As a swing trader, decide to be a bull or a bear on the weeklies – execute on the dailies. As a day-trader, decide to be a bull or a bear on a 25-minute chart, execute on a 5-minute chart. Kerry, by the way, prefers a different pair – he makes his strategic decisions on 39-minute charts, executes on 8-minute charts (notice that he uses the same ratio – about 5 to 1).Look at it this way: you see an attractive girl in a club and want to invite her to dance. Take a look at the bigger picture: is she at the club with a bunch of girlfriends or is there a big mean guy with a facial tattoo right behind her, staring at you? Do yourself a favor and make a strategic decision based on the big picture before zooming in on your attractive trade!Spend some time looking at many trades featured in our A&K Journal on the website – and you will see multiple examples of this strategy. Remember: make a strategic decision on the longer-term chart, tactical on the shorter-term chart, and keep the ratio between them at about five to one.Alex
The market is like an ocean, with its beaches, currents and predators. To navigate, you must know your ship (your trading tools), the range of weather conditions, and the waters (your stocks). I like to work with a small number of markets, I know well and approach each trade in a disciplined manner:
There are three basic main styles:1. Trend Following (Position Trading)2. Swing Trading3. Day TradingWithin these styles there are sub styles of trading, counter trend trading, momentum trading, low volatility style, and scalping.I would say the most difficult style is day trading. Day trading can and will have the most emotional turmoil of all the trading and why I believe it is the most difficult style. It requires intense focus and processing of information to make decisions very quickly. One cannot stop to think about what they will do, they must know what they will do the instant they see the action and the discipline to act must be solid. There is very little room for error.Trend following (Position Trading) is likely the easiest of the styles but it is the most boring and many find it difficult to have the patience to wait for trends to form and the patience to sit in trends while they work. It is also difficult to sit thru the drawdowns while trends pull back and one waits to see if the trend will end.Swing trading is the most popular and personally is my favorite style. I would not say it is easy to master, nothing in trading is. It does tend interest most traders as you do not need to make lightning fast decisions and you can take time in the evening to set up trade plans. It can be rewarding quicker than trend following but not necessary to make lightning fast decisions that is required in day trading. I would say the difficult part is the time it takes to sort thru and find reasonable trade set ups. The danger is we get caught trading lots of mediocre trades and churn our accounts.I prefer a mix of swing trading partial position and trend following the balance. I find it works and suits my personality well. I do day trade when the action becomes too volatile and we do not have intermediate bullish cycles in place that is more conducive to my personal style. Not all styles are conducive in all market conditions. There are times our style of trading and the particular system we trade will have us on the sidelines in cash, which can be the most difficult position to hold.For the past several weeks I have been in day trade mode. This does not suggest I sit in front of the computer each day and crank out 10 – 30 trades every day. I use basically the same strategies just on smaller time frames. A the volatility rises we can get the same movement in markets in hours that could take days to occur when volatility is low and bullish cycles exist. This helps control risk by eliminating holding lots of positions overnight. During higher volatile markets we experience many more knee jerk reactions and larger gaps overnight. These gaps can erase existing profits fast or accumulate losses quickly.
Last Sunday I wrote “What if you could increase your
What is the best way to determine trends and analyze the current trend condition?The basic structure of trends is prices making higher lows within an uptrend and lower highs within a downtrend. When looking at charts with all our indicators and price bars showing the intraday highs and lows we can lose sight of a basic trend structure.Let’s take a look at a chart of closing prices only, but smoothing out the price fluctuations using a simple 3 period moving average.
How much weight does fundamental analysis have in a medium term trade?The shorter the time frame, the less irrelevant fundamentals are.
European conference
No sooner do we discover a new apparently good method for trading, when it becomes obsolete and something new is needed. I was struck by how many Spikers and members were long at the beginning of last week. I did not enter a pick last week because I could not figure out what I wanted to do by the Sunday deadline. Somewhere Alex has written that “standing by” is a wonderful advantage we individual traders have over institutional traders.It’s easier said than done. One needs to learn to enjoy just sitting at the screen, relaxing and watching it all unfold without a penny in there (for the moment).I have found that the strong emotion of anxiety that one is going to miss a move is usually a prelude to a bad trade. That was why I did not enter a full position last Thursday in TVIX when it took off for the races the moment the market opened. In fact I bought only 10 shares premarket when I saw it was up 9% (it eventually closed up over 40% and added another
The folks in Washington continuing to try and arrive at some conclusion how the debt ceiling issues should be resolved. Currently the powers to be are scrambling to finalize a debt deal. The futures market will open soon as well as foreign markets. Until this deal is done the uncertainty has and will weigh on the markets. Once a deal is done a relief rally is likely to ensue. Once the deal is done the market will focus more if the economic slowdown continues.If a debt deal gets done and the markets do encounter a relief rally will it be a rally to sell into or a rally to buy for the next intermediate bullish cycle?Many traders, investors and Institutions follow the 50 and 200 day moving averages. The SP500 tested its 200MA Friday, while the DOW and NASDAQ are very near its 200 MA levels.
While working on SpikeSpeak, I stepped out for a bite to eat. As I walked in the shade on 28th Street, a car pulled over, its driver rolled down the window and started speaking to me in Italian. From what little I understood, he was asking for directions to FDR Drive, a major highway nearby. I answered him in Spanish that he had to turn left on Third Avenue, right on 34th Street, and he’d be there. He was profusely grateful, and somehow his English seemed to improve. He told me it was his first time in New York, that he just finished a fashion show at the Javits center (a major local arena), and gave me his business card. He said he was representing Armani and happened to have a few pieces in the back of his car he wanted to get rid of before flying home.Somehow, being offered cheap Armani goods from a car on a side street, coupled with his rapidly improving English seemed a bit too good to be true. I waved him off and walked. After turning the corner on Third Avenue I stepped into a shop, turned around and looked at the intersection through the window. The light changed, and my new friend’s car drove straight through the intersection, never turning on the avenue in the direction of the FDR, about which he had stopped to ask. Having avoided his hook, I walked to to a very pleasant plate of sushi, sharing a beer with the sushi chef.This was just like the market: when something seems too good to be true, it usually is a fake. When an indicator rings a quiet alarm, like that rapidly changing accent, we better listen. Avoid wishful thinking. The world is full of goodness, but it does not usually take shape of a stranger offering discounted goods. Wishing to believe that we are special makes us ignore warning signs – in life in general and in the markets in particular.