Soultrader

Yes, you are right about that. I would be wrong to say TA does not work completely. I cant quite explain it in words... somehow I dont like it. I think there are better methods to trade the markets. I just think there is no need to follow patterns when all you need to look at is price action. Price and volume pretty much tells you all you need to know. I am sure many traders would disagree.

I used to be a strong advocate of technical analysis but each day my feelings for TA is diminishing. There are some patterns that remain valid but I am starting to think that it has nothing to do with the pattern. An ascending triangle is a pattern where a breakout to the upside is expected. However, to me this is simply price making higher lows and hugging the upper resistance line. Technicians choose to call it a pattern. A bull flag is simply a small sell-off. There is simply more demand than supply. You can just watch volume to know price will probably lift instead of going crazy over a bull flag. A head-n-shoulders pattern is simply price unable to test the previous high. There are sellers rushing in to sell before price can even test the previous peak. Isnt this an automatic bearish signal? Why bother making rules such as "Short the neckline!" So technical analysis is slowly fading in my trading strategy. I am still trying to organize my thoughts on why I do not like TA anymore. But currently at the moment it seems like bunch of BS.

The YM looks fairly bullish ever since the break of the 11400 mark. We could see a lift towards the early May high at 11872. This is another 200 points from where price closed on Friday. The question is what will happen if price breks the early May high. There are a couple ways to estimate the next target level. One method is using fibonacci extension lines. In the second attachment, I took the May high to the July low and drew a couple fib extension lines. The next target would be the 1.272 fib extension ratio at 12158. The target after that would be the 1.382 fib extension ratio at 12273.

I trade intraday only and I scale out of all my trades. The next line of pivot is a common exit target for many pivot point traders. The way I time my entries is based on tape reading and market internals. If price reaches a support pivot, but the market internals are pointing down I will not buy at this pivot. There is a good chance the markets will break this pivot and go lower. In this case I will short the retracement back to the pivot. I do not use pivot points blindly. If a support pivot is right above the previous days low, there is a chance the markets will break the pivot and test the previous days low. Its important to know where all the key levels are to use pivot points successfully. By market internals, I look at the TICK, TRIN, TIKI, Prem, and PC ratio. This gives me the feel of the markets. You dont want to be shorting at every pivot level in a strong market environment.

The value high and value low pivot is from the concept of Market Profile. It has nothing to do with the previous days high or low. If you are not aware of Market Profile, browse through the market profile forum. You will find some good resources there. Also Tradestation does not provide such indicator for market profile. Only third party data vendors provide this. Here is a list of data vendors that provide market profile: http://cbot.com/cbot/pub/page/0,3181,1183,00.html Also if you are interested, Antonio or ant wrote a great indictor for Tradestation that will give you a similar market profile structure. If you are interested check this thread out: http://www.traderslaboratory.com/forums/beginners-forum/307-number-markets-trade-3.html#post777 If you want to learn about market profile, I highly recommend you pick up "Mind over Markets". This is my favorite trading book by far. Also check out the videos: http://www.traderslaboratory.com/forums/market-profile/376-market-profile-education-resources.html If you have any questions, feel free to post it here.

Thank you Study the TICK's and you will be surprised how useful this tool can be.

Hello namstrader, I do have a couple videos posted on tape reading. I will try to make more this week. Here are the links to the vidoes: http://www.traderslaboratory.com/forums/trading-videos-members-only/297-tape-reading-traders-laboratory.html http://www.traderslaboratory.com/forums/trading-videos-members-only/323-tape-reading-part-2-traders-laboratory.html If you have any questions, feel free to post them here.

Trading for a living requires a different kind of mindset than the typical profession. Most professionals believe in being right: there is a cure for every problem. But in the financial markets, fighting the markets because you believe you are right can lead to financial suicide. The markets function in its own set of laws. You must learn to obey it. No trader can apply his own law to the markets. The markets do not care what you think is right or wrong. There is no fairness in trading. One side wins and the other side loses. Hope is a bad sign: Unlike business, there is no negotiating in the markets. The markets will tank or rise regardless of what you want it to do. If the market is declining and you are holding on to a long position, you can not negotiate your way out of it. Your only escape is to liquidate your position and minimize your losses. The moment you hope for the markets to turn, it is usually a good sign to get out. Don't try to be right: Perfectionists have a need to be right. The need to be right is another conflicting belief in the financial markets. The markets do not care what you think. It does what it does. Traders will hold onto a loss small loss thinking the markets will reverse. This usually ends up disastrous as they see their loss become bigger. When the feeling of pain becomes too overwhelming they will liquidate their position. Are you trying to be right? Or are you trying to make money? Control your emotions: Do not expect to find fairness in the markets. Whether you are euphoric or in pain, the markets do not care. The futures markets is a zero-sum game. One traders pain is another traders feeling of accomplishment. Learn to control your emotions in both losses and wins. Traders trade recklessly after a loss and also after a big win. "It is easier to make money than to keep it." The laws of the financial markets and the rules that govern trading must be followed. Those who have done well for themselves in other professions find this concept hard to grasp. This is because they are used to a different set of laws in which they have complete influence over. Breaking your trading rules can cost you alot of money. Trading requires discipline and commitment. You must follow your rules day in and day out. Some examples of rule breaking are: risking more than your defined risk parameters, removing your initial stop-loss, entering without following your setups, and not exiting when the markets tell you are wrong. Play by the rules or get played by the markets.

