Reminiscences of a trade-learner , journey to become a PRO

[oilman5]

since we are approaching now trade-learning some quotations may be called for.
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1]We trade only price. We do not trade information. We do not trade knowledge (of the asset being traded). Nor do we trade computing power or expertise. We do not trade anything at all other than price: ie: the number. Therefore since the only factor that counts in this game is the price, it is only smart to focus all, or almost all, our attention on this number on the price and its movement; in other words, what the price has done in the past and is doing in the present. Approach the game/business of trading in this manner - an up down number game where the focus is on what the price does and not why - and you will be on the right path to succeed as a trader

You are trading against the wealthiest and most knowledgeable people and organizations in the world.Do not delude yourself, you cannot compete on their terms: information, knowledge, experience, staying power, and so on.Do not spend time and energy trying to figure out why a price moves.Focus all your attention and energy solely on what the price is doing.You are a trader. A trader does not get paid to understand or explain why something has happened. The question "why?" deals with the past. The question "what?" deals with the present and provides the best clues to the future. And never forget that you are trading "futures," not "pasts." Discovering the supposed "why" of a price move will provide you with little more than temporary intellectual comfort. Whereas observing and focusing on what the price has done and is doing will help you anticipate what the price will do in the future. Leave the intellectualizing to those paid for their words not their deeds, i.e., journalists and brokerage house analysts

Predictions tend to lock you into a preconceived scenario of the future making it more difficult for you to adapt to unforeseen events.Futures trading is not like betting on a horse race. In futures trading you can change your bet as the race progresses. In trading, as soon as you make a specific prediction about where a market is going, you sacrifice your freedom. A trader must always feel free to change trading positions on very short notice. And most importantly, you do not need to be good at predicting to do well at trading. If making predictions can be quite harmful and you do not need to be good at predicting in order to be successful, why bother with predicting at all?
The average trader focuses too much on big payoffs. This is a stock market mentality, i.e., buy it and ride it to the sky, or sell it before the crash. Trading is not about predicting and catching the "big" moves. This is "fantasy" trading. It is the "lottery" approach to trading which, in the end, pays off only for a very, very few. Trading is about "seeing" momentum and positioning with it, "seeing" trend and following it.

The average trader relies too much on feel, on intuition. The possibility that any one of us is a natural market genius is realistically somewhere between zero and none. Accept that you will never be a world class athlete, sing a perfect musical note, or find a theory beyond relativity; and neither will you ever reliably predict the future. But be aware that you can know the past and see the present.

If you're going to trade futures, you might as well do it correctly; and doing it correctly means doing it intelligently. Look at reality. Futures trading is a competition. It is financial warfare. You are trading against thousands of smart, aggressive, extremely well-informed, very well financed, extensively experienced professionals. Look at the facts! Over eighty percent lose; so by definition the average trader (even the well above average trader) is going to lose--eventually.
- Chick Goslin
2]Most traders and potential traders are looking for rules-based trading systems or approaches. Using rules to make money is, of course, incredibly appealing; however, such cut-and-dried rules are seldom accompanied by the most important rule - a rule to connect, manage, and harmonize all the other rules.
Every trader will be tested emotionally, mentally and monetarily to varying degrees in his career. Most times, it’ll be extremely unpleasant and you’d most likely want to quit right there and then. Only those who can endure this kind of hardship, learn from their mistakes and persevere on will make it.
Trading with confidence has to do with having a method which you have proved yourself, and which you know will win over time if you follow it consistently. That means being able to recognize the conditions which allow you to trade, and only trading when they are all present. This is comparatively easy with hindsight: when we're actually there, we can see when all the pieces fit. But beforehand, we don't know that all the pieces are going to fit

3] The study of charts is not as some people claim, the mere identification of certain labeled patterns made by the actions of stocks. That sort of thing borders on the mechanical and does little to aid in the development of one's judgment. But when a student undertakes to read from his charts the purposes and objective of those who are responsible for a stock's action in the market, he is beginning to see, in a true light, the meaning of scientific stock speculation.
The market always tells you what to do. It tells you: Get in. Get out. Move your stop. Close out. Stay neutral. Wait for a better chance. All these things the market is continually impressing upon you, and you must get into the frame of mind where you are in reality taking your orders from the action of the market itself — from the tape. -- Richard Wyckoff

