Price Up or Down, Wheels Turn = same thing

[bighog]

I have always asked this question? WHY...Why do so many traders lose? With such numbers as 90% lose, there must be a common mistake being made because that % of losers has been consistent over the years, come Bull or come Bear. We will not even consider thinking about the % at major mkt turns.

WHY?................. Well please allow me to say a couple lines about what i observe over and over in this ET forum. Not saying there is no value here because there is. There is value if the 90% do not wise up and see what this game is about.

Ever take a serious look at a wheel? You never pay much mind to a wheel because it is as simple today as it was when first used by man. What can a modern wheel do that the first wheel used by man do? Right, nothing different. Disconnect the disk brakes, the sensors etc and you have the same deal = a round wheel. same thing , a simple round wheel.

What can that wheel do? What is a wheels maximum potential? What can a wheel not do? what a wheel can NOT do is easy to understand, common sense. (excluding cognitis, we all in here have common sense)

Ok, now that we understand what a wheel can not do, lets go back to what a wheel can do. A wheel can roll forward or backward as being useful. A wheel can stay still if all energy is removed. Thats it, thats all a wheel can do. Now with something that simple it is easily understood and basically forgotten as being all important in our daily lives.

Is there a compelling reason to reinvent the wheel? No, even a blockhead would admit that.

Ok, now do yourself a favor and ask yourself the difference between a wheel and price. price can do what? Yep, up or down or stand in place. Same principle of the wheel.

I observe over and over many new traders come in this, other forums and make the same mistake over and over. How is price different from a wheel? Price needs energy to move same as a wheel.

Ok, to end this..........i see new people come in forums and first off not even understanding what price is, but yet want to reinvent how and why price moves. A wheel has a basic energy need to be functional, price needs the same energy to do what simple moves it also can do.

.. this silliness about this follows that, when this lines up with so and so, etc, etc. FOLKS uncomplicated your brain, think of price and make it as easily understood as you see how a wheel functions.

remember a car with no motor but with wheels placed on a hill top and with the energy of wind can push car over and what happens? Think of a price breakout the same way. do not continue to complicate the simple force of energy and you might join the club of 10% winners. Later dudes and dudettes.

 

[marketbarometer]

It is *easy* to make money in the stock-market. All of the lessons have been learned time and time again. Mr. Jesse Livermore spells out these lessons in his book and if one followed his common sense strategies then they would have made a lot of money in the stock market. All of the things that you should do are well documented.

However, the main reason people do not make any money in the market is because they choose to repeat the mistakes that have been made before...no one wants to read about Mark Twain's mistakes or Jesse Livermores success (and mistakes). Mr. Buffett has spelled out the simple lessons to success, however, everyone just rolls their eyes when they hear them. If you followed Mr. Buffett's words about selling into greedy markets and buying into fear then you would have been a millionaire by now. The time to have invested in the stock market was 2003-2004 and not 1999-2000.

The way to grow rich in the market is to jump on a trend in the beginning and ride it out to its conclusion as the DOW theory suggests. When the war in the gulf started, I was in an office. When I had exited that office on that day in 2003, suddenly the gas prices had been raised by 50 cents within 24 hours. This was a clear indicator that it was now time to buy into energy and ammo stocks. However, most chose to wait until the later part of 2005 and 2006 to get into the energy market. By then it was too late to get into players like Exxon.

The same went with Starbucks. In 1995, there was a trend starting to form at college campuses where people were hanging out at coffee-shop style places. This was the time to get in on Starbucks. Now its too late to get in on Starbucks and you can only hope to ride the price channel and hope for a meager return. Starbucks

The current bull market is long in the tooth and there are probably many people looking and wondering what to do next. The market may go up or may go down. It may bubble up with so much liquidity floating out there or it may fall downward as interest rates rise.

I feel as if this is 1998 all over again. The world economy will be allowed to run wild until central banks have no choice but to raise interest rates. By that time, the markets will have bubbled and P/Es will have reached the upper range. The time to have raised interest rates was now, but Bernanke failed.

