thalestrader

LM is a runner - I can never tell which will run and which will flame out and fizzle.

FDO closed @ 32.63 +$0.43 ISRG closed @ 159.02 +$0.42 Still long LM from 20.42, current price 21.44, current stop loss 20.94, soon to be moved up to 21.17

Well played, B.R., well played!

Hi Folks, This is my first day back since before Memorial Day. Three trades so far: Long FDO @ 32.20 Long LM @ 20.42 Long ISRG @ 158.60 And I just got long ISRG. I ISRG gave me a lot of time to wait for it, so I was took a snap of the chart to show what I was looking at, as well as an update. It is difficult for me to post while trading but I wanted to try to get some close to real time trades posted to show better what I am seeing when I place my bets. Best Wishes, Thales

Hi Abe, Have you heard anything concerning your problem? Thank you, Thales

I agree. I've been trading TTT for fair amount of time. I have always found that most folks who fail to understand Taylor fail largely because they are fixated on the cycle, rather than on how Taylor uses where price is in relation to Support and Resistance. For example, I have rarely, if ever, read anyone here mention the "objective Point," a concept Taylor uses without which you will not succeed with Taylor's method, at least not as Taylor himself understood his own teachings. It is precisely this failure to appreciate Taylor's understanding of trading price action that leads folks to assume that the cycle needs repeatedly to be "re-set" or "adjusted" as George Angell famously (or infamously) suggested is necessary. If one were instead to view the cycle not as a set of strict trading rules, but rather as Taylor intended it, i.e. as a critical apparatus through which to view and interpret price action around significant support and resistance levels, i.e. Taylor's objective points, then one would also no doubt understand that for Taylor it is not nearly so simple as buying on Buy Day, selling on Selling Day, and shorting on Short Sale Day. Indeed, a close reading of Taylor will reveal that Taylor clearly (insofar as he can be accused of clarity at all) taught that the trader will at times buy on a Short Sale day and Sell Short on a Buy Day, but unlike George Angell and more than a few forum posters, both here at TL and elsewhere, those circumstances do not override the trading cycle. For example, let me quote Taylor concerning just such circumstances: 1) "In the case of a Higher Buying Day Low, the stock or future shows support causing a rally and a strong close on the Short Sale Day - the decline from this rally, next day, on the Buying Day, fails to sell down to the previous low - the Short Sale Day Low - this rally on the Short Sale day is an indication of a Higher Buy Day Bottom" and 2) "A Short Sale put out at the High of a Buying Day made FIRSTon the penetration of the Short Sale Day High, should be covered on the reaction ... for short selling on the Buying Day High made FIRST is generally a weak short sale." To really benefit from Taylor's method, one needs to see that the cycle, in and of itself, is useless without an accute awareness of price - especially where price is in relation to the open, and more importantly, where price is in relation to immediately prior highs and prior lows and previous closes. After all, what does Taylor keep in his book but a record of PRICE high, PRICE low, and the closing PRICE, and whether PRICE made its high or low first. The primary data from which all else in his Book (meaning the hand written Book he kept for trading and not the book he published about his method) consists of (Surprise! Surpise!) volume, opening price, high price, low price, and closing price. As is the case with all indicators, methods, systems, etc. anything that may be useful to making trading decisions will be derived from price. The true value and genius of Taylor's method, properly applied, is that it focuses the trader on specific price levels and price action, i.e. how price behaves around those levels, and how to anticipate in which direction the path of least resistance lay. As an aside, when Ed Dobson chose to publish Taylor's method, he did no one anywhere any favors by not only publishing Angell's and Raschke's interpretations of the method in the same volume, but then he went farther by suggesting in the publisher's forward that readers skip reading Taylor first, if not altogether, and simply read Angell's and Raschke's essays! What a mistake! This is, no doubt, one reason why most traders who approach Taylor become enamored of the trading cycle, and ignore price action, support and resistance, completly ignoring Taylor's objective points, as Angell in particular focuses squarely on the trading cycle in his essay on Taylor's method. Of course, another reason so many focus on the cycle and not the whole of Taylor's discussion on trading price action is that traders always want the easy money. How nice would it be if it really were so simple as buying on a buy day, holding overnight and selling soon after the open on the selling day for a nice profit, and then go short on the short sale day, cover at the close, again for a nice profit, and then start it all over again the next day by again going long on the subsequent buy day! If only trading were that easy! Angell was the one who first suggested that cycles need to be shifted from time to time. Let us all remember that Angell was selling a primitive computer software program using the Taylor method (dubbed LSS by Angell) and as Taylor's method is a discretionary method, Angell's project to automate trading signals from Taylor necessarily broke down. Angell could only make his program marginally salable by allowing the program to periodically re-set its cycle. The Book Method, you see, is meant for human intelligence, not artificial intelligence. As a further aside, anyone interested can quickly verify that Angell was fined by the CFTC/NFA (http://www.cftc.gov/opa/enf02/opa4628-02.htm) for his sale of and claims made on behalf of his LSS method and his computerized trading system. Why anyone would depend upon an essay that was originally intended as a piece of sales literature for what amounted to a faulty and fraudulent computer trading system scheme for his or her understanding of Taylor's (a real trader, by the way) method is beyond me. But those who insist that the cycle is anything other than a three day affair, or that it otherwise is in constant need of periodic adjustment is doing preciely that - interpreting Taylor's Trading Method through the lens of a fraud and a propagandist. In the end, it is always all about price. If its not about price, then it is about fear, greed, and EGO. Best Wishes, Thales