As traders, we cannot afford the luxury of wishing and hoping because it puts us in a passive relationship with the markets. When we wish and hope, we are shifting responsibility on to the markets for making something happen instead of confronting the conditions and doing something about it ourselves. If we find ourselves wishing and hoping, it is an excellent indication that we don't know what is going on and as a result need to get out of the markets. - Mark Douglas
4]....... the problem with amateurs, they only have half a plan, the easy half. They know how much of a profit they're willing to take, but they don't have the foggiest idea how much they're willing to lose. They're like deer in the headlights, they just freeze and wait to get run over. Their plan for a position that goes south is, "Please God, let me out of this and I'll never do it again, but that's bullshit, because if by chance the position turns around, they'll soon forget about God. They'll go back to thinking that they're geniuses, and they'll always do it again, which means that they're sure to get caught, and get caught bad.
What most people fail to understand is that while you're losing your money, you're also losing your objectivity. It's like being at the craps table in Vegas, and the fat bleached blonde in the sequined dress is rolling the dice, and you're losing, and you're determined that you're not going to let her beat you. What you've forgotten is that she doesn't care about you, she's just rolling the dice.
Whenever you have jealousy as an emotion, or greed, or envy, it distorts your judgment. The market's like the bleached blonde in Vegas, it doesn't care about you. That's why you have to put aside your ego and get out. If you have trouble doing that, as most people do, be like Odysseus: tie yourself to the mast with an automatic stop and take your emotions out of play. - Marty Schwartz
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[oilman5]

some more gems
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5] "It is very important to visualize the many ways in which the market may unfold, rather than trying to forcast or predict how it will unfold. With a market understanding, you can begin to visualize each possibility, and what each would indicate to you about the market and your position."
I'm sure there are highly profitable pros somewhere who trade wave patterns, moving averages, chart formations, and the like. In several years of working hands on with such traders, however, I have yet to meet one who uses these methods. The pros do, on the other hand, care very much about who is in the markets and why markets are moving. The principles provide a framework for making sense of market behavior, which then can be used to filter the setups provided by charts, cycles, and the like. The really good traders understand markets; they don't just predict them. - Brett Steenbarger
Speculators and investors who simply guess, follow tips,rumors, newspaper talk and so-called “inside information"have no chance of ever making a success in market- WD Gann
Really rich-and smart-people don't make big bets. First they are not out to "prove" anything, they are out to make more money, and second, they know that risk control is as important as the other two legs of speculation, selection and timing. That is all this business of commodity trading gets down to, selection, timing, and risk control. - Larry Williams
To play the market properly requires silence, and seclusion to examine the situation, and to appraise, and deliberate on new information that comes to hand during the trading day. One must always have a clear strategy to play the market and clear rules to follow. - Jesse Livermore
I have a theory that the public is always guided to do the wrong thing so that they will make a contribution to the market infrastructure and provide funds for the massive communication costs, buildings, salaries, brokerage house traders, dealers, hedge funds, and mutual funds that must survive in order for the whole ball of wax to continue. - Niederhoffer
6]People underestimate the time it takes to succeed as a trader. Some people come here and think they can sit with me for a week and become great traders. Gaining proficiency is the same in trading as in any other profession—it requires experience, and experience takes time.
A man few years ago asked me, "How long will it take me to become a professional trader ?"
"Three to five years," I said. You can't expect to become a doctor or an attorney overnight, and trading is no different. It is a vocation that takes time, study, and experience. Wisdom is a product of knowledge and experience, the learning curve is very steep here. ---- Mark Cook
A characteristic of a good trader is to be realistic and understand what comes from noise versus what comes from true data. Another is to understand whether you have done something stupid, or if you were too quick at judging yourself. Another characteristic of a good trader is being able to find an effective way to deal with his emotions, to set them aside. - Taleb
6] a story to understand a RIGHT trader................
there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others.He did not seem very keen to get tips -- that is, he never asked the talkers what they'd heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again -- when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn't donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap's answer was always the same.The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?"
Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!"

One day a fellow named Elmer Harwood rushed into the office, wrote out an order and gave it to the clerk. Then he rushed over to where Mr. Partridge was listening politely to John Fanning's story of the time he overheard Keene give an order to one of his brokers and all that John made was a measly three points on a hundred shares and of course the stock had to go up twenty-four points in three days right after John sold out. It was at least the fourth time that John had told him that tale of woe, but old Turkey was smiling as sympathetically as if it was the first time he heard it.
Well, Elmer made for the old man and, without a word of apology to John Fanning, told Turkey, "Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I'll be able to buy it back cheaper. So you'd better do likewise. That is, if you've still got yours."

Elmer looked suspiciously at the man to whom he had given the original tip to buy. The amateur, or gratuitous, tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out.

