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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (7242)	3/11/2000 12:58:00 PM
From: aldrums	Read Replies (1) \| Respond to of 18137

Dan, I interpret Lefervre's quote as referring to human nature, not to technological developments. In regards to Dave's post Message 13168219 It could be interpreted (although I do not think Dave was actually trying to say this) that the current bull market should be a reason to start trading with low or inadequate capital. If you are worried you don't have enough money, wait and save carefully. There will always be opportunity. P.S. If one wants to learn how to make money in a bear market, I think Lefevre's book might be a good place to start, IMHO. amazon.com

To: Dan Duchardt who wrote (7242)	3/11/2000 2:21:00 PM
From: TraderAlan	Respond to of 18137

From The Master Swing Trader by Alan Farley Publication Date Fall, 2000 McGraw-Hill Copying or republication strictly prohibited. Other than that, enjoy <g> Trade Alignment Trend-range alternation naturally evokes numerous trade strategies that capitalize on both events and their turning points. But most new market participants chase momentum and never learn any other tactics. The media and chat rooms broadcast popular stock trends to a wide audience. Their excitement awakens greed, inviting neophytes to build a stake and join the game. Without skill or humility, they fