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Making of a method
- Thread starter game
- Start date
This journal is a breath of fresh air, kudos to the student and the teacher.
"You cannot be successful at trading any more than you can be at mining, manufacturing, doctoring or anything else, unless you are trained for it. And by "training" I do not mean an occasional dab. Incidentally, unless you are peculiarly adapted to the business you had better become an intelligent investor instead of an unintelligent trader."
How I Trade & Invest in Stocks & Bonds - Richard Wyckoff
A synopsis of Wyckoff's principles required for trading success:
1) The main factor is the trend
2) Risk should be limited
3) Anticipated profits should be at least 3 or 4 times the risk
4) One should be able to deal freely on both sides of the market
5) Dealings should be in active stocks
6) Make a business of trading or else try not to be a trader
This guy was diverse in his approach. In addition to all out reading the tape type of speculation he was also an entrepreneur, a swing trader and a long term investor.His was a precursor to and a probably more sophisticated approach than CANSLIM.
He moved away from a pure day trading to a swing trading approach, finding it more profitable while less stressful.
His is a great model. It is vital that I learn day trading fundamentals so that I can then intelligently participate in a swing time horizon.
If the principles of trend and S&R apply in all time horizons then Daytrading is excellent training because of the number of at bats and the immediate feedback.
If the edge is there, then few options can compete with day trading in terms of leverage, cash at close and # of times risk capital can be turned.
The trading computer died this morning. Perhaps it is a sign to pullback and wait for the retracement.
How I Trade & Invest in Stocks & Bonds - Richard Wyckoff
A synopsis of Wyckoff's principles required for trading success:
1) The main factor is the trend
2) Risk should be limited
3) Anticipated profits should be at least 3 or 4 times the risk
4) One should be able to deal freely on both sides of the market
5) Dealings should be in active stocks
6) Make a business of trading or else try not to be a trader
This guy was diverse in his approach. In addition to all out reading the tape type of speculation he was also an entrepreneur, a swing trader and a long term investor.His was a precursor to and a probably more sophisticated approach than CANSLIM.
He moved away from a pure day trading to a swing trading approach, finding it more profitable while less stressful.
His is a great model. It is vital that I learn day trading fundamentals so that I can then intelligently participate in a swing time horizon.
If the principles of trend and S&R apply in all time horizons then Daytrading is excellent training because of the number of at bats and the immediate feedback.
If the edge is there, then few options can compete with day trading in terms of leverage, cash at close and # of times risk capital can be turned.
The trading computer died this morning. Perhaps it is a sign to pullback and wait for the retracement.
Observations:
1) Price does move in waves. Waves succeed each other to form a trend.
2) Trends retrace but just basing an entry on this fact is not enough. The nature of the retracement matters.
3) The key is to seek low risk retracement entries at turning points of continuation or reversal.
4) Some ways to think about risk in the RET pocket:
By observing the range exhibited by the RET in relation to the trend. If the RET bars are long, the chop can become expensive should the trade not work out.
Smaller and more congested bars represent lower volatility. Being propelled into a trade via a stop is an option and lower volatility around the option strike means cheaper and less riskier.
Time seems to play a role - In some cases, the pullback and breakthrough occurs in just 1 bar. These are tempting to get into especially when price is looked at as continuous and quick pullbacks become an excuse to just jump in.
But strong continuations don't always happen fast. There is a process and it is taking a few mins for traders to decide which way to go. A lot of the strong moves are occurring many minutes after initial pullback of trend - the formation of temporary S/R is going to give me a logical point for risk management. I was assuming that waiting would increase my price risk. In fact the opposite is happening by getting in too early. Waiting is decreasing both price and information risk.
Without incorporating any of this into hard rules yet, I can start experimenting with some general guidelines:
1) Give the pullback some time to form. Wait for the first pullback bar to close and then see if the RET goes deeper. Let the hollow form and get round.
2) Avoid RET's with big relative ranges. Look for tight range and slowing action. This may be the stop before the roller coaster moves down. Or for RET action that is moving up or down in a trend like fashion, displaying a continuous build up of S or R behind it.
1) Price does move in waves. Waves succeed each other to form a trend.
2) Trends retrace but just basing an entry on this fact is not enough. The nature of the retracement matters.
3) The key is to seek low risk retracement entries at turning points of continuation or reversal.
4) Some ways to think about risk in the RET pocket:
By observing the range exhibited by the RET in relation to the trend. If the RET bars are long, the chop can become expensive should the trade not work out.
Smaller and more congested bars represent lower volatility. Being propelled into a trade via a stop is an option and lower volatility around the option strike means cheaper and less riskier.
Time seems to play a role - In some cases, the pullback and breakthrough occurs in just 1 bar. These are tempting to get into especially when price is looked at as continuous and quick pullbacks become an excuse to just jump in.
But strong continuations don't always happen fast. There is a process and it is taking a few mins for traders to decide which way to go. A lot of the strong moves are occurring many minutes after initial pullback of trend - the formation of temporary S/R is going to give me a logical point for risk management. I was assuming that waiting would increase my price risk. In fact the opposite is happening by getting in too early. Waiting is decreasing both price and information risk.
Without incorporating any of this into hard rules yet, I can start experimenting with some general guidelines:
1) Give the pullback some time to form. Wait for the first pullback bar to close and then see if the RET goes deeper. Let the hollow form and get round.
2) Avoid RET's with big relative ranges. Look for tight range and slowing action. This may be the stop before the roller coaster moves down. Or for RET action that is moving up or down in a trend like fashion, displaying a continuous build up of S or R behind it.