"Yes, Mr. Harwood, I still have it. Of course!" said Turkey gratefully. It was nice of Elmer to think of the old chap.
"Well, now is the time to take your profit and get in again on the next dip," said Elmer, as if he had just made out the deposit slip for the old man. Failing to perceive enthusiastic gratitude in the beneficiary's face Elmer went on: "I have just sold every share I owned!"
From his voice and manner you would have conservatively estimated it at ten thousand shares. But Mr. Partridge shook his head regretfully and whined, "No!No! I can't do that!"
"What?" yelled Elmer.
"I simply can't!" said Mr. Partridge. He was in great trouble.
"Didn't I give you the tip to buy it?"
"You did, Mr. Harwood, and I am very grateful to you.Indeed, I am, sir. But --"
"Hold on! Let me talk! And didn't that stock go up seven points in ten days? Didn't it?"
"It did, and I am much obliged to you, my dear boy. But I couldn't think of selling that stock."
"You couldn't?" asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers.
"No, I couldn't."
"Why not?" And Elmer drew nearer.
"Why, this is a bull market!" The old fellow said it as though he had given a long and detailed explanation.

"That's all right," said Elmer, looking angry because of his disappointment. "I know this is a bull market as well as you do. But you'd better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself."

"My dear boy," said old Partridge, in great distress "my dear boy, if I sold that stock now I'd lose my position; and then where would I be?"

Elmer Harwood threw up his hands, shook his head and walked over to me to get sympathy: "Can you beat it?" he asked me in a stage whisper. "I ask you!".I didn't say anything. So he went on: "I give him a tip on Climax Motors. He buys five hundred shares. He's got seven points' profit and I advise him to get out and buy 'em back on the reaction that's overdue even now. And what does he say when I tell him?

"I beg your pardon, Mr. Harwood; I didn't say I'd lose my job," cut in old Turkey. "I said I'd lose my position. And when you are as old as I am and you've been through as many booms and panics as I have, you'll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don't feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It's a bull market, you know." And he strutted away.............
7]"The art of contrary thinking consists in training your mind to ruminate in directions opposite to general public opinions; but weigh your conclusions in the light of current events and current manifestation of human behavior."
"It may appear to some readers as though the theory of contrary opinion, or the art of contrary thinking, is a cynical one. I do not think it is at all. I believe it is merely a matter of getting into the habit of looking at both sides of all questions and then determining from your two-sided thinking which is the more likely to be the correct vision - which in turn leads to the correct conclusion." Humphrey B. Neill
"For every style of trading there is a "perfect" market environment. When the market is aligned to your style, everything you touch will turn to gold. Your patterns will set up and run without stress to your target zones, your excitement and confidence will soar as your win cluster grows. But these glorious periods seldom last long. Stops will begin to appear again, and then perhaps a loss cluster. This constant cycle from "zero" to "hero" and back again is why trading is the manic depressive business it is. This constant shift from in alignment to out of alignment is what I call the payout/payback cycle."-Bo Yoder
8]Without the stabilizing effect of a theoretical framework of how the markets function - whether intuitive or logical built upon the trader's fascination with the inner workings and price movement - research, trading-plan development and trade execution will remain volatile. - Joseph Hart
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[oilman5]

Gems u reqd to know
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9]Trading financial markets is difficult, because the markets by their very nature must have more losers than winners, this is how supply and demand works. Markets accomplish this by frequently whipsawing, moving rapidly from one price level to another in two or three bars preventing you from getting a position you feel comfortable with. This puts the trader under stress almost immediately he has entered the trade. To add more problems to the would be trader most of the information received about the stock market is incorrect or at its best, is misleading. - Tom Williams
10]"If the market or individual stock does not act according to one's primary analysis, the market itself is trying to tell the trader to change that analysis, or at least cut losses short and get out.
Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited - Soros
11]And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. .....Jesse Livermore
12] Most investors remember and learn from what has occurred in the recent past. Investors must realize that they must learn from periods that might extend beyond their own memory. Market cycles can last a long time, and people have too much at stake to make all the mistakes themselves, so they must learn from market history - David Tice
13]In this business if you're good, you're right 6 times out of 10. You're never going to be right 9 times out of 10. .........Peter Lynch.
Trading is 'teachable' but its definitely not something you can teach through seminar/lectures, there are just too many subtleties involved....CV
14]"The main goal of each trade is to minimize risk rather than maximize profit. Positions are managed according to the market's behavior after we've made our trade. We can't really predict the outcome. For example, if we are trading on a test, we don't know if it will lead to a true reversal or just a consolidation pattern before further continuation of the preceding move. We are trying to achieve a "headstart" in the right direction together with a chance to put in a tight stop."
Al Simpson: I would like to ask you a question that I have wondered over the past couple of decades: When you take a position, do you feel you have taken a good position?
Phantom: Never! Do you understand my NO? If a trader thinks at any time they have a very good trade, they are going to get removed from trading very quickly. I make the best trade on my trade probabilities program, but who is to say my guess is better than someone else's? Never do I know it is a good trade until it proves to be.
To feel you are making a good trade is signing your death warrant in trading. The majority of traders do certainly feel they have a good handle on a trade and are only putting on good trades.- Phantom of the pits
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15]Avoiding Confirmation Bias in Trading

