Link: Interviews with top 3 traders.
"A single conversation with a wise man is better than ten years of study" ~Chinese Proverb
I came across these interviews recently. The traders interviewed were Marty Schwartz, Paul Tudor Jones and Ed Seykota. The interviews seems to be done around 1989 but were not published till 1996. I think the choice of traders is a great combination i.e., not only all 3 are world class traders but their approaches are vastly different.
Link: Interviews with top 3 traders.
Link: Interviews with top 3 traders.
Most traders at some point runs into this question i.e., for entry should I wait for market to confirm that chart pattern is complete or SR has held the price etc (OR) should I enter on anticipation that pattern will be complete or SR will hold the price etc?
Before one can develop a systematic approach, I think one needs to make sure the foundation on which the approach is/will be built is correct and enduring for decades. Instead often the focus is on patterns or setups with foundation either ignored or considered as an after thought.
Following are four classic principles of price action which have held over time and true for all markets.
Following are four classic principles of price action which have held over time and true for all markets.
- A Trend has a higher probability of continuation than reversal.
- Markets alternates between expansion (trends) and contraction (ranges).
- Momentum precedes price.
- Trends end in one of two ways - Climax with testing process or V spike reversal
Methods that play trend pullbacks are generally based on first principle. What makes the pull back methods high probability is the underlying principle. It doesn't matter whether the method uses simple MA or some secret proprietary indicator or some chart pattern.
The above is just my opinion. Feel free to comment if your views are different.
The above is just my opinion. Feel free to comment if your views are different.
I track few select stocks. Conceptus (CPTS) is one of those. Analysis is on the chart itself.
In India there are lot of monkeys. When a local wants to catch a monkey, following is one efficient way used to trap them. A hole is drilled in a coconut just large enough to accommodate a monkey's hand. The coconut is then secured to a tree by a wire. Then a banana is placed inside the coconut.
My current thinking is it will be some more time before we have a top i.e., Market (SP-500) might have either some more upside or go into side ways congestion. My reasoning as follows:
From bearish view, (see the chart for annotations) market has multiple confluences currently i.e.,
So why then bullish/sideways view?
Given above, my current preference is to take both Long and Short positions provided they are at low risk position and play for smaller targets. Should sideways correction materialize, then both long and shorts has equal chance. Instead if bullish view materialize (i.e., market goes up next few weeks) then shorts might be stopped out for break even (hopefully) or with small losses and long positions would make up.
From bearish view, (see the chart for annotations) market has multiple confluences currently i.e.,
- Extended bull market and currently in 3rd leg.
- Decreasing momentum & volume in 3rd leg.
- Strong resistance and stall near resistance in 3rd leg.
- The 3rd leg is a 2 legged up move unlike prior legs i.e., leg-1 and leg-2.
- Topping signs are too obvious. I find bit difficult to trust market when it is too obvious.
- Low volatility trend. Generally they are persistent and good at trapping most people.
- Low volatility trends end more often with side ways than V Shape corrections.
- Time symmetry - Current leg is only 23 weeks. Much smaller than prior 2 legs.
Given above, my current preference is to take both Long and Short positions provided they are at low risk position and play for smaller targets. Should sideways correction materialize, then both long and shorts has equal chance. Instead if bullish view materialize (i.e., market goes up next few weeks) then shorts might be stopped out for break even (hopefully) or with small losses and long positions would make up.
I don't believe there is one right way to analyze. I am always interested in other perspectives. Please feel free to let me know your analysis or comments.
Prior two posts on IWV short trade can be found here - before entry and before 1st target. Today IWV triggered the break even stop. Some might have locked profits on part of the position if they had sold on next day at open (details in 2nd post) without waiting to reach the dashed line on charts. What is more important is not loosing money. So getting out as break even is still a plus. Chart has more details along with my current thinking about market direction.