Hi Folks, Price action around trendlines and prior highs/lows often offer decent trading opportunities. Best Wishes, Thales

I would say that your largest problem is that you take 3 point losers and 2 tick winners. There is nothing wrong with letting your initial stop do what it is suppossed to do, which is let it take you out of the trade if you are wrong before a loss becomes ruinous. The problem is not that you take the 3 point loser, but that you don't stick around long enough for the profitable trade to run for that 14 point gain! If you are thinking that the problem is not cutting your trade short prior to you stop is the problem, then you just risk compounding your current problem. Having said that, I do subscribe to the idea that every trade starts as a scalp, i.e. I will from time to time take an early profit or an early loss if I feel that price action isn't behaving as I had anticipated that it would. But, most of the time, I am comfortable letting my inital stop stand, and moving it as subsequent price action develops natural stops. Also, why is your stop loss always 3 points? Sometimes your stop should be less, sometimes it will need to be more. If you are always throwing a 3 point stop on all of your trades, then you are not trading price, but rather you are trading an arbitrary abstract of price. As for the small account, if you are trading scared small, then you will trade scared big. Fear is not a function of capital. Here is how to control your fear: Buy support, sell resistance, use the stops the market gives you, and respect those stops. Now, set a daily loss limit, stick to it, and get on with it. Best to your trading, Thales

Hi Chris, You have 16 trades, with 13 profitable and only 3 losses, but you finish with a net loss. You are letting the wrong trades run. I suspect, though I may be wrong, that you were never more than slightly net positive for the day. More likely you found yourself in an early hole, and your overtrading was driven by a desire to get back to even. In fact, letting your trades run was more likely enabled by a sense of desperation than discipline. Your average winning trade netted just $28.85 while your average losing trade lost $158.33. Turn that around and you will need only 20% profitable trades to make you net wealthy. Failure to turn that around will lead you, quickly, to ruin. It would seem that you are focused too much on winning percentage, which is the wrong thing to focus upon. You must work on cutting your losers, and letting your profits run. Think about it this way: You won 81.25% of your trades today. So whoever took the other side of your trades today only won 18.75% of his trades, but he finished with a $100 profit, while you finished with a $100 net loss. I recall that you were studying Van Tharp. I know he cautions his students against falling for the "high winning %" trap. It is a tough trap to elude and elude it you must. The good news is that you can do it, but first you must decide to do so. Best Wishes, Thales

Well, as I said, "those figures may change depending upon what develops here." And what developed was little "double bottom" with what some may call a "123" - market made a low at 886.25, rallied to 890.25, and then price again tried to go below 886.25 but failed to do so. The sell stop at 886 would never have been triggered, and instead, this price action created an opportunity for a buy stop at 890.50 (or perhaps 890.75, as 890.50 was the prior day's low), with a stop loss at 886. Either way, you would have been on board for a potential 20 points - though there were natural stops along the way that could have stopped you out with as few as 5 points or so. Best Wishes, Thales

Hi Bathrobe, Here is what I'm looking at on the ES right now (see chart). If I were trading ES today, (and I am not trading at all today) I would have a sell stop at 886 and a stop loss at 890.50. Those figures may change depending upon what develops here. But at this momnet (10:18 am EDT) that's how I'd be playing the ES. I would prefer price to tag that 890.50 prior to making a new low at 886 (and better still exceeding 890.50 by a bit and quickly reversing down. I have to run, and won't be back until the afternoon. Best Wishes, Thales

Hi there, No problem. I'm of from trading this week through next Tuesday so I'll post some details next week, unless I find some leisure time to post. For now, if you look at the average size of my losing trades to my winning trades, you will see that I focus on cutting my losses as short as the market allows, while letting the trade run if profitable as far as the market will allow. The key to consistent profitability is not high winning % but rather keeping the size of your losses small relative to the size of your profits. Best Wishes, Thales