Confirmation bias is the tendency to search for and overweight evidence that supports one's own position. This can be a major problem in trading, as it leads traders to become overconfident in their positions and stay in trades well after they should be abandoned. A simple example occurs when traders are in a position and then focus mainly on the indicators or market behavior that supports staying in the position.
In such instances, the stop loss for a position will not be a planned set of criteria. More likely, the stop loss will be pain: the position will only be abandoned when it becomes impossible to sustain a confirmation bias. Quite often, that point of pain will be an obvious point of disconfirmation, such as a break to new price highs or lows.
Trading with pain as a stop-loss is not only bad for the trading account; it makes it difficult to sustain a sense of confidence in one's work. It also leads to the kinds of frustration that can generate subsequent poor trading decisions.
When traders explicitly identify the risk and reward for each of their positions, they mentally prepare themselves for loss. In taking the threat out of normal loss, they remove much of the psychological need for confirmation bias. It is when traders feel the *need* to win that they are most likely to cling to information supporting their positions. Accepting the possibility of loss enables traders to view their positions as hypotheses: ideas that may or may not be supported by fresh market data.
The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge. Because I think there are certain situations where you can absolutely understand what motivates every buyer and seller and have a pretty good picture of what’s going to happen. And it just requires an enormous amount of work and dedication to finding all possible bits of information. - Paul Tudor Jones
There are no certainties in this investment world, and where there are no certainties, you should begin by understanding yourself.
— James L. Fraser
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[oilman5]