I don't think traders are in love with their ideas. This would make them feel like a genious... and in trading the moment you think you know everything is the moment you have become a fool. Good traders all have a distinct style of trading that they have come up with over their trading career. They have worked hard to develop this style and have tested their methodology and trading setups. Thus, their unique trading style gives them an edge over others. Trading style is like a fingerprint. No two are alike. Good traders have adjusted their styles to fit their personality. The most important is that you find your style as well and become an expert in it. Too many traders search for the Holy Grail jumping from one methodolog to another without mastering one method. Study from the good traders and take what fits you. Then adjust it accordingly, implement new ideas..... and that becomes your style. Also, price based traders like myself are not fond of technical indicators. Like the name states, they are indicators. My style of trading is discretionary but with a systematic approach. Pivots work well in any market. You just have to test it out, take some data, and see if its suitable. Don't rely on them blindly though. Learning market language and internals is important to your trading strategies.

You will either love this book or hate it. This book is more of Victor's personal blog writing about his early days as a squash player to his victories as a speculator. One might find his ego a bit annoying. The author jumps from topic to topic, some relavant to speculation and some not. Overall there is alot of good trading wisdom. This book is not meant to be read to learn about trading strategies or market tactics. What you will learn is Victor Niederhoffer's autobiography. However, I have to admit he is one brilliant guy and alot of the tips and advices in the book is priceless. If you are looking to invest in the markets, read this book. If you are looking for a good trading story to read pick this book up as well. I wouldnt quite say this is a modern day Reminiscence of a Stock Operator but it is definitely a book one should read.

I actually like the idea of a volume line chart and will add it on my charts to see how it goes. This octant concept is new to me and I have trouble grasping. I may need to look into the Cisco-Futures course. After reading the posts here, I spent some time thinking about breakout patterns and strategies to play them before they happen. One problem I have relying on volume when playing breakouts is that the breakout bar (tall green candle) occurs on high volume. Wouldn't this be a late entry because you are entering after a volume confirmation? The concept of having a long bias if price is trading above the HVN is a similar concept when using pivot points. Traders hold a bias towards the long side when price is above the daily pivot or PP. Some traders base their pivot on the opening price as well. I do feel comfortable applying time into a breakout strategy. If price is hugging the upper or lower bracket for some time, this could be a good signal for a breakout. However, I will need to create a stricter rule for this setup. Some people use a combination of bollinger bands and keltner channels to anticipate breakouts as well. This topic has become fairly interesting... and I will try to research more on breakout patterns. This is a trading setup that can offer a tremendous edge when mastered because by getting in early, you can completely eliminate risk at the moment of the breakout. The first breakout bar tend to be quick and fast. Therefore, I would like to be in the trade beforehand to cut a portion of my position loose at this first bar.

I use trading levels combined with market understanding through market profiel. I would like to ask a few questions regarding your methods. By averaging in, do you mean adding to your position? Also what do you mean by stop & reverse? Thank you.

Thank you ant.. very nice post. Volume divergences is a very powerful signal. I was taught this method early in my trading career from a trading buddy of mine. I have two questions: is the volume indicator just a line chart of volume? I have never quite seen volume plotted that way but it makes alot of sense since I use a line on close TICK chart. Also, regarding the stop loss placement I am still having some difficulties where you would actually place the stop. Lets say you were to buy right before the upper bracket limit breakout around 11314 on 9/12, you would use a 1.5pt stop from your entry? The concept of time and breakout is something I use as well. Whenever I see price hugging the upper extreme bracket, I anticipate a breakout. I do not remember where I learned this concept but I picked it up about 2 years ago.

