Bored to Death

"Trading is meant to be boring, If it wasn’t it would be gambling”   -Unknown

The second this game gets fun, your doing something wrong.  If your looking for excitement, you have come to the wrong place.

"The public is so often whipsawed that one marvels at their

persistence in not learning their lesson.

Eventually something happens that increases the power of

either the upward or the downward force and the point of

greatest resistance moves up or clown -- that is, the buying at

130 will for the first time be stronger than the selling, or the

selling at 12o be stronger than the buying. The price will break

through the old barrier or movement-limit and so on. As a rule,

there is always a crowd of traders who are short at 12o because

it looked so weak, or long at 13o because it looked so strong,

and, when the market goes against them they are forced, after a

while, either to change their minds and turn or to close out. In

either event they help to define even more clearly the price

line of least resistance. Thus the intelligent trader who has

patiently waited to determine this line will enlist the aid of

fundamental trade conditions and also of the force of the

trading of that part of the community that happened to guess

wrong and must now rectify mistakes. Such corrections tend to

push prices along the line of least resistance"

 -Reminiscences

Time Period Bias Change

Early in month bearish break, then reversal through pivot and above opening range...Extremely bullish.


Euro:

 

“Fear blinds us to opportunity: greed blinds us to danger.”

This is what I look for

or this

 

Opening Range Break Out

Defined by first two days of the month

Be wary of the pivot

1st indicator: Opening Range green lines (determines supply and demand/bias of market, defined by the first 2 days of the month

2nd indicator: Shadow pivot blue band (information taken from prior month or time period)

shadow pivot band:  (high+low+close)/3 =  A     (high+low)/2 = B      A-B= R=Differential

A+R = Top Band            A-R = Lower band



 Concepts:  You either want to trade through pivot or against pivot.  The opening range is more important though because it simply measures supply and demand.  If market breaks above opening range and holds you create a long bias until the market breaks below opening range.  Add a the pivot to the scenario and create tighter stops and explosive outcomes.  Narrow pivot ranges relative to prior months generally result in larger moves.  Most important concept is know where you will get out.  This works for all markets that are liquid AND volatile in any time frame.

Spend 7,000 hours studying this and you will understand.

Hope and Fear

"I sometimes think that speculation must

be an unnatural sort of business, because I find that the

average speculator has arrayed against him his own nature. The

weaknesses that all men are prone to are fatal to success in

speculation -- usually those very weaknesses that make him

likable to his fellows or that he himself particularly guards

against in those other ventures of his where they are not nearly

so dangerous as when he is trading in stocks or commodities.

The speculator's chief enemies are always boring from

within.

It is inseparable from human nature to hope and to fear.

In speculation when the market goes against you -- you hope that

every day will be the last day and you lose more than you should

had you not listened to hope -- to the same ally that is so

potent a success-bringer to empire builders and pioneers, big

and little. And when the market goes your way you become fearful

that the next day will take away your profit, and you get out

too soon. Fear keeps you from making as much money as you ought

to. The successful trader has to fight these two deep-seated

instincts. He has to reverse what you might call his natural

impulses. Instead of hoping he must fear; instead of fearing he

must hope. He must fear that his loss may develop into a much

bigger loss, and hope that his profit may become a big profit.

It is absolutely wrong to gamble in stocks the way the average

man does."

-Reminiscences 

What is written above is a very very simple concept that is very very difficult to follow.  It is almost becoming second nature to me in at least being able to observe this natural tendency.  I still find it hard to add to winners, but that is what makes me money.  What is so hard about that?  

Bias Change through Pivot

Bias' can change, and when they do it is usually powerful, especially through pivots.  Remember, if the market does not react to what you see don't hang around too long.  Always know where you will get out if you determine you are incorrect about your assumptions. 

