Dutchie's Trading Tips

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Good on DUTCHIE for starting this thread. Of all the forums I have read this forum is a big stand-out for a number of reasons, mainly the number of members who go out of their way to help others(sometimes the readers take the advice/observations a bit personal). Anyway I for one have learnt as much from threads on ASF as I have from all the trading books, and a bit of "discusion" only helps sharpen your focus!

+1

If I may ask Dutchie's indulgence just this one more time, then I'll shut up:
I take his title "tips" as the guide. Not the complete guide to guaranteed success, but as a collection of what the Germans call "Denkanstoss" = things that kick your mind into gear.

Whether any collection of guidelines, including my "nutshell", be called "Method", "Plan", or "List of Good Intentions" is semantics. IMO it's also semantically equivalent whether I quote a theoretical expectancy or a backtested ratio of winning vs losing trades. One may be more scientific, the other more broadly understood.

The only thing nobody can ever expect in the context of this Forum: A sure-fire recipe that guides a newcomer to instant success, effortlessly bypassing the need for his/her own studies and learning curve.
Like Dutchie and tech/a, I'm willing to share my experience, honestly and with as little jargon as I can muster; if I don't at every stage add the full extent of decades of learning, I trust members will accept that.

 

[Julia]

Good on you, Dutchie, for having the goodwill to try to help others by starting your own thread.

It's sadly predictable that it has gone the way it has.

People have different approaches to all aspects of life, including how to assess the validity or otherwise of a plan for trading/investing.

Hope you'll not be deterred, Dutchie.
All the best.

Julia

 

[tech/a]

So are you saying that you need to have a working and tested trading plan before you worry about a business plan?

A plan is just a plan without a tested methodology.
If I dropped you in LA without a map and told you to get to Denver I'll guarantee you'll find a tried and true method to get there.

 

[wayneL]

Anyone tested Elliott Wave? How about Wyckoff style methods (tradeguider etc)?

Just wonderin'

 

[peter2]

In support of Dutchie's good intentions to contribute.
-------------------------------------------------------------------------

Trading Business Plan (SFund)

Main business activity: To use the ASX market to increase the size of the fund for the members' retirement. This involves the buying and selling of ASX stocks and the SPI futures contract which is done in accordance with the business trading plans.

Business Goals: To increase the fund size 20% pa (average) with a max draw down of -10%.

Business Risks: (plans for backup, alternatives ...)
(a) Equipment breakdown (computer, ISP, data backup ... )
(b) Broker breakdown (eg MFGlobal, access to ETrade, over zealous exits by MM)
(c) Market (volatility, news, trading suspensions etc)
(d) Financial (portfolio heat, individual trade risk, pay pensions, business costs, cash flow ... )
(e) Trustee/trader (health, mindset, style drift ...)

Business Trading Plans:
(a) Creation and back testing of trading plans to be used in business
(i) fitness for purpose (W%, AW/AL, edge, frequency, max and average consecutive wins/losses )
(ii) Identifying best market conditions (implementing plans for the right market conditions)

(b) Investigation of appropriate money management models to comply with goals.
(i) max/min portfolio heat
(ii) position sizing models (FF, equal size, other ...)

(c) Detailed trading plans (including scans, stock selection, trading plan checklists, trade risks, position sizing ... )
(1) ASX trading plans
(i) Break outs (Darvas, horizontal resistance, asc tri ...)
(ii) Trend following (buying dips)
(2) SPI hedging (offset for down trends)

(d) Forward testing of trading plans to confirm suitability of resources for implementation.

Routine Business Activities (implementation of all processes (plans) of the business)

Performance monitoring:
(a) Annual audit and tax preparation (goals attained?)
(b) Performance of trustee/trader in following trading plans (continual)
(c) Performance of trading plans (compared to back testing stats, real time monitoring)

Business quality improvement process
(a) for trustee/trader
(b) for trading plans
(c) research new trading plans

 

[dutchie]

Nice post peter2

Thanks for words of encouragement, Julia. Not deterred at all.

All posts welcome. As always each member will get different things out of the thread. At the least, hopefully, it will make them think about what they are doing.

 

[tech/a]

Anyone tested Elliott Wave? How about Wyckoff style methods (tradeguider etc)?

Just wonderin'

Elliot evidently has been tested by those at esignal but I haven't.
Kris the PHD and I are working through VSA.
We will publish the results when we have verified the many many variants and combinations.
No it won't be free.

 

[motorway]

Anyone tested Elliott Wave? How about Wyckoff style methods (tradeguider etc)?

Just wonderin'

Just as food for thought !

Any real Scientific Method
of recognizing Accumulation and Distribution
is real
= it works

Wyckoff is a name given to such method.

It's like chosing to use gravity to roll down a hill.

It just is going to work.