The pivot points can used for intraday, weekly, and even monthly charts. Simply take the high, low, and close and use the formula to get daily pivots. It does not matter what time frame charts you use. I usually plot all the daily, weekly, and monthly pivots on my 233 TICK chart. One quick note though.... the basic concept and formulas of pivot points are just starters. In order to use them successfully there are many other information that you need to understand. For example, in my article of "Advanced Pivot Point Trading" I mention how I use clusters. I also adjust pivots manually after plotting them. I will go over the charts and figure out the significant pivots from the less significant ones. I also use market understanding and market internals with pivots. This gives me an edge instead of just using pivots which alot of people follow. Also, I trade index futures. Different markets require different strategies so you will need to study the methodology to see if its works or not. Remeber, I do not trade a mechanical system. All trades are done discretionary so you need to have a "feel" of the market language.

Here is a quick link to pivot point formulas: http://www.traderslaboratory.com/forums/derivatives/35-pivot-point-formulas.html?highlight=pivot+points If you want more info, I write about pivot points 80% of the time in my articles or setups. Use the search box in the left hand navigation and input "pivot points." You should get a list of threads or videos on pivots. As far as I know you can purchase commercial pivot point indicators. Most trading platforms should also come with it. But since I use my own custom pivots, I plot everything manually everyday. Here is an article I wrote about my methodology using pivots: http://www.traderslaboratory.com/forums/trading-articles/351-advanced-pivot-point-trading.html This is no exact science but I am able to use it successfully because I understand market internals and market concept. You need to understand the bigger picture before you can narrow it down to your entry points. PS: Its always good to ask questions, so feel free to keep asking

How is your current trainer helping you out? Does he stand by you when you trade? Is he teaching you any trading techniques? My advice for you is to not get absorbed too much with Level 2. Once you are certain of your entry point, you can narrow it down to Level 2. Other than that, it should be your last resort. What you need to do is study different methodologies and strategies and find something that fits your personality. Are you familiar with pivots, fibs, market profile, market internals, etc..? Try to expand your mind to the different techniques available to trade the markets. Pick one and work on it. Forget indicators. They are useless. My methodology is based on pure price action using market profile and pivots. I use market internals as well to gauge market strength or weakness. This method may fit you or may not. This is up to you to decide. I know of traders who trade price action based on moving average clusters and fibonacci clusters. Traders have their own preference of style but all successful traders have found a style that they feel comfortable with. They have picked one style, worked on it, and have become experts at it. Tape reading is an excellent skill to have but unless you are a pure scalper you need to learn other methods. Combine tape reading with different strategies and you will have an tremendous edge over other traders. Do you know what kind of trader you are? Are you aware of your style of trading?

awhoa99, You probably are getting into the stock at a later point than most professionals. You wrote that you may be chasing profits which you probably are. And this is due to the fact that you trade using lagging indicators. I am sure you read alot of articles convincing you to trade with indicators on multiple time frames. But this is a strategy that all new traders use. Professionals rely on price action only. Indicators only exist to indicate or confirm price action. Do not base your trading decision on indicators. Instead use it as a tool of confirmation. Learn to read price action. Then until you get used to it you can rely on indicators to confirm your decision. The MACD is not a great tool to use when you are trying to trade on a 1,5 minute chart. In my opinion it is way too slow. You are still very new to trading. Know beforehand that trading can take a lifetime to master and at least 1-3 years to trade profitably. Your first year should be for you to craft and perfect your skill. I am not saying you need to lose this year.... but you need to spend time developing your trading style. So far, it seems like you have only one trading method based on the moving average and MACD. I suggest you unlearn and learn. Hope this helps.

Understanding where to place your stops is an important skill in trading. Many new traders do not place importance on this and will usually place stops at the most obvious locations. New traders also like to place stops at a fixed amount no matter what the setup. Each setup requires a different risk parameter. I base my stops according to my entry. Since I am a pivot based trader, alll my stops will be placed above or below the pivot line. However, ff you entry is based on a indicator signal your stop should be based when your indicator proves you wrong. One mistake I see with new traders is that they will place their stop 1-2 S&P points after a buy/sell signal. If you entry was not based on price action, you are not using a smart stop. Price can drop to your stop loss level without your indicators confirming it. This is a sure way to lose. Tape readers are able to use a tighter stop. This is because they clearly see short-term support/resistance levels on the tape. Most new traders do not understand tape reading. This skill takes months to years to learn. Yet, new traders attempt to scalp placing 30-40 roundtrips a day. This is not the way to learn successful trading. Trailing stops Once a trade moves in your favor, it is wise to move stops to protect profits. However, trailing stops by a fixed percentage or points is not the greatest way to manage your position. I use what are called "smart stops". As a trade moves in my favor, my rule for stop placement is automatic. After 10 dow mini points, I move my stop to breakeven. I will also scale out half at +10 and a quarter at +20. The last quarter position is the portion I manage. When price breaks a pivot line, I will move my stop below the pivot. All of my stops are based on price levels. Once price breaks that level, I will move my stop. I also combine fibonacci levels and pivots to find good stop placement levels. This gives room for the trade to work out. Wins must be greater than losses. Managing a winning position is crucial in trading success. Good luck and best of trading. Regards, James Lee