We have thousands of books promising knowledge and success in trading. Especially more so in recent years. I think 90% of books on trading are useless and do lot of damage to traders. The damage is not just the cost of the book. IMO it is much more than that - like loss of time to learn that useless stuff, years wasted pursuing wrong alleys and expectations etc and then (if one is lucky to recognize) several months and years to unlearn these concepts and bad habits.
Both IVW and IWV bounced from the resistance zone couple of days back providing low risk entry point for shorts. If interested, first post has my analysis, resistance zones and reasons to consider shorts. It took nearly a month for these ETFs to reach the resistance zones. I guess I under-estimated the time factor.
As I mentioned in that post, given these two markets are tightly correlated, there is no point taking short on both trades. Often as traders we run into this situation i.e., we get entries for multiple shorts and we need to pick one. My reasons for picking IWV short are - (a) Tighter resistance band and (b) Weaker relative strength. Who knows, IVW might turn out to be better short but we never know future. We have to work with present.
So what's next?
As I mentioned in that post, given these two markets are tightly correlated, there is no point taking short on both trades. Often as traders we run into this situation i.e., we get entries for multiple shorts and we need to pick one. My reasons for picking IWV short are - (a) Tighter resistance band and (b) Weaker relative strength. Who knows, IVW might turn out to be better short but we never know future. We have to work with present.
So what's next?
Given the sharp drop plus the fact it is now at short term swing point (blue dash line on chart), I think IWV might stall or bounce in next couple of days. Given quick 1R+ gain, my preference is to take profit on part of the position tomorrow and move stop on the remaining position to entry point (i.e., break even stop as marked on the chart).
So if this minor resistance (blue dash line on chart) holds and IWV bounces back, we will still be in a good place i.e., we already pocketed some profits and remaining position is not at risk. (Past Example: See TLT long trade post. There stock came back few days later and stopped out rest of the position). Another reason, taking partial profit here will also help ride any noise without much stress. (Example: See SLX trade posts. SLX had lot of noise after first target which was also faced minor resistance like here.).
Now instead of bouncing, if the minor resistance fails, then the next strong resistance is near blue solid line on chart. Should that happen we have 2nd part of the position to participate in the gains. (Past Examples: See EURUSD long trade posts. Another example is on-going SLX short trade. That one now chugging towards target-2).
SLX price action so far is fairly close to analysis done in prior posts. In retrospect, it was good call to exit 1st part of the short position at what turned out to be low of the range (Second post). If interested, chart analysis and entry locations before the short was triggered is available in First post.
I think SLX trade is a good example of why having patience and getting a good entry location matters. These helped position to be at risk only for a very short time. Also it helped to ride out most of the noise comfortably sitting with above 1R gain pay off in pocket (on part of the position) and risk free position on the rest.
What's next?
SLX came close to stopping out and then made strong down move today. I think general market sell off helped. SLX now is in an interesting location.
I think SLX trade is a good example of why having patience and getting a good entry location matters. These helped position to be at risk only for a very short time. Also it helped to ride out most of the noise comfortably sitting with above 1R gain pay off in pocket (on part of the position) and risk free position on the rest.
What's next?
SLX came close to stopping out and then made strong down move today. I think general market sell off helped. SLX now is in an interesting location.
If in next couple of days SLX follows through and closes strongly below $52, then there is good chance it will go down further and we can start thinking about target-2 (see chart). On other hand, if it stalls here and starts coming up, then there is good chance it will run all way to top of range. So it makes more sense to tighten the trailing stop (2nd red bar on chart). That way should SLX come back up, we locked-in some profit on remaining position.
This parable is told of a farmer who owned an old donkey. The donkey fell into the farmer’s well. The farmer heard the donkey praying or whatever donkeys do when they fall into wells.
I came across this stock few days back. A recent IPO and then formed long base last few months. I think that would have been sufficient time to lose interest of crowds and enough time for value players to build positions. Since beginning of this year the stock started moving up. May be its fundamentals were improving or about to improve. I am not as such that much concerned with fundamentals.
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