SOME USEFUL QUOTES
Losing less is more important then winning more. it's a long process of becoming a winner from a loser and psychology plays a major role. losing less gives us more confidence while trading and therefore resulting in better decision making abilities WHILE carrying a position. if we are trading with higher risk during the process of becoming profitable, we will mostly beat ourselves before the market beats us. we can't trade in fear and to minimize the fear, we need to minimize the risk. we cannot get over our emotions just by asking ourselves to do it. we need to understand those factors that trigger these ' greed and fear '.........Manpreet, a trade learner on psychology of trading.
Developing a feel and understanding of market dynamics is key to profitably taking advantage of short-term fluctuations. In foreign exchange trading this is especially critical, as the primary influence of intraday price action is orderflow. Given the fact that most individual traders are not privy to sell-side bank order flow, day traders looking to profit from short-term fluctuations need to learn how to identify and anticipate price zones where large order flows should be triggered. This technique is very efficient for intraday traders as it allows them to get on the same side as the market maker
Kathy Lien
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uote:
The longer I’ve been trading, the more humble
I’ve been forced to become. I don’t consider
myself to be a great trader. Whenever I have
been tempted to feel this way, I have been on
the brink of making a catastrophic trading mistake.
Louise Bedford
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My Synopsis is given here.
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there r 2 concept in finance for making money.
1] investment
2] trading
............gambling is sure way to lose. also mixing trade with investment.
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speculation is a different ball game.
Most data -study suggest 99% r definite to fail here.
My long journey/understanding on market sees success is ridiculously low because of poor discipline, greed /fear driven personality, not being independent trade learner and ofcourse poor knowledge.
INVESTMENT: bookish theory on investment-portfolio....blah-blah in std MBA college.
Analyst's wrong understanding of data.basic wrong assumption that forecasting is easy,only marginal error factor or av price buying and hold ,and by company's efficient business model + good price hype in market will give u money.
actually u can make money in this way using PATIENCE, understanding business-economy cycle.Being a contrarian ....buy at big correction.
TRADING : Here u r at market, so flow with it .....use momentum. stoploss is key as action speaks better. understand ur system first, entry exit rule , but set up and at what condition u trade.
a trader has to fight in 3 place........self , other trader and ofcourse MARKET.
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understand past suggests WHAT NOT TO BE DONE. but trading/investment really deals in future, So study on PROBABILITY ,SQC ,programming idea develops objectivity in u , strategic thought process,and psychologically cool sharp mind to decide under stress without damaging skill ......is requirement.
yes behavior modification takes 10yr+ to be flexible enough to do what NEED TO BE DONE NOW.
ANY FUND MANAGER TO WORK INDEPENDENTLY atleast takes 5+ yr,pl add his experienceof dual degree + execution skill learning and understanding marketing hype.
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let us clarify ..........both basic of investment and trading not told to free forum
INVESTMENT starts with concept of business. So enterpreneur comes first.HE has a zeal, supported by knowledge and money. Now requires adventurism , marketing click and ofcourse flow of fund.....all this make HIM sustainable and capable .THEN fund raise ..by equity or through bank loan , if HE can maintain ROA + growth , business succeeds. So durability is to be checked ,continuity is to be confirmed and business acumen of CEO makes a company click,WHICH CREATES A CANDIDATE FOR AN ANALYST/FUND MANAGER TO MAKE MONEY out of a name.
SO u as investor has to be shrewd ,well informed + understand hype in market.
NORMALLY to follow buy comparatively low and
sell later with better realization.BUT if he dont understand business/sector /business viability ..DONT EVER TRY TO INVEST DIRECTLY IN MARKET ,better come through MF.
So as a trader, first clarify who u r...............means ur time , knowldge on psychology , peoples behavior ,understanding of behaviorial finance,profit and loss,objectivity in mind, extra money availability.
WHY u can forecast , market shall follow, ur confidence, at what condition u understand u r wrong, necessary corrective action .......again comeback attitude, knowledge on ta,money management , habit of diary writing.
MOST imp is change of self , when market condition changes
there r few secrets in trading but difficult to implement , because our intellect tells us to sabotage ,so we use software for objectivity
TRADE SECRET
1] ALL INDIVIDUAL R NOT SUITABLE FOR TRADING ,IT REQD DIFFERENT MENTALITY/DISCIPLINE
2] MUST UNDERSTAND BUSINESS /PROFIT-LOSS/RISK AVOIDANCE FIRST.
3]OPPURTUNITY COMES TO U, IF U UNDERSTAND MARKET....IT TAKES TIME TO LEARN.
4] FIRST DISCIPLINE,THEN MONEY MANAGEMENT THEN SEARCHING OPPURTUNITY AND FOLLOW UP AFTER TRADE ANALYSIS.
5] TRADE FROM HIGHER BACK UP TIME FRAME.IF POTENTIAL OPPURTUNITY RS20.CASH ON Rs 10/-........KNOW WHEN NOT TO TRADE.
6] WIN OVER TRADE EXCITEMENT ,MAKE IT A BORING -REPEATATIVE ATTITUDE, TRADELIFE AND PERSONAL LIFE R 2 DIFFERENT THING
7] BE A SPECIALIST ON SOME STOCK/SOME SECTOR/PARTICULAR TIME FRAME
8] DEVELOP HABIT OF TELLING LOSS/WRONG TRADE.......IT MAINTAINS HUMILITY, a preventive doze...A SO CALLED SUCCESSFUL TRADER ONLY DIE BY SELF ARROGANCE.

 

[oilman5]

