Theories, Ideas, Questions, Answers

[luker 10]

Trading, doesnt that word have such sex appeal?

 

The promise of riches, the dream of sitting in the bahamas, sipping on your cocktail while making your millions. It happens everyday, to people like you and me!

 

The dream, sadly not the reality for most of us. Trading, is possibly the hardest way to make money, its psychological warfare, that attracts the psychology weak to take on the psychologicaly strong.

 

The more you learn about trading the more you realise how little you know. It all seems so easy at first, the mountains of information given to you! A little knowledge is dangerous thing never rang so true in the world of trading.

 

I noticed something very interesting the other day, have a look at a trading channel on foxtel, bloomberg, your money your call etc. Now have a look at the sky betting channel. Notice the similarities? Panels of experts, tips, massive amounts of information provided so that you can feel like you make expert decisions on something your really know nothing about? It really is impressive.

 

So where am i going with this? Well i want to share my theories, my ideas, questions and hopefully everyone can find some answers, including me. Now what i am sharing, some of may be right, some of it may be wrong, the idea is not to preach my ideas and try and puff my chest, rather to share my ideas to be subject to others thoughts. I would really like to hear from everyone as to what they think, construcitve critsicm would be appreciated.

[luker 10]

Ok before i continue writing i want to share a trade idea i have now. I am short 1 standard contract on wall street futures at 10502. Stop loss 142 points away, limit 955 points. I'll get back to why i have taken this trade later.

[luker 10]

Ok My first idea for discussion.

 

Identifying changes in trend.

 

I think we can all agree that one of the most important aspects of trading is anticipation. When we take a position, we are anticipating a move. The difficult part, is how we can identify a move, and how we can use that to profit.

 

Now there are a number of ways to do this, and i really don't know them all. I have one that im using at the moment, and it relates to the trade i posted above. So i will share it right or wrong, and let me know what you think.

 

You would have to say, that right now, it is very hard to have any medium term outlook on the market. You can build a case for both the long and short side. But right now, at the point we are at, i can build a stronger case short then long, and i can skew my RR very favourably. So i have a set up, right or wrong.

 

Looking at the chart, we have come to an important swing point between support and resistance. The market has lost considerable momentum at this swing point. Usually to break through such a resitant point, considerable strength is required. The chart cleary shows hesitation, weakness appearing. One of the first signs of weakness can be seen in the stronger performing mid and small cap stocks. These are the stocks that start to see strength first, bcause buying these stocks has a far larger noticebale effect, they will move further quicker, while everything else still appears weak, including the overall index. Conversly, they are the first stocks which show weakness, while the larger caps and index still show moderate signs of strength.

 

Now why is this? I could be way off, but here is my thoughts anyway. The larger caps, are the easiest to use to manipulate the index to give false signals. You move the larger caps up, the index moves up, investors think the market is bullish, whilst the mid and smaller cap stocks are being sold into this strength. Once the smart money has distributed, the rest of the money comes out of the larger caps, and the market as a whole collapses. I beleive this is happening right now. Yesterday i had signals from a few of these smaller and medium cap stocks, they went down a moderate amount, on medium volume, while the larger caps made some small gains. So i expect tonight, that the market will come back signficantly lower. But know that ive said it, watch it go signficiantly higher! haha.

[SIUYA 11]

Ok My first idea for discussion.

 

Identifying changes in trend.

 

I think we can all agree that one of the most important aspects of trading is anticipation. When we take a position, we are anticipating a move. The difficult part, is how we can identify a move, and how we can use that to profit.

.

 

As part of a discussion mainly with regard to mental frame of mind and jargon.... I disagree.

I believe one of the most important aspects of trading is participation.

I try not to anticipate moves, as to me this is like trying to pick tops and bottoms, but rather I try to participate in moves as and when they occur based on signals/patterns/triggers/context of the market.

[bootstrap 47]

anticipation is the first cousin of hope. you don't anticipate and you don't hope.

[Tams 20]

Ok My first idea for discussion.

 

Identifying changes in trend.

 

I think we can all agree that one of the most important aspects of trading is anticipation. ...

...

haha.

 

looking for what to anticipate?

do a search on WMCN

[HIGHLIGHT YELLOW][/HIGHLIGHT YELLOW]

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[luker 10]

anticipation is the first cousin of hope. you don't anticipate and you don't hope.

 

Fair call, Do you think that maybe that is why i have trouble objectifying my trades?

 

So if we dont anticipate a move what do we do?

 

Not trying to be smart, just trying to learn.

 

There is nothing worse then being right for the wrong reasons :S

[luker 10]

Ok, my analysis hasn't played out at perfectly as i would of liked, but some serious signs of weakness are now appearing. The market moved up last night into the weekly highs, and was met with some strong selling. The market then found a small amount of buying, but fortunetly there was no follow through, demand dried up very quickly, and the market has now found further selling. I expect the market to continue to move down tonight and into the end of next week.

[luker 10]

Ok my next idea up for criticism. I don't mind being made an example of with my ideas, because there is really no other way for me to learn. So don't hold back!

 

When looking to take a trade, i look to build a case. I do try really hard to look at oppurtunity as objectively as possible.

 

I ask why is this a good long opportunity? What Signs of relative strength can i see?

 

I will then look at it and say, what signs of relative weakness are there?

 

If i can find that the signals are much stronger for the long side i then look at my R/R.

 

Does the trade give me a large enough reward to warrant the risk?

 

If it does, then i take the trade.

 

I have been trading for 3 years now, which really, isn't that long. And i still find myself having trouble being completely objective. In some ways, i want to find a trade, and i feel like i am looking for reasons more on one side then the other in order to satisfy my desire to take a trade. I am alot better then i was mind you, the trade i posted above is the first trade ive taken in 1 month, as i could not find a high probability set up.

 

So how have others managed to combat this? Or is it, that there will always be a part of the psychology/emotion that can never be rid of?

 

Or maybe once a level of confidence in ones methods is reached, knowing full well, that if i am wrong on this trade, in the overall scope of things, i will be profitable in the long run?

 

For me, i have a low frequency of trading as i work full time, long hours, and i simpy dont have the time to scalp or day trade. So i must take trades which allow me to walk away from my computer for a day.

[natedredd10 10]

Trading, doesnt that word have such sex appeal?

 

The promise of riches, the dream of sitting in the bahamas, sipping on your cocktail while making your millions. It happens everyday, to people like you and me!

.

 

It totally does not...From my experience retail traders fail because they are lazy, incentive is delusional greed..however the biggest mistake is that they are delusional that they are up against some boogie man they call "smart money"...

As if somehow institutional traders are not equally lazy and their incentive is delusional greed...from my experience they are actually more delusional..You aint never going to bump shoulders with a bank trader who isn't going to crush reality with their own hedge fund some day...Even though their frat boys or daddy got them their job to start with and they really couldn't give a shit about the game.

The reason to trade as an individual is because there are exploitable billions on the table up for grabs to those who want to take it more than the next guy...

Collectively, we have evolved a system that is laughable as far as efficient markets go...Your either a 2 bit pirate or you are being exploited.