The Biggest Trading Lessons Thread

[tech/a]

well, hypothetically, what if your choice of stocks consistently dip before an uptrend, and you get stopped out consistently? that would erode your capital too.

If anyone is even slightly concerned about this situation occuring,it will be because they are trading a theory,or at best a well laid out un tested plan.

It is here that a tested and proven system/methodology with its associated numbers and blueprint give the trader confidence and a positive edge/expectancy.

 

[motorway]

well, hypothetically, what if your choice of stocks consistently dip before an uptrend, and you get stopped out consistently? that would erode your capital too.

just a thought. of course one can position stop losses below support levels etc etc but there is still that minute possibility of stop losses slowly eating away at you.

Well How are you defining an uptrend?

As a smooth line?

If prices move in waves
Then an uptrend is a series of higher highs and higher lows

Stocks will continually dip in up trends..

It is not that they dip but how they dip that confirms or negates an uptrend.

So part of what makes a stop more effective in giving

the trader confidence and a positive edge/expectancy.

Is what part of the trend you are entering.. And how you defining and recognizing a trend..

You can buy the bulges or the those successful tests on the dips.
On a bulge demand is creating supply.
On a dip supply is generating demand.

In between demand generates demand and supply generates supply.
Every dip and bulge is a test of the trend when a test is passed the trend is confirmed.

Stocks dip because buying generates selling there are waves inside waves.

of course one can position stop losses below support levels etc etc but there is still that minute possibility of stop losses slowly eating away at you

And if you buy as close to that support as possible
The natural movement will mean very few stops being hit even with tight stops. But if they are You probably get a better entry .. If you still want one.

A breakdown of a bullish definition (fall through support) might mean something significant is changed..


motorway

 

[purple]

ha ha ha...sorry, i'm finding it hard to concentrate after coming out of the ASF Joke Thread...who knew money-faced traders could be e-stand up comedians...

Moderators, is there a Stop Loss thread somewhere? don't want to bring this thread too far off topic...

 

[The Barbarian Investor]

Notice how the old adage: Cut your losses short and let your winners run is totally against the way we are naturally psychologically wired as human beings.

But is there any1 out there that are holding onto losing stocks that have gone from $10 to 0.007 ?? (tech stocks)
In my opinion theres PLENTY
Why?

Because selling at a loss is very hard, its like admitting you were wrong, and of course those champion fund managers who i quoted the other day about worldcom, have the approach of, its never a loss until you sell LOL

Yep

I've spoken to a couple of people who held CHEMEQ to the end, a friend of the family sold his two Investment Properties (pre WA Boom) to a developer and bought a HUGE chunk of CMQ (never having been mixed up with stocks before) which was touted to be a $30 stock one day

I believe he held on until (very near) the end hoping it would recover

 

[theasxgorilla]

On a bulge demand is creating supply.
On a dip supply is generating demand.

In between demand generates demand and supply generates supply.

motorway,

That was a superb post. Can you elaborate or confirm if I'm on target with my interpretation?

The higher prices resulting from demand creates supply by attracting sellers...vice versa for supply generating demand.

In between the lower prices which occur due to supply encourages further selling and a rise in prices due to demand encourages further buying?

ASX.G

 

[CFD]

I know you will want to hear it from MW, but yes that is what his teaching say.
Prices rise in search of supply and fall in search of demand.

In between is an interesting bit. I think it's where neither buyer or seller has an advantage and where a fair price is obtained by those who need to trade on the day.

 

[R0n1n]

Here are mine.

1. Never chase a stock that has taken off, wait for it to consolidate or let go.
2. Never buy at whim, gut feeling, angel on my shoulder feeling.
3. Never buy at the opening of the market, wait for 1/2 hour to 1 hour.
4. Never buy againt the trend.
5. Check all the indicators. Volume and RSI are must and check market news.

 

[motorway]

motorway,

That was a superb post. Can you elaborate or confirm if I'm on target with my interpretation?

The higher prices resulting from demand creates supply by attracting sellers...vice versa for supply generating demand.

In between the lower prices which occur due to supply encourages further selling and a rise in prices due to demand encourages further buying?

ASX.G

I think this is where an accurate understanding of how the character of price and volume action can reveal the creation , sustaining and termination of trends .

We have to keep in mind that volume traded is not the same as liquidity.
Liquidity defined as the impact of any one transaction on the subsequent transactions. That there is a different liquidity for sell orders and buy orders at any particular time and that the context that the action in the moment is occurring in is crucial..


Up trends, downtrends , sideways ( different from nothing )... All in their way crystallize and generate a following

The liquidity for buy and sell orders is very different in a downtrend than an uptrend...

Large volume can bring about a large movement in price
or it can simply generate demand or supply

What really cause large price movements is changes in liquidity

liquidity imbalances.....

Price moves in waves of buying and selling.

When a following is generated... It is then that a liquidity imbalance is crystallized....

We can look at different time frames
daily weekly monthly
We can look at different magnitudes of moves

But really waves transcend defined time and defined magnitudes.


