"Risk management is a more realistic term than safety. It implies that hazards are ever-present, that they must be identified, analyzed, evaluated and controlled or rationally accepted." - Jerome F. Lederer
Wednesday, 20 May 2020
Linda Bradford Raschke – 50 Time Tested Classic Stock Trading Rules
1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don't take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point.
25. The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.
26. In trading as in fencing there are the quick and the dead.
27. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
29. Accept failure as a step towards victory.
30. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don't let ego and greed inhibit clear thinking and hard work.
31. One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door.
32. The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed.
33. It’s much easier to put on a trade than to take it off.
34. If a market doesn't do what you think it should do, get out.
35. Beware of large positions that can control your emotions. Don’t be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts.
36. Never add to a losing position.
37. Beware of trying to pick tops or bottoms.
38. You must believe in yourself and your judgement if you expect to make a living at this game.
39. In a narrow market there is no sense in trying to anticipate what the next big movement is going to be – up or down.
40. A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss – that is what does the damage to the pocket book and to the soul.
41. Never volunteer advice and never brag of your winnings.
42. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss.
43. Standing aside is a position.
44. It is better to be more interested in the market’s reaction to new information than in the piece of news itself.
45. If you don't know who you are, the markets are an expensive place to find out.
46. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.
47. Except in unusual circumstances, get in the habit of taking your profit too soon. Don’t torment yourself if a trade continues winning without you. Chances are it won’t continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost.
48. When the ship starts to sink, don’t pray – jump!
49. Lose your opinion – not your money.
50. Assimilate into your very bones a set of trading rules that works for you.
Source: http://www.tischendorf.com
Tuesday, 19 May 2020
Quote for the day
"The men who have done big things are those who were not afraid to attempt big things, who were not afraid to risk failure in order to gain success." - B. C. Forbes
15 Fundamentals To Win Stock Market Battle
Gerald Loeb was a founding partner of E.F. Hutton, a renowned and successful Wall Street trader, and the author of the books 'The Battle For Investment Survival' and 'The Battle For Stock Market Profits'.
Mr. Loeb promoted a contrarian view of the market as too risky to hold stocks for the long term in direct contrast to many of his generation.
At the time, many considered Loeb’s comments heresy to the buy and hold doctrine so common among many in the industry. While Loeb never had the opportunity to trade in an environment now ruled by quants, algorithmic trading and massive government intervention, his wisdom and insight is still applicable in today’s environment. After all, the more things change, the more they always stay the same!
Based on his two books, here are 15 fundamentals Loeb argues that you need to understand to win the battle not only against yourself, but also against the market:
01. What everyone else knows is not worth knowing.
02. Stocks are always way overvalued in a bull market and way undervalued in a bear market.
03. The best stocks will always seem overpriced to the majority of investors.
04. Expectation, not the news itself, is what moves the market.
05. Three basis elements should be considered when evaluating a stock – 1) quality (fundamentals, liquidity, management), 2) price, and 3) trend (the most important).
06. Stocks act like human beings and go through the same stages and phases as people do, including infancy, growth, maturity, and decline. The key in trading is to be able to recognize which stage the stock is in and to take advantage of that opportunity.
07. Pyramid your buys – start with an initial position and then add to it only if the trade moves in your favor.
08. The more experienced and successful you become, the less you should diversify.
09. Traders must always resist the urge and temptation to change their strategies for each and every different market cycle.
10. To succeed in trading you must 1) aim high, 2) control the risks, 3) be unafraid to keep uninvested reserves and 4) be patient.
11. Successful traders are intelligent, they understand human psychology, they practice pure objectivity, and they have natural quickness.
12. You must always trade with the actions of the market and not simply by how you might think the market should trade.
13. Knowledge through experience is one trait that separates successful stock market speculators from everyone else.
14. The stock market is more an art than a science and far more complex than most people understand.
15. Always sell when you start patting yourself on the back for being smarter than the market.
In reflecting upon these 15 fundamentals, ask yourself the following question:
Mr. Loeb promoted a contrarian view of the market as too risky to hold stocks for the long term in direct contrast to many of his generation.
At the time, many considered Loeb’s comments heresy to the buy and hold doctrine so common among many in the industry. While Loeb never had the opportunity to trade in an environment now ruled by quants, algorithmic trading and massive government intervention, his wisdom and insight is still applicable in today’s environment. After all, the more things change, the more they always stay the same!
Based on his two books, here are 15 fundamentals Loeb argues that you need to understand to win the battle not only against yourself, but also against the market:
01. What everyone else knows is not worth knowing.
02. Stocks are always way overvalued in a bull market and way undervalued in a bear market.
03. The best stocks will always seem overpriced to the majority of investors.
04. Expectation, not the news itself, is what moves the market.
05. Three basis elements should be considered when evaluating a stock – 1) quality (fundamentals, liquidity, management), 2) price, and 3) trend (the most important).