And here is a follow-up, with a few cautions, caveats, etc. 1) As I have said before, it is always easier to "read" a chart after the fact than as it is happening. So the fact that I have marked the chart as you will see does not mean I would have been smart enough, nor quick enough, to place the trade. 2) Also, this is a 512 tick chart. I have no idea how quickly this price action unfolded, so even if I saw it, I do not know if there'd have been time enough for me to decide and then enter where I'd like to have entered. 3) It is not uncommon for the market to push to one further lower low or higher high (a third push) after the initial appearance of "divergence." The basis for it is that price drops quckly into a low with nary a pullback along the way, and then price consolidates in a choppy fashion. When the down move resumes it manages only a brief two tick penetration of the first low, and then reverses. An aggressive trade would be to enter when price traded 1 tick above the previous low, a more conservative approach (albeit with a larger inital risk) would have been to enter on a stop 1 tick above the consolidation's high. Depending upon you entry, this would have been good for a 5-7 point profit before you would have reversed to a short position on the same basic set-up. The short trade would have been a small .75-2.75 loser. This is a very common occurrence, and after time, one hardly needs an indicator to see that there is not as much strength on the move to a lower low or higher high. Best to your trading, Thales

That is interesting. Would you be able to share with us what that set up was?

Interesting statement, and one I come across frequently. How do you feel it has changed? Thank you, Thales

I agree. I was one who did fall for the cons. My bs-detector was so maladjusted that I spent an amount equal to several times my inital grubstake on systems, software, seminars, books, courses, etc etc etc. I was fortunate enough to manage to muddle through, marginally profitable, for years. The few things necessary to know to trade profitably are susceptible to easy and quick communication. What is usually, and unfortunately, neither easily nor quickly accomplished is the belief that those few necessary things is all that is necessary to succeed. Elsewhere, I posted the following: So, I would say that if anything, perhaps DbPhonix is being a bit too pessimistic as he implies that several months is perhaps the minimum necessary. I think that the right person, with the proper respect and tolerance for risk, could, like a young Livermore, show proficiency and profit immediately. However, that would be an exceedingly rare individual indeed. Far more common is the experience most of us have when we decide to participate in the markets with the hope of profiting from our speculative encounters. We approach this new activity with so much emotional and psychological prejudice and misconception that we allow ourselves to become the prey of the dream vendors. We struggle. From our repeated defeats and our lackluster victories we imagine that the key to success is even more complicated and elusive than we initally believed. We seek new indicators, ever certain that somehow the mathematics of these criss-crossing lines will carry us to profits. We vacillate between "technical" and "fundamental" analysis. First we want to day trade, and then we convince ourselves that such is a fool's errand, so we focus on longer term swings. Failing there, we are back to day trades. Or worse, we come to have an account filled with day trades that "became" swing trades or "long term holdings" because we did not cut our loss short with the first few minutes of the inital trade. We are, unthinkingly, drawn to the blinking and flashing red and blue and green lights of fancy software systems as the instinct driven insects are to our glowing and flashing backyard bug zappers, and with not unsimilar results. Our egos fried, and our equity burnt to a lifeless crisp, we retreat from the market's battlefield, defeated. I do not know DbPhonix, but I have been a visitor to his blog here at TL for some time. There is enough technical information there provided free of charge to give anyone all the knowledge necessary to trade successfully - whether you are a day trader or a trader who plays for the bigger swings or longer pulls. In the end, the key to success in trading is much more a matter of will and emotional control than any amount of technical knowledge. Such technical knowledge as is necessary as well as descriptions of the emotional and psychological control necessary is available either free of charge or in rather inexpensive books by authors with names such as Lefevre, Wyckoff, Schabacker, Baruch, Darvas, and O'Neill. I would also add Sperandeo, Buzzy Scwartz, and Stanley Kroll to the list. Perhaps Brownsfan could set up amazon links to these books somewhere here on TL where the purchase would benefit the Leukemia & Lymphoma Society. That would be a great way to benefit both struggling and aspiring traders as well as a worthy orgnaization striving for the benefit of all people. Best Wishes, Thales

Hi there Abe, I have not experienced that in my use of the software. I went to the online help and could find nothing that would address why that window keeps opening for you. I would suggest that you email your screenshot with your above comment to feedback@freestockcharts.com and see whatthey might suggest. Of course, with the holiday weekend, I wouldn't expect a response until Tuesday at the earliest. Best Wishes, Thales