You have to use common sense. When you see something happen, then you have to ask yourself what to do next and react immediately. You get in on the start of the trend and then exit when you reasonably believe the investment has run its course.

There are ALWAYS excellent values in the market that are very obvious. I had featured in my blog and on this site several excellent swing plays like PETS, MED, VSE, and MXWL. These equities had dumped down and everyone was in great fear. According to the charts, that was the best time to get into them. You can clearly see where the support lies on the magical charts. Now its about 10 days later and each one is up 20%. Am I a genius? Did I just get lucky on my picks? The answer is no to both. I used common sense. The prices of each of those stocks had reached those points in the past as the charts demonstrate. Common sense dictates that that level is the support or the floor.

Many people still follow the old philosophy of buying high and selling higher which does work on occasion. The problem with that philosophy is that you never know if your getting in at the top. If you get into Mastercard right now, then a 20% gain will be had when the price reaches 133. Will it get there? I dont know. It seems like its already trading too high as it is...

I say to avoid the winners list on yahoo and focus in on the losers. Look at Nissan, for example, you just know from the chart that it WILL dump back down to 19 dollars. Then it will be time to buy once again.

http://stockcharts.com/h-sc/ui?s=NSANY&p=W&b=1&g=0&id=p86067104244

Use common sense, think. Daytrading and prop trading is a suckers game. Prop traders like Steve Tvardek are very successful with an actress girlfriend, six figure salary at age 27 and an apartment overlooking the Hudson , but he is the exception not the rule.

One last bit of advice is to NEVER throw all your capital at one stock. I know many people do that on elitetrader and sometimes they win, but its the times they lose that is the key. I suggest 10 or more swing positions over different industries and to keep a cash position of at least 20%. There are thousands of publicly traded stocks. Its not difficult to find 10 or more excellent positions. If you are wrong in your thesis, then its not hard to recover. The key is to having a system and not back the truck up into what you believe is the lotto ticket stock. It may work a few or multiple times, but it will be that day when the storm comes that you will be hurting.

Most people invest 100% of their money in the hope of earning a 10% return. A rational speculator, on the other hand, looks to invest just 10% to 20% of their money in investments that hold the potential for a 100% or better return.

Over the last two weeks, I've heard from two old acquaintances whose retirement nest eggs - millions in all - were wiped out by a series of bad trades in traditional stocks recommended by their mainstream brokers. A rational speculator, even after a complete wipe-out, would still have 80% to 90% of his money to start over with.



Dr. Michael Roberts
www.marketbarometer.blogspot.com
(I am going to update the blog this weekend, sorry been busy)

 

[marketbarometer]

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[tradingbug]

Not many replies so far. I guess its boring for others to here that reinventing the wheel is not necessary.

I recently stumbled on a post that might be a good addendum for this thread.......

Quote from PoundTheRock:

Few people have the will and drive to study intraday price action for years... but a funny thing happens along the way. What happens is that a full-blown framework emerges, as the market swings from one level to another. Take a couple of moving averages for trend, some bands for mean reversion, and throw in key S&R -- and all of a sudden it's magic, but only after much study of how the market reacts above/below/around these levels.

If you have the stamina to grasp choppy markets, then you achieve knowledge that others will not bother trying to understand -- there is an underlying microstructure, and you're part of a small fraternity. All of a sudden, what seems to be a muddle becomes clear as day -- day after day.

If you want to play the orchestra, then you need to understand both dimensions of time and instrument. What are the ES, NQ, and YM doing on a daily, 30-minute, and 5-minute basis, for example? Which is the leader, and which is the laggard? Which are hitting key resistance? Which are touching key support? What starts to happen is that you flow from level to level (the closest thread is Jack Hershey's SCT) in an effortless manner.

Finally, I have to believe that Cody Willard loved the movie Pi because of its entertaining notion of an ultimate market key -- that's what everyone wants. But I think the movie was all about Max's search and drive, and his countless hours of devotion to the craft. You can work hard all your life and never find the Holy Grail of trading, but you can come pretty damn close.