So new learner is getting ,what it takes to learn/understand
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In trading , novice learner gives high priority to entry.but pro on exit, and fund managers are on money management.unfortunately FM( young one ) dont know risk management and contingency to implement WHAT IF.
TO solve it ,i am giving 2 variables....market condition and trade set up.
Third where u fit , u should do yourself.
Market condition : 1] slowly up moving.......see 50dma uptrend, buy and hold easiest to play.normally country economic condition upswing
2] After continous upmove for some yr, media hype straight line index projection,analyst suggests 3yr projection ,forward looking p/e ,big enterpreneur r confident of capex and plans growth rate geometrically, WHILE economy moneyflow sustainability NOT possible,bear market starts.......shrewd traders join short in intermediate term downtrend.
Tool...10dma rapidly cuts down 100dma .
3] Market is rational , fluctuate within range, ......small target swing traders earn heavily,,,,
TREND is your friend... TREND TRADER goes back to market as snake oil vendor and teach the fools 'buy low sell high' ; ta ' dcf, cagr, They sell ...once upon a time....but fact is THEY dont suit in PRESENT market.
4 ] Market is efficient ........haha...present market,
a suffiently knowledgable -flexible with objective mind can earn here.HE knows to programme but takes trade what he likes, a strong filter .may be advance/decline signal & moneyflow .
By the way......market reversal at pivot a major right set up bias for intra day candidate.
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2]TRADE SET UP
a] flow with trend ....as per ur suitable tactics, see HIGHER HIGH in price
b] a pre determined reversal pt , confirmed by reversal bar
c] break out of certain narrow range, supported by 2 x av traded volume
d] unsustainable parabolic rise , so distribution started with higher sell volume..........short candidate
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scanner - pattern seach - volatilty study .........this r extra, basically confidence build up measure.
HOPE it helps to right initiation
Just for a thought
...........A stock in a persistent downtrend is providing a feedback signal that investors overlook when they go bargain hunting among stocks. The downward trend in price indicates that the majority of participants in that stock are voting negatively about the stock. They believe that the future financial performance of the company is, or will be, in decline.
Sophisticated investors are always looking to the future and their expectations about the fundamental performance of the company will shape their decisions to buy or sell the stock. The major holders of a stock and the other members of the inner circle know what the downtrend is forecasting. The members of the inner circle surrounding the market for the stock are more knowledgeable about the company and its financial performance and they are probably more sophisticated investors. The belief that the market is efficient and that all participants in that stock get the same information at the same time and correctly evaluate that information, just does not hold up in the real world. The sophisticated investor knows that the major trend of the stock price is very important. He tends to rely on the signals generated by the major trend of the stock price in the market. He is always alert for indications that the trend may be changing direction or strength.
It is especially important to consider how the financial media tends to reinforce the feedback loop. A stock that is going down in price will call forth explanations for the decline by the media because the media knows that their users want to know why the decline is taking place. These explanations may be delivered as established fact when they are nothing more than educated guesses.
Experience shows that downward price trends are usually more dramatic and volatile than the up trends. It is also true that both up trends and downtrends are the result of a random process. This does not diminish the value of watching the price trends of a stock. A stock’s price trend is actually a summation of the votes by buyers and sellers. In order to get the true meaning of the major trend it, is necessary to dump out the short-term noise in stock prices. There are several well established methods for filtering the stock price data to remove the noise.
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[oilman5]

GREAT QUOTES
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1]fROM A GREAT TRADER:Nothing is irrational in the markets... Markets can do whatever it wants, whenever it wants....
Never ever blindly trust what people write in the forum's/ blogs/books..... Not alway's they are telling you what they really believe in and their real market perceptions...
Bottom line of your account is not determined by how well you can read the markets but how well you can trade them....
2]“Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be.” – William Eckhardt
3]“There are many successful approaches and techniques for managing risk. The real difficulty is finding one that works for you. It could be systematic or discretionary, but it needs to suit you in order to protect you from yourself, that is, from your natural biases and your predispositions to act in a self-sabotaging way.”...........KK
4]“The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability – the reasoned probability – of that investment causing its owner a loss of purchasing-power over his contemplated holding period. …Investment possibilities are both many and varied. There are three major categories…
a)Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as ‘safe.’ In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. …Under today’s conditions…I do not like currency-based investments.
b)The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. …The major asset in this category is gold
c)My own preference…is our third category: investment in productive assets, whether businesses, farms, or real estate. …I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three… More important, it will be by far the safest.”-Warren Buffet
5]In market ,its important to know how market functions,how price behaves,but more important is how u behave with price,adjustment of self with price movement prepares you a level in which u find oppurtunity.
Trading is very easy,if you follow price,and trade as per plan .Right trading is nearly impossible ,if allow your emotion or others opinion to enter into your trade.
Trading is not group activity.Be alone, with your own plan & line of action ,success awaits for U . A dependable personality can only shine for some days.Here r lakhs of trade learners in market,but successful technical traders can be counted in fingers (consistently about 5yrs make above 50% annual return)In trading,i have success in momentum trading, counter trend swing, as well as break out................all have particular condition to succeed.AND on different condition , all of them have FAILED...its the mastery of setup/market dynamics on a particular condition makes U a successful trader.......
Sit idle , in a small range market..........join in break out side ,in the 1st symptom of breaking price barrier.
OILMAN5