06. Stocks act like human beings and go through the same stages and phases as people do, including infancy, growth, maturity, and decline. The key in trading is to be able to recognize which stage the stock is in and to take advantage of that opportunity.
07. Pyramid your buys – start with an initial position and then add to it only if the trade moves in your favor.
08. The more experienced and successful you become, the less you should diversify.
09. Traders must always resist the urge and temptation to change their strategies for each and every different market cycle.
10. To succeed in trading you must 1) aim high, 2) control the risks, 3) be unafraid to keep uninvested reserves and 4) be patient.
11. Successful traders are intelligent, they understand human psychology, they practice pure objectivity, and they have natural quickness.
12. You must always trade with the actions of the market and not simply by how you might think the market should trade.
13. Knowledge through experience is one trait that separates successful stock market speculators from everyone else.
14. The stock market is more an art than a science and far more complex than most people understand.
15. Always sell when you start patting yourself on the back for being smarter than the market.
In reflecting upon these 15 fundamentals, ask yourself the following question:
Among all of these fundamentals, which of these do you disagree with and/or do not reflect your personal experience so far?
In doing so, I want you to consider that not only could you be wrong in that view, but that knowledge of the difference may help you to explore a new path to improving your performance.
http://www.anirudhsethireport.com
http://www.anirudhsethireport.com
Monday, 18 May 2020
Quote for the day
"People should watch out for three things: avoid a major addiction, don't get so deeply into debt that it controls your life, and don't start a family before you're ready to settle down." - James Taylor
Bollinger Bands - 22 Rules
Bollinger Bands are available on most charting software.
They have become popular primarily because they answer a question every investors needs to know: Are prices high or low?
What are Bollinger Bands?
Bollinger Bands were created by John Bollinger, CFA, CMT and published in 1983. They were developed in an effort to create fully-adaptive trading bands.
Bollinger Bands are curves drawn in and around the price structure on a chart that provide a relative definition of high and low. Prices near the upper band are high prices,while prices nrear the lower band are low.
The base of bands is a moving average that is descriptive of the intermediate-term trend. This average is known as the middle band,and its default length is 20 periods.The width of the bands is determined by a measure of volatility,called standard deviation. the data for the volatility calculation is the same data that was used for the moving average. The upper and lower bands are drawn at a default distance of two standard deviations from the average.
These are the standard Bollinger Band Formulas:
Upper Band = Middle Band + 2 Standard Deviations
Middle Band = 20 - Period Moving Average
Lower Band = Middle Band - 2 Standard Deviations
Learning how to use Bollinger bands effectively cannot be fully explained in this article. However the following rules serve as a good starting point.
1. Bollinger Bands provide a relative definition of high and low. By definition price is high at the upper band and low at the lower band.
2. That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.
3. Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.
4. If more than one indicator is used the indicators should not be directly related to one another. For example, a momentum indicator might complement a volume indicator successfully, but two momentum indicators aren't better than one.
5. Bollinger Bands can be used in pattern recognition to define/clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.
6. Tags of the bands are just that, tags not signals. A tag of the upper Bollinger Band is NOT in-and-of-itself a sell signal. A tag of the lower Bollinger Band is NOT in-and-of-itself a buy signal.
7. In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.
8. Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. (This has been the basis for many successful volatility breakout systems.)
9. The default parameters of 20 periods for the moving average and standard deviation calculations, and two standard deviations for the width of the bands are just that, defaults. The actual parameters needed for any given market/task may be different.
10. The average deployed as the middle Bollinger Band should not be the best one for crossovers. Rather, it should be descriptive of the intermediate-term trend.
11. For consistent price containment: If the average is lengthened the number of standard deviations needs to be increased; from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if the average is shortened the number of standard deviations should be reduced; from 2 at 20 periods, to 1.9 at 10 periods.
12. Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent.
13. Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window. Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation.
14. Make no statistical assumptions based on the use of the standard deviation calculation in the construction of the bands. The distribution of security prices is non-normal and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. (In practice we typically find 90%, not 95%, of the data inside Bollinger Bands with the default parameters)
15. %b tells us where we are in relation to the Bollinger Bands. The position within the bands is calculated using an adaptation of the formula for Stochastics
16. %b has many uses; among the more important are identification of divergences, pattern recognition and the coding of trading systems using Bollinger Bands.
17. Indicators can be normalized with %b, eliminating fixed thresholds in the process. To do this plot 50-period or longer Bollinger Bands on an indicator and then calculate %b of the indicator.
18. BandWidth tells us how wide the Bollinger Bands are. The raw width is normalized using the middle band. Using the default parameters BandWidth is four times the coefficient of variation.
19. BandWidth has many uses. Its most popular use is to identify "The Squeeze", but is also useful in identifying trend changes...
20. Bollinger Bands can be used on most financial time series, including equities, indices, foreign exchange, commodities, futures, options and bonds.