Accumulation/Distribution ... Think about it buying generating selling , selling generating buying.. waves swinging up and down , bounded , meeting edges

How do We get waves ? Anywhere ?... Ocean ?.... Wind provides energy..
A skipping rope ? Someone has to be holding the rope.

All sideways need not be Accum or Dist it can be just nothing, random movements.

No wind blowing on the water... No one holding the end of the rope...
No waves....

What stands opposite random disorder and meaningless movements ?
Order.... what creates order ? energy ... what is energy ? Here it is information..

Some sort of information is the energy that creates meaningful waves
When someone is holding the rope they can manipulate it ,make it move..

In a range buying generates selling and selling generates buying
When there is some sort of information , energy .When someone picks up that rope..
Movements then take on some sort of order..

We get waves.

A nothing range becomes accumulation or distribution
Positions are taken and waves of activity that will gather a following are being generated.
How ? By change of ownership and crystallizing of sentiment...

Liquidity imbalance is built up... Buying starts to generate more buying. A range also build contigency ( All those who will buy or sell when price does move) Accumulation gives way to markup. Then Ease of movement
No longer need volume to produce markup... Inventory just gets a new price ticket.
Waves of buying and selling then unfold very differently
higher highs higher lows
selling waves have little ( in comparison ) following

But new information is always flowing like the wind

At some stage prices reach an overbought , top heavy state...
Waves have overreached like waves that rush too far up the shore
With energy spent.. It just flows back ..
We with mkts though have two waves , selling and buying.
Waves can just rollover and subside like on the beach or they can violently meet with the other side.

In every trend there are ranges
and in ranges there are trends
look at all time frames , all magnitudes...

ranges build trends which then terminate back into ranges

buying generates selling----> until a liquidity imbalance
prices jump out of the range gathering a following
buying generates buying
Sellers place limit orders above the depth
A series of higher highs and higher lows

waves of buying and selling a clear following.

liquidity imbalance is finite
markup over... Range.. Buying generaties selling .selling generates buying.
Only way you can have a range.. Information energy creates order
Range again involves change of ownership crystalizing of sentiment..
( Information can also be of various kinds . Some real knowledge to just someone watching the price action )

Look at different magnitudes
Look at different time frames

Look for the trends and ranges on different time frames
Look for the character of bars and waves ( a series of bars only make up one bar on a larger time frame )

Look for where the liquidty imbalances are being created...
Look for serious information driven accumulation and distribution.

The most important change of ownership is
between weak and strong hands
different chracteristics at bottom and top of waves

Strong hands are forward looking
weak hands are backward loooking
one is early and on time ,buying or selling for the next move
the other is always late buying or selling the past move.

If you see a range or a trend in any time frame
look at the context from the perspective of the other time frames...

Range or trend... both are made up of waves of buying and selling, demand and supply , that build and gather a following..

Volume will tend to define where the followings start and end..

motorway

 

[motorway]

Following ....

Everyone is following....Something..

When We buy We don't want too much following
We want some sellers
After We have bought
We want everyone to follow after
We want all buyers esp when it comes time to sell.

Everyone else wants the same
We Buy something because We are following a signal of some type
A signal generated by the action of others
Others in turn follow along after Us..

Hence prices move in waves
that gather followings

This has a life cycle.

Everyone is trying to manipulate price in some way.


motorway

"For the savvy market player, knowing when to jump on the bandwagon is only half the battle won. You must also know when to jump off "

Imagine a bandwagon rolling slowly forward. Music is playing. A few people on the wagon are having the time of their lives. The sweet music begins to attract many people standing by the side of the road. These people unable to resist the pleasant sounds, rush to join the party.

They jump on the back of the wagon. The wagon gradually slows under the increased weight. It comes to a stop. A few wise souls get off pleased at having enjoyed the ride.

The rest of the crowd however, sees this as an easy opportunity to jump aboard. There is a mad rush to jump aboard. The wagon now under the increased weight begins to lurch backward.

Momentum picks up, the wagon is upended and the latecomers are thrown off getting crushed under the wheels. The party has turned into a nightmare and a disaster. The last of the hangers on crash to the ground maimed and broken.

The wagon finally comes to a halt.

Standing in the shadows behind the trees are a few onlookers. Strangely they are the same group that enjoyed the first ride and got off early.

This group not only got off early but they were the organizers of the party!

All the broken souls by the side of the road can do is watch as these masters of the game go back to work. They begin the game again. The wagon moves slowly forward. The music is turned on. The crowd is attracted.

From Richard Wyckoff's Stock Market Technique, 1934 an Experts bandwagon.

Richard Wyckoff recognized who the experts were and He used this information to make a vast fortune . He was a master swing trader who traded shares on the New York Stock Exchange.

He made a statement that applies to trading that may live forever

"Listen to what the market is saying about itself, not what others are saying about the market."

 

[hatrader]

Here is a original one.....

--- Make sure you have a STEADY hand on the mouse!---

Crikey, after a heavy celebration the night before, I had the platform loaded ready for a CFD buy trade, hand on mouse ready for the appropriate price when the "twitching" prematurely entered me into the trade.

I was lucky and got out without loss.

 

[CFD]

And another ...
One should never try and second guess the response!