Everything else ?.. What most people do proverbial 99% of them ?

Maybe Needs a Blue print (long time since I really used them and then really didn't )
Why ? Because all such methods are NON OPTIMIZED derivatives ..

I mean momentum , trend following & Oscillation Indicators.

They are all Non optimized derivatives of averages of price volume and/or time

When what matters in the actual traded Prices , Volumes and Times.

They are non optimized in regards to the accumulation and distribution that matters.

That is that in the process of being.

Supply and Demand.

These need to be identified and measured.

Not the artifacts they throw up and leave behind.

Plato's cave anyone ?

Plato lets Socrates describe a group of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall by things passing in front of a fire behind them, and begin to ascribe forms to these shadows. According to Plato's Socrates, the shadows are as close as the prisoners get to viewing reality.

He then explains how the philosopher is like a prisoner who is freed from the cave and comes to understand that the shadows on the wall do not make up reality at all, as he can perceive the true form of reality rather than the mere shadows seen by the prisoners.

Shadows need Blueprints

Reality Does not. It just works !

Motorway

 

[wayneL]

Just as food for thought !

Any real Scientific Method
of recognizing Accumulation and Distribution
is real
= it works

Wyckoff is a name given to such method.

It's like chosing to use gravity to roll down a hill.

It just is going to work.

Everything else ?.. What most people do proverbial 99% of them ?

Maybe Needs a Blue print (long time since I really used them and then really didn't )
Why ? Because all such methods are NON OPTIMIZED derivatives ..

I mean momentum , trend following & Oscillation Indicators.

They are all Non optimized derivatives of averages of price volume and/or time

When what matters in the actual traded Prices , Volumes and Times.

They are non optimized in regards to the accumulation and distribution that matters.

That is that in the process of being.

Supply and Demand.

These need to be identified and measured.

Not the artifacts they throw up and leave behind.

Plato's cave anyone ?



Shadows need Blueprints

Reality Does not. It just works !

Motorway

Most of your posts are a bit opaque and esoteric for me. This one perfectly clear.

Agree.

 

[tech/a]

Motor way

It just works until something changes
Even gravity
Oxygen
Night and day as we know it
Works until something changes
We need to know as early as we can that a change is on the cards
Without a blue print we cannot see the change occurring.

So see your point but think your using a blueprint even if you don't think you are.

 

[motorway]

Motor way
but think your using a blueprint even if you don't think you are.

Yes..

It just works until something changes

Yes this is important.
But it is all the factors that are important.

Some time VOLUME
some time time
Often time the way price hunts for volume.. without finding it

So conditions change
markets trend and churn

A wonderful Study
That Probably never ends



But still a big difference between what I call Shadows and Reality.

Motorway

 

[tech/a]

A wonderful Study
That Probably never ends

EVOLUTION

Everything has it.
From Planets to People to PRICE

 

[Joe Blow]

OK, we're only two pages into Dutchie's thread and although it clearly hasn't gone to plan so far I don't think there's any need to start removing posts as there's some useful discussion emerging already. Lets keep it intact and just move forward from here.

I would ask everyone to keep in mind that this is Dutchie's thread and he will contribute to it at his own pace. He is under no obligation to post any more frequently than he would like to.

Lets keep the discussion constructive, civil and centred around Dutchie's discussion points as mentioned in the thread's initial post.

Thank you all for your co-operation.

 

[dutchie]

TIP02

The market(s) is manipulated.

There are people, syndicates, fund managers et al (the smart money),out there with big wads of money who have knowledge of the market and are able to use their resources to manipulate the market to their advantage.

That's what the retail trader (you) are up against.
It’s like turning up to poker game with $500 and only a rough idea about the rules of poker and on the other side of the table sits a seasoned poker player who knows all the tricks and has a kitty of $5 million. Who do you think is going to lose all their money??

Most peoples’ money runs out before their mistakes do.

It is impossible to beat these people your only hope is to ride the market with them.
There are statistics out there that say 80%-90% of traders fail.

Do you want to risk your hard earned capital at those sort of odds?

You may think “Oh, I am smart, I am definitely in that top 10%-20% and therefore I can’t fail.”
I don’t want to discourage you but…….no you’re not (I have a 4 out 5 chance of being right).
I thought that once too and boy did I get smacked around.

Their method is fairly simple: buy off the people who are selling (sometimes in a panic) because there is bad news; accumulate at low prices; then sell to people who are buying (sometimes in a frenzy) because there is good news, at higher prices. Do this over and over again – and they do!

So you need to sell on good news and buy on bad news ( an oversimplification I know and you still need to use other skills as well). Don’t forget for every seller there is a buyer and for every buyer there is a seller. Why are they buying when everyone is selling? Why are they selling when everybody else is buying?

