in both patterns, the decreasing volume that usually accompanies a head and shoulders formation is a characteristic fully compatible with the Wave Principle. In Figure 7-3, wave 3 will have the heaviest volume, wave 5 somewhat lighter, and wave b usually lighter still when the wave is of Intermediate degree or lower. In Figure 7-4, the impulse wave will have the highest volume, wave b usually somewhat less, and wave four of c the least.
Key Events during the week....
Key events during the week |
India |
| v India’s Industrial production (IIP) for September 2010 is at 4.4% versus 8.2%YoY v Food inflation declined for the 4th week consecutively to 12.30% from October 30 v India's foreign exchange reserves rose to $300.214 billion as on Nov. 5 v India's apparel exports returned to a growth trajectory expanding year-on-year by 2.5% to US$743mn in September v West Bengal government increased the VAT rate on luxury items by 1%, from 12.5% to 13.5% for additional resource mobilization |
| United States of America |
| v US Job openings dropped by 163,000 to 2.93 million in September v US Jobless claims declined by 24,000 to 435,000 in the week ended Nov. 6 v US government posted a smaller budget deficit of $140.4 billion in October v US consumers’ index improved to 69 from of 67.7 in October v US wholesalers Inventories climbed 1.5% in September |
| Europe |
| v Europe’s economic grew 0.4% in the 3rd quarter v U.K. manufacturing rose 0.3% in August v German economic growth slowed & rose 0.7% in the 3rd quarter v France’s economy grew 0.4% in the 3rd quarter v Italian industrial output plunged 2.1% in September |
| Asia Pack |
| v People’s Bank of China ordered an increase in bank reserve requirements by 50 basis points v China inflation rose to 5% in October v China's trade surplus widened to US$27.15bn for the month of October v Moody’s Investors Service raised China’s foreign and local debt rating to "Aa3" from "A1" v Japan’s Consumer confidence in Japan fell to 41.1 points in October v Japan's current-account surplus rose to $24.1bn in September |
Economic Release calendar as per IST
(01/11/10 to 06/11/10)
| Country | Economic Data | Exp-ected | Prior | Due date | Re- Marks |
| JN | GDP (QoQ) | 0.60% | 0.40% | 15/11 | Inc |
| JN | Capacity Utilization (MoM) | - - | -0.90% | 15/11 | NA |
| JN | Ind.Prod. (MoM) | - - | -1.90% | 15/11 | Na |
| IN | Mthly WPI YoY% | 8.50% | 8.62% | 15/11 | Dec |
| US | Advance Retail Sales | 0.70% | 0.60% | 15/11 | Inc |
| US | Empire Manuf. | 13 | 15.73 | 15/11 | Dec |
| US | Business Inventories | 0.60% | 0.60% | 15/11 | Unc |
| JN | Machine Tool Orders (YoY) | - - | 70.90% | 16/11 | Na |
| US | Ind. Prod. | 0.30% | -0.20% | 16/11 | Inc |
| UK | BOE Minutes | -- | -- | 17/11 | Na |
| US | Housing Starts | 600K | 610K | 17/11 | Dec |
| US | Building Permits | 570K | 539K | 17/11 | Inc |
| RU | Ind. Prod. R MoM | 1.70% | 1.50% | 17/11 | Inc |
| US | Initial Jobless Claims | 445K | 435K | 18/11 | Inc |
| US | Philadelphia Fed | 5 | 1 | 18/11 | Inc |
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