"There are men who will take no initiative on their own responsibility, who will undertake nothing without consulting others as to the feasibility of the schemes and plans they have in view. When a man puts more confidence in another than in himself he is bound to lose all will power and become a mere dependent, awaiting orders as to the course of action. It is impossible for such a man to get along in the world and make a success of his own life. When opportunity comes along he is afraid to seize it without asking his neighbor's opinion." Certainly one of my favorite teachers, any book written by Wyckoff is a must read. His teachings are based on a simple law of supply and demand. Every piece of market knowledge you absorb from him is pure market information. Originally published in 1924, his trading wisdom still holds till this day. There are a couple reasons why I love reading about stock market operators back in the early 1900's, but one biggest reason is that they are the original market philosophers. Every modern day teachings contains influences from all our past teachers. This book is not about trading strategies or setups. What Wyckoff does is explain good common sense that can help save the amateur trader/investor thousands of dollars. His teachings are truely an inspiration for many traders today.

Hi awhoa99, Couple of things I would like to point out. $1300 is not alot of money to be losing as a beginner trader. But just because you are losing less than the average new trader does not mean you are trading better. I assume commision is taking a big chunk out of you since you make 30-40 trades a day. This is approximately 15-20 roundtrips? Or are you making 30-40 roundtrips? Regardless I think you are overtrading as a new trader. If you are scalping than 30-40 roundtrips is understandable but I do not recommend any new trader to begin scalping. Couple of things you need to keep in mind. How you been demo/paper trading? Do you have a trading strategy that fits youre style? Do you have a methodology that works? Trading because the stochastics pointed up or the RSI is up is a sure way to lose. You need to find a strategy that you feel comfortable with and that represents you. For example, my core methodology is based on market profile and pivot points. If you are unsure what your trading method is, you probably do not have one yet. It is crucial to study and find one first. Other examples could be: fib trader, Gann trader, etc... But make sure you become an expert in one method. Linda Raschke said it best. "You can make a living trading just one setup." There is no need to trade as much as you do. Trading should be boring and not exciting. Most of the time should be spent waiting for the right opportunity. I make anywhere from 1-5 roundtrips a day. But I trade in a sniper mode waiting for high probability opportunities. Remember, trading is a game of probabilities. Also, what stocks do you trade? What is your average size positon? Do you use stops? I would like to know a little more about how you control risk. You mentioned you keep your losses pretty tight but maybe that is causing a lot of losses by being stopped out? Regards, Soultrader

My core methodology is based on pivot points and market profile. But if there was one trade I would take 100%, it is fading the R3 or S3 pivot line. It is not often that prices do reach these extreme levels but a trader can make a living just by fading at these levels. Why? Prices tend to stay within the S3 and R3 pivot over 80% of the time. This is a high probability trade. Trading is about probabilities. You find certain setups that give you an edge and you exploit it. This is the reason why I always fade the S3 or R3 pivot. In this chart, the markets gaped up 40 points above value and above R2. The markets then lifted to test the R3 pivot offering a good short opportunity. Notice price declined for approximately 40-45 points to the R2 pivot.