So let's examine, opening range are the green lines, blue lines are pivot range (meat of the market) from prior month.  Market opens down for the month and creates a negative bias because market holds below opening range for one day (half of the value of opening range in this case 1 day because I use a 2 day opening range).  So this stock really should of collapsed further but it didn't.  Strong buyers and or short covering caused this stock to explode.

Bias changed, had many people caught , and broke opening range held above and created long bias.  The fact that it was through pivot range adds to the strength of this move.  Also, reversal through pivots are very strong, coupled with 14,30,50 day Moving Averages are starting to point up.  There should be no reason why this does not continue. 

Where do I get out if I am wrong, just below pivot range.  That is price stop.  My time stop is 2 days, if this does not continue in the up direction I'm out.  Why?  Because if everyone can buy where I am buying then how good of a trade could this be..."Next"

Same concept here, in ARMH: 

Intraday first 20 minutes is opening range.  Bias down, then late day move extremely bullish, followed by gap up.  Lots of people caught short cover, and buying.  I bought exactly where it says buy.

I always use price AND time stops.

Chain Reactions of Uncertainty

I don't know what came over me.  There I was long as can be watching the equity grow then all of a sudden something happened that I did not like.  My expectations were high and I refused to settle for less, forgetting what I wrote about recently.

The first idea was, to remember that your thoughts can and at times will be wrong and this is a pure given.  Finally I made a mistake and this set off a chain reaction to throw every stock I had overboard and now I am sitting net short?

  

I guess I am not that crazy?  But, this goes entirely against the rules that I am trying to solidify in my mind.  Why in the hell would I jump in front of this freight train?  All I know is I did oblige to an important rule, start with a small initial position and if it works add to it.  I hope to add, and if the market does not do what I expect it to do I will admit the mistake and say "Next".

Or, maybe the answer is this:

"Each of us is possessed with the common weakness of wanting to have an interest in every jackpot, and we certainly would like to play every hand at bridge.  It is this human frailty which we all possess in some degree that becomes the investor’s and speculator’s greatest enemy and will eventually, if not safeguarded, bring about his downfall."

-Reminiscences

Sell some, then sell some more

It seems like this is a good short, I sold some yesterday, and sold a little more today.  Why, Because the market agreed with me.

Not sure how far it will go, but I do know where I will cover. Broke opening range early in the month and sliced fast through prior months support.  Very bearish action and I could not help to add.

Reinforced Concepts

I wish I knew this when I first started engaging in the speculative art of trading.  If someone were to ask me how should I trade?  I would reply:
 

Before you buy, understand that your thoughts maybe wrong.

Buy what is going up and sell what is going down.

Risk management is essential, so buy small and add if the market gives you the green signal.

Further on risk management, if market does not do what you expected then just close out the position.

If market does what it's supposed to then add in that direction.

Never average losers, for any reason at all.

Be patient with winners, and very impatient with losers.

If market does not do what it is supposed to in a defined time frame, then exit and say, "next."

Spend thousands of hours reinforcing these concepts and hopefully you will learn them but most likely you will make the same mistakes over and over again.  As mentioned before this is the primary reason for writing this blog...simply reinforcement of the concepts I am trying to master.

Well-Authenticated Hoodoos

"Like all well-authenticated hoodoos this has its reason for

being. What does a man do when he sets out to make the stock

market pay for a sudden need? Why, he merely hopes. He gambles.

He therefore runs much greater risks than he would if he were

speculating intelligently, in accordance with opinions or

beliefs logically arrived at after a dispassionate study of

underlying conditions. To begin with, he is after an immediate

profit. He cannot afford to wait. The market must be nice to him

at once if at all. He flatters himself that he is not asking

more than to place an even-money bet. Because he is prepared to

run quick -- say, stop his loss at two points when all he hopes

to make is two points -- he hugs the fallacy that he is merely

taking a fifty-fifty chance. Why, I've known men to lose

thousands of dollars on such trades, particularly on purchases

made at the height of a bull market just before a moderate

reaction. It certainly is no way to trade."

-Reminiscences