Hi Chris, Here are three charts for you to ponder over. In the first, you will note that divergence is ubiquitous in the world of oscilators and momentum indicators. In the other two, see what it looks like without indicators. At one time I was an indicator dependent trader. I am much more comfortable now trading with just the price bars themselves (though I do still place a 20 ema on my charts throughout the day, but that is it). My point is not to convince you t shed all reliance on indicators overnight, but simply to ask that you start really paying attention to what price is doing when your indicators provide you with a "set up" or "signal." Once you start to study this relationship, really paying attention to what price is doing at the moment of decision, you will find that you will wean yourself from all dependence on indicators surprisingly quickly. As you come to trade more on price and less on indicators, your confidence will increase. You will find yourself able to let your trades work with the stops the market present to you, and you will find yourself holding for more than a 1-3 tick profit. Study, study, study your charts - that is what traders do on Saturday mornings! Best Wishes, Thales

Hi Folks, Two trades today: CME +$0.45 and NDAQ + $.10 for $0.55 total/share Here is a sumary of this week's activity. 21 trades 13 Profits 8 Losses Average Profitable Trade: was +52 pennies/share, and average loss was -8 pennies/share. R:R ratio approx. 6.5:1 Total profit for the week was $6.17/share. This simply means that total profit in dollars = $6.17 x # of shares/trade. For example, if each trade were 100 shares, total profit would be $6.17 x 100 = $617.00. If each trade was 1500 shares, then total profit for the week would be 1500 x 6.17 = $9255.00 If each trade were 1 share, then the total profit would be 1 x $6.17 = $6.17 My weekly goal is a total profit of $1.50/share. Some weeks I fail to reach my goal, some weeks I exceed it. The key is keeping losses small relative to profits. Best Wishes for the weekend, Thales

Agreed. And for the record, I have bought more than my share of software, systems, books, dvd's etc etc over the years. In the end, it was a handful of inexpensive books and hours upon hours of screen time that really pointed me in the right direction.

Just for the record, I never watch a stock for days waiting for an opportunity. I never know what I'll be trading on a particular day until I am placing the order. Many times I have no idea what the company whose stock I am buying even does! Best Wishes, Thales

I doubt any of these system sellers, software vendors, or "trading course" authors will ever provide audited trading statements. And even if they did, and even if they showed a profit trading whatever sytem, method, etc they were selling, one's ability to duplicate their success is, unfortunately, not teachable. Whether one makes a profit or not trading any "system" will depend far more on the soul of the individual doing the trading than the system or its rules. Best Wishes, Thales

Excellent post, Brownie. My only point of contention would be that I am of the opinion that risk/reward is indeed everything. I have one more trade to close out and I will be finished for the week (I am long NDAQ at 19.50 and my stop loss is 19.39, looking . Once that is finished, I'll post my weekly summary and I'll share with you how focus on risk/reward like a laser beam. Best Wishes, Thales

Hi Folks, Two more trades this afternoon. Final tally for the day: +$2.52/share Best Wishes, Thales

I think the best way to organize your thoughts so that this question no longer affects you is to understand the difference between trading profits and ROI, between trading capital with leverage and investments made using savings deposited into a brokerage account. Don Bright of Bright Trading explained it this way: "We don't really think of trading profits as "ROI." Or even in terms of return at all. For example, our people might put up $20K, and make $5k per week...but they are using our capital to trade with. We consider the money that is being used as simply another tool, just like a computer or trading method. An investor looks for ROI. FWIW, Don" Traders trade for profits, while investors seek ROI. I have a colleague who starts each month with a balance in his futures account that most would find a ridiculously small capital with which to trade, let alone to trade for all of one's livlihood. He trades only the TF (formerly the ER2) He routinely nets two - three times his starting capital in the form of profits month after month. He never thinks in terms of having made a 200-300% return in a month. He simply knows he needs X thousand dollars in order to trade his way, and that is what he does. On the last day of the month, he draws out his profits for the month, and leaves his small starting capital to do it all over again. Now, as to the question as to when a new trader can expect to be breakeven or profitable, well, that depends entirely on that trader's psyche. In the end, the only thing standing between any trader and either incredible income and wealth generation or terrible financial ruin is whether he or she is able to cut losers quickly while not cutting profits short too. If you can master your emotions, the rest if a piece of cake. Some may be successful right away. Others may forever be net losers. Near the beginning of Wyckoff's Studies in Tape Reading, he compares two traders, both of whom started out together in the same brokerage office watching the same ticker machine trading 10 share lots. Years later, one of these traders was still trading 10 lots while the other, in addition to having amassed a great fortune, was now trading an account equity of 100K. Some have it, and others never will. So, in regard to the first question, think profits not ROI. You are a trader, not a money manager. If you understand yourself as seeking "a reasonable return on investment," you will never achieve what it is possible to achieve as a trader. Such thinking will limit you. It will leave you susceptible to others limiting you. The answer to the second question is going to be unique to each individual, and can range on a scale of immediately profitable to perpetually unprofitable. Best Wishes, Thales