The markets are also manipulated because the news is manipulated.
Headlines - “Economy is improving as oil prices rise”. Next day “Manufacturers suffer under higher oil prices” - so what is it good news or bad news – neither – its manipulation.

A typical example of manipulation – say the smart money wants to accumulate some shares in XYZ. During the morning auction they will sell XYZ to make the price go down. During the first hour of trading they will continue to sell XYZ (taking out stops that they can see sitting there) till the price goes down say 50c. They may have used $250,000 to do this. For the rest of the day they slowly start buying XYZ (this of course slowly raises the price). By the end of the day the price has risen 50c to where it started but there has been $5 million in turnover. (i.e. lost $250,000 to gain $5million at cheaper prices).

There are lots of other ways that the market is manipulated - inside trading, lies, rumours etc etc.

How do the 10% - 20% succeed in beating this manipulation?
The short ,simple answer is - education, watching and learning, maybe for 3-5 yars, to “get it”.
More on that later.

 

[joea]

TIP02

How do the 10% - 20% succeed in beating this manipulation?
The short ,simple answer is - education, watching and learning, maybe for 3-5 years, to “get it”.
More on that later.

dutchie
Do you really believe that it will take 3 - 5 years to get it.
With VSA, books on "price action" that have just come out, software availability etc.
books that explain VSA are now readily available. With more to come out this year!
So I think people will learn quickly(those that can grasp it). Traders need and "edge" to be more successful, and that is probably why this forum has such a high guest viewing.
Those "guest" probably view several forums to look at stock tipping and the new posts. So I would think people are learning quickly due to the works of people like Joe Blow and his team. The people who want to learn, will learn quickly. just a point!
All the best with your thread.
joea

 

[Gringotts Bank]

There's a few very easy ways around the manipulations you describe dutchie.

1. stick to very small cap and low priced stocks. Funds won't go near them for 2 very obvious reasons.
2. trade stocks that can't be short sold (again, this is the small end of town, with a few exceptions).
3. Avoid lies and fudging of the books by relying on T.A. as opposed the fundamental data. Charts rarely lie. Boards do, especially in stocks outside the top 200.
4. not sure about syndicates. I've often thought how incredibly hard and risky it would be to take a stock and make it run hard for a day completely off your own funds (even if you had 10 traders with 10 million). So I don't think syndicates are a problem.

 

[tminus]

dutchie
With VSA, books on "price action" that have just come out, software availability etc.
books that explain VSA are now readily available. With more to come out this year!
joea

Do you have any recommendation for VSA books?

 

[joea]

Do you have any recommendation for VSA books?

tminus
If it is under the VSA banner, the books that I have seen are:
Master The Markets (free download)
Trading in the Shadow of Smart Money, and it's supplement books to show the setups.
The supplement books only describe the setups in words as far as I know.
Basically the tradeguider software is a requirement. its explained in MTM.
joea

 

[tech/a]

While I do have a great deal of respect for Volume Spread Analysis and I have seen manipulation in the Index Futures I feel the notion of Market Manipulation has been popularized by Tradeguider--- in particular Gavin Holmes and his massive relentless marketing machine.

Frankly in these markets just like everyone else the " SMART " money isn't that smart.
I'm not seeing too many outperforming the market.
Not only that but every time you see a change in significant buying or selling of shares you'd expect these " smart " people would be rewarded with a rising or falling stock.
Truth is it rarely happens like that

Just check a few announcements in the past and see the price action.
All of us including " Smart " money look really smart in a trending market.

The common notion is that very high volume in either direction is " Smart " money either entering or leaving a stock.
Yet you'll also be told that very large holders will leave or add to a holding over a long period of time and not in one fell swoop.----- which is it?

I have been doing a great deal of work testing VSA and many of the arguments given to those disappointed at poor results when taking what they believe to be VSA signals.
( one would be told to look at past history ---- as one example).
Don't be so sure that all results are poor or tha t VSA or indeed any form of analysis is the holy grail--- or even the/an " EDGE".

When we are finished this study it will be available ----- on the open market.

As for " getting " it.
I often see this argument targeted at those who can't see the value of Gann / Elliot / Point and Figure / Market Profile and now VSA.

I like most who are sure "They Get it" have my own definition of what it is you NEED to get--- to get it.
Interested in Dutchie expansion on " Experience "
And others who like me believe we understand what it is we get.

 

[joea]

Dutchie
In the world of trading there is a term "market master" and it covers your ability to trade.
The following site talks about the modes of competence. That would be needed to match the manipulator.

http://www.marketmasters.com.au/37.0.html

In "Charting the Stock Market", the writer refers to the buying and selling of a stock as a "campaign". These guys have it pretty well rehearsed, but it is there to be absorbed by upcoming traders. i.e. how to do it profitably.
joea