6]The moment when a trader is able to change from the state of "understand the principle of probability" to the state of "thinking in probability mind set", he changes his world.- Mark Douglas
7] In market what is, is all that is important – at least with regarding making decisions. If you can put aside what should be, what could be, what ought to be, what would have, could have, should have occurred, and just pay attention to what is actually happening, the act of paying attention transforms what is. The greatest action, the wisest, the best action that you can take in almost any situation is to stay with what is, instead of jumping to conclusions or trying to come up with conclusions.” - John Henry
Trading is simply a transfer of accounts from those who don’t know what they are doing into the accounts of those who do. The consistently profitable trader knows whether the person on the other side of their trade is a novice trader or a consistently profitable institution....SAM (ota)
Without specific, clear, and tested rules, speculators do not have any real chance of success.There is always the temptation in the stock market, after a period of success, to become careless or excessively ambitious.It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day—and you lose more than you should had .
And when the market goes your way you become fearful that the next day will take away your profit, and you get out—too soon.
Fear keeps you from making as much money as you ought to.
The successful trader has to fight these two deep-seated instincts.
He has to reverse what you might call his natural impulses
He must fear that his loss may develop into a much bigger loss,
and hope that his profit may become a big profit - Jesse Livermore
..............................................
pl read through all these true statements

 

[oilman5]

So novice /new learner must face some dose on reality of trading
.................................................................................................
Never aim money...[greed will definitely ruin you]
a balance speed of 2hr a day..+3hr weekly analysis ..what i learn this week
discipline not only imp.. but to be followed..
you have to read..
you have to practice..
you have to analyse
yes its a game of hard work..
.........................................................................
Trading must be treated as business ..not hobby
its the dream .. supplier of new fool..
all mutual fund-FII r waiting../.
you must know how to handle business venture...dream vs. REALITY.
Nobody suits in trading..its not natural...its WAR,..MUST KNOW ART OF SURVIVAL first..
best single book to learn ..phantom of pit.
gist of the book is here : 1. be an observer first
2. learn from own mistake and other mistake......imprint this in mind
3.correct knowledge and behavior modification.
4. preparation yourself thoroughly for entry and exit.....with some superlative idea....what goes up must come down[mean reversion]...it takes time to rise but fall rate is quicker....
clock ..stands for timing....diary ..to write opinion and mistake study
5. behavior modification.....this unlearning process is key.......what works for u.
correct behave is....what to do under unexpected event......not emotional reaction.
6.share market is a loser's game....u must know to survive first.then learn probabilistic approach on right trade vs. learning trade[assuming loss]............add position to winner immidiately...and cut loser earliest whole @ a chop ..
7.design everything to all unforseen scenario....so that u can act while they occur..as its a journey on unknown.....be ready where to exit and when....on what condition........understand...rush problem of public.....in fear and in greed...always act before them.........must get out @ redoubtable top..........same way.....wait for a minor confirmation @ intermediate bottom...then enter.but act swiftly
8. always say.....i am only responsible for my behavior modification,proper observation to trade and correct reaction[execute] to market.i must adapt with market...not vice versa..otherwise sit idle...... i must understand bull trap...and check for it
i must think before i act/i execute a trade......[punch list]
9.sometimes i must look for reverse image[in chess terms look from otherside of board].....and plan for reversing the trade.[this is the toughest psychological hurdle i find to overcome]
10.Initially i should take a small position.........must be swift to liquidate that one if sense....
market proves u wrong.
11. always use own signal only for entry..........but use market guidance to continue/exit/addition ......or even reverse position.
this slow behavior modification is to be practiced unless it became ur 2nd nature......this is right way to trade for intermediate term.
12.when u hold a position ,within a reasonable time [as per ur chosen validity period]....it is not confirming to prove correct........better get out.
RULE 1:
In a losing game such as trading, assume you are wrong until the market proves you are right. Positions established must be reduced and removed until or unless the market proves the position correct. Why is rule one so hard to implement? The answer is that 98 per cent of all traders trade to be right. The rest trade the markets to make money. The fear of being wrong is more often than not a greater motivator than the fear of losing money. Be conscious of it when you are trading.

RULE 2:
Press your winners without exception. By incorporating rule two in your game plan from the start, you will be eliminating the desire to be proud when the market moves in your direction, and to take profits to show you are right. Traders love to be right. This is your enemy – to love to be right. Your motivation must be to love to do the right thing. When you think you are right in the market, this is just the beginning of your trade – not the time to take your profits to say to the world, ‘See, I was right!’ Who really cares if you were right? You will become the best trader you can be by being wrong small, not right small! Get that in your mind now. You are going to have to press your winners if you really consider yourself to have the ability to make a living or extra income from trading. Otherwise, face the truth that you are only playing to break even. The money will follow the correct action.

 

[oilman5]

1] STUDY MARKET...CONSIDER GLOBAL VILLAGE CONCEPT...
WHERE INDIA IS SUPERIOR...
EXPORT..OF SERVICE.. SOME CHEAP MEDICINE...