Author: Sue Jan If you trade, you may have heard of options. Trading options carries high risk and has many disadvantages for beginners and even seasoned traders. Therefore, it is wise to be cautious if you are considering options trading. An option is a contract between two parties giving the taker or buyer the right, but not the obligation, to buy or sell shares at a specific price on or before a specific date. To have this right, the taker pays a premium to the writer or seller of the contract. There are two types of options available: call options and put options. Call options give the taker the right but not the obligation to buy the shares at a specific price on or before a specific date. The put options give the taker the right but not the obligation to sell the shares at a specific price on or before a specific date. The taker of a put is only required to deliver the underlying shares if they exercise option. There are a few advantages in option trading: Put options allow you to hedge against a possible fall in the price of the shares you hold. You can consider taking it out as insurance against a loss in the share price. By taking a call option, the purchase price for the shares is locked in. This gives the call option holder until the expiry date to decide whether he or she will or will not buy the shares. This is also applicable to the taker; he or she has to decide whether or not to sell the shares before the deadline. The ease of trading in and out of an option position makes it possible to trade options with no intention of ever exercising them. If you expect the market to rise, you may want to buy call options, and if you are expecting a fall in the market, you may decide to buy put options. This means that you can sell the option prior to the expiry date to take a profit or limit a loss. Options also allow you to build a diversified portfolio for a lower initial outlay than purchasing shares directly. The income generation for options can get you profits over dividends by writing call options against your shares. By writing an option, you receive the option premium up front. While you get to keep the option premium, it is possible that you could be exercised against and have to deliver your shares to the taker at the exercise price. This strategy uses stock bought on margin. By combining different options, or stocks with options, you can create a wide range of strategies. You can earn extra income by writing options against shares you already own or are purchasing. This is one of the simplest and most rewarding strategies. Using options gives you time to decide. Taking a call option can give you time to decide if you want to buy shares. You pay the premium, which is only a fraction of the price of the underlying shares. The option then locks in a buying price for the shares if you decide to exercise. You then have until the expiry date of the option to decide if you want to buy the shares. This is the same as to the put option. Keep in mind that, same as any other trades do not trade what you cannot afford to lose. About The Author: For more on Option Trading, visit Susan's sites at Option trading -> Online Option Trading Susan also enjoys writing on a wide range of topics at Health and Fitness Hub

Author: Robert Valentine One size usually doesn't "fit-all" and especially not when it comes to the stock market. Choosing the right sized company or fund can be a tricky prospect. "How are the different levels defined?" and "What are the pros and cons of each type?" are two major questions many people have. When dealing with market capitalization and deciding which size is right, it can be a tough choice, so here's an overview of all three major categories of market capitalization. Small Caps Small cap stocks are companies who typically have a small market capitalization. (Usually somewhere between $300 million and $2 billion, but definitions vary). Market capitalization, simply put, is the price of the company's stock, multiplied by the number of shares outstanding. It's basically the value the market places on a company. With the potential for growth, comes the potential for risk as well. All portfolios should be properly diversified to help reduce overall portfolio risk. Investing is small cap stocks comes with an additional set of risks unique to these types of investments, consequently any money you invest in small caps should be money you're prepared to expose to these risks. Small cap stocks are also more difficult to research and choose precisely because of their obscurity. Mid Caps The definition of a mid cap varies greatly depending upon who you ask. Some define mid caps as being companies with a market capitalization between $1.5 billion and $5 billion. Others bump that number up a bit and define them being between $2 billion and $10 billion. In the end, it depends on exactly who you ask. Mid caps are generally thought of as a happy-medium between the growth of a small cap, and some of the stability of a large cap. Large Caps Large caps also vary in range, depending on who's answering. In many cases, large caps, or "blue-chip" stocks, are stocks with a market capitalization between $8 billion and $100-200 billion. This range includes some of the giants. With the larger cap companies, you get more proven stability and less volatility. But in many cases, that means less glamorous returns and a smaller chance for growth. As with the other two levels of capitalization, it's not a one-size fits all. Some investors want the proven reliability of the big names. Others value the large caps because they've already experienced their growing pains, and are now established. Many large cap companies also do a great deal of work around the world, which means an added flavor of global diversification. Numerous developing countries are seeing the birth of a middle-class (China, Brazil, etc.) and many large U.S. companies are seizing the day and expanding their reach. Each type of market capitalization category comes with its own unique risks and rewards. Trying to balance the risks and rewards of all of the assets in your portfolio can be tricky. Consulting with a financial professional can help you identify which investments may be appropriate for your situation. About the author: Robert Valentine is a well-known expert in the matters concerning investors. His articles on financial planning matters that concern investors have been published by several publications throughout the United States. Please visit his website, The Money Alert to view his column.

I tend to enjoy tape reading books. There is always something you can learn about them. Orline Foster gets straight to the point. He talks about the speed of transactions, block prints of volume, and support and resistance points on the tape. He also talks about volume and price analysis that reflects the teachings of Wyckoff. If you are a student of Wyckoff like myself, you may find some things repetitive. However, if you are unfamiliar with tape reading this is a must read. There is alot of insightful information available throughout the book. Chapter 9, written by Herbert Leisner, offers good information especially for day traders.

As you may have noticed from the poor rating I did not enjoy this book. In fact, this is more of a pamphlet than a book. At $29 with 69 pages of mostly charts, this is way overpriced. The only strategy the author talks about is using stochastics on 3 different time frames. When all stochastics point in the same direction, this is the trading signal. If this strategy worked, every trader would make money. The only trading wisdom that is worth noting is using indicators in multiple time frames for confirmation. Unfortunately this is not my method. I can not quite recommend it. So hence my rating.