21. Bollinger Bands can be used on bars of any length, 5 minutes, one hour, daily, weekly, etc. The key is that the bars must contain enough activity to give a robust picture of the price-formation mechanism at work.
22. Bollinger Bands do not provide continuous advice; rather they help identify set ups where the odds may be in your favour.
A note from John Bollinger:
One of the great joys of having invented an analytical technique such as Bollinger Bands is seeing what other people do with it. These rules covering the use of Bollinger Bands were assembled in response to questions often asked by users and our experience over 25 years of using the bands. While there are many ways to use Bollinger Bands, these rules should serve as a good beginning point.
Source: Edited Articles from
http://www.bollingerbands.com - Where you can learn more about Bollinger Bands.
(If time permit watch the webinar)
They have become popular primarily because they answer a question every investors needs to know: Are prices high or low?
What are Bollinger Bands?
Bollinger Bands were created by John Bollinger, CFA, CMT and published in 1983. They were developed in an effort to create fully-adaptive trading bands.
Bollinger Bands are curves drawn in and around the price structure on a chart that provide a relative definition of high and low. Prices near the upper band are high prices,while prices nrear the lower band are low.
The base of bands is a moving average that is descriptive of the intermediate-term trend. This average is known as the middle band,and its default length is 20 periods.The width of the bands is determined by a measure of volatility,called standard deviation. the data for the volatility calculation is the same data that was used for the moving average. The upper and lower bands are drawn at a default distance of two standard deviations from the average.
These are the standard Bollinger Band Formulas:
Upper Band = Middle Band + 2 Standard Deviations
Middle Band = 20 - Period Moving Average
Lower Band = Middle Band - 2 Standard Deviations
Learning how to use Bollinger bands effectively cannot be fully explained in this article. However the following rules serve as a good starting point.
1. Bollinger Bands provide a relative definition of high and low. By definition price is high at the upper band and low at the lower band.
2. That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.
3. Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.
4. If more than one indicator is used the indicators should not be directly related to one another. For example, a momentum indicator might complement a volume indicator successfully, but two momentum indicators aren't better than one.
5. Bollinger Bands can be used in pattern recognition to define/clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.
6. Tags of the bands are just that, tags not signals. A tag of the upper Bollinger Band is NOT in-and-of-itself a sell signal. A tag of the lower Bollinger Band is NOT in-and-of-itself a buy signal.
7. In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.
8. Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. (This has been the basis for many successful volatility breakout systems.)
9. The default parameters of 20 periods for the moving average and standard deviation calculations, and two standard deviations for the width of the bands are just that, defaults. The actual parameters needed for any given market/task may be different.
10. The average deployed as the middle Bollinger Band should not be the best one for crossovers. Rather, it should be descriptive of the intermediate-term trend.
11. For consistent price containment: If the average is lengthened the number of standard deviations needs to be increased; from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if the average is shortened the number of standard deviations should be reduced; from 2 at 20 periods, to 1.9 at 10 periods.
12. Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent.
13. Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window. Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation.
14. Make no statistical assumptions based on the use of the standard deviation calculation in the construction of the bands. The distribution of security prices is non-normal and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. (In practice we typically find 90%, not 95%, of the data inside Bollinger Bands with the default parameters)
15. %b tells us where we are in relation to the Bollinger Bands. The position within the bands is calculated using an adaptation of the formula for Stochastics
16. %b has many uses; among the more important are identification of divergences, pattern recognition and the coding of trading systems using Bollinger Bands.
17. Indicators can be normalized with %b, eliminating fixed thresholds in the process. To do this plot 50-period or longer Bollinger Bands on an indicator and then calculate %b of the indicator.
18. BandWidth tells us how wide the Bollinger Bands are. The raw width is normalized using the middle band. Using the default parameters BandWidth is four times the coefficient of variation.
19. BandWidth has many uses. Its most popular use is to identify "The Squeeze", but is also useful in identifying trend changes...
20. Bollinger Bands can be used on most financial time series, including equities, indices, foreign exchange, commodities, futures, options and bonds.
21. Bollinger Bands can be used on bars of any length, 5 minutes, one hour, daily, weekly, etc. The key is that the bars must contain enough activity to give a robust picture of the price-formation mechanism at work.
22. Bollinger Bands do not provide continuous advice; rather they help identify set ups where the odds may be in your favour.
A note from John Bollinger:
One of the great joys of having invented an analytical technique such as Bollinger Bands is seeing what other people do with it. These rules covering the use of Bollinger Bands were assembled in response to questions often asked by users and our experience over 25 years of using the bands. While there are many ways to use Bollinger Bands, these rules should serve as a good beginning point.
Source: Edited Articles from
http://www.bollingerbands.com - Where you can learn more about Bollinger Bands.
(If time permit watch the webinar)
Sunday, 17 May 2020
Quote for the day
"Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved." - Helen Keller
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