U IDENTIFY ..BEFORE OTHERS... YOU WILL DEFINITELY MAKE MONEY...

2]MONEY FLOW CONCEPT..
WHETHER FURTHER MONEY SHALL COME IN INDIAN STOCK MARKET

3]RISK OF FAILURE THE PREMISES....can indian products & services able to maintain its cheapness..
do FII money shall continue to pour....
failure of PREMISES must be checked,.
4]uncertain factor: global and local
IMPACT STUDY MUST BE READY & KEPT WITH WRITTEN POSSIBILITY,HOW IT SHALL IN YOUR CHOSEN TIMEFRAME OF TRADING
this is i call visualisation..
so that u can act when it happens...
5]MICRO VIEW...
INDIVIDUAL STORY OF ANY COMPANY..
6] WHAT MAY HAPPEN TO MARKET...AS PER BIG ANALYST
MIND IT ITS AN OPINION , NEVER TRUE ...
A FAILED TRADER.. ANALYST IS BORN...
7] CHECK PRICE(at present)...ITS SUPREME...ALL IFS & BUTS COME LATER...
so ta is helpful isnt???
forget pattern , follow what price is telling...
it shall move up or down..
use ma..ma.x as hints..
depending upon.. your time frame.. uplimit...price target
down limit .. loss pt...
now observe PRICE...WHO IS WINNING BULL OR BEAR...
join the winner..
trend is nothing but strengh in direction..

yes the REVERSE CAN HAPPEN ANY TIME..
.
flexibility..calmness. puzzle-solving attitude,.direction orientation..natural in mind

7]now comes entry..here the puzzle starts..
breakout..
pullback
retracement..
oversold condition..
as per me...all of them given SUCCESS to me..at particular time..
definitely failed in different market condition..
YES THE VARIABLE IS MARKET..CONDITION..STRATEGY CHANGE ACCORDINGLY..
STUDY NEWS FLOW,,ITS REACTION ..DEFINITELY ..U CAN TELL HOW
PRICE SHALL BEHAVE..
if wrong ..stoploss is there to safe guard

DIARY WRITING A MUST FOR ANY TRADER.

for conceptual development Bill william-chaos theory is MUST...

You can learn trading
provided u honestly know your strength and weakness..
hard part is TO MODIFY ..YOU..YOUR HABIT..
earlier u start is better..
............................................
Trading plan..
recently.. many a teach it..
money management..u learn it..
when to pyramid ..when to fold..

 

[oilman5]

Who are in upperside of learning curve?
ANSWER :good rm/dealer..(a profit generator for broking house ).A good dealer has skill to execute, though they call back customer..telling what client wants ,to generate order flow -matter of fact.Since his job is watch the price, he is way ahead to understand short term reversal/continuation.

Anybody LOGICALLY WHO CAN THINK , MATURE..UNDERSTAND RISK..NOT A RUMOR SPREADER and ready to spend about 4yr,unfortunately its rare breed now.
........ in your effort if no gap exists[strong base]......success must come to you.
MYTH : analyst can be a trader ............HAHAHA........
MUST REMEMBER...ANALYST HAS LONG TERM VIEW..
MANY BROKER/FUND MANAGER HAS OWN REPORT....THEY R EXCELLENT..for call generation
JUST before PUBLICATION..THEY BUY FIRST..THEN PUT BUY CALL/PUBLISH...
SAFELY broking house join in otherside...you doubt me...
check fund buy report.. & dt of publish of REPORT
Syncronise publish to newspaper.. & public buying ..
use..www.nseindia.com..volume study of those day..delivery%..
VISUALISE..A BLIND EVEN CAN SEE...how money is made.

INSTEAD READ NEWS PAPER,PARTICULARLY ECONOMIC DEVELOPMENT..ORDER POSITION to a company.
Result Session oppurtunity
See Last 1yr..4 Qu...compare..what Is Expected...av result..already Discounted..
Unexpected Good..buy...

Very Bad Result..but Price Not Falling
Buy Slowly...
All Other Case..use Result Publication To Get Out.

 

[oilman5]

what may work in indian stock market
.................................................. ...
1] SWOT...[FOR YOU]
2] definitely VOLATILITY play [prepare a tool/plan to use it]
3] result play...try to know estimate before hand....compare its surprise factor
4] rumor play...who is sponsoring...operator..behind any game...
mind is its RUMOR..
5]buy at pullback
6]longterm contrarian view...what goes up must come down..
7]fund flow...fii..rbi policy
8]YOUR CONFIDENCE..FLEXIBILITY..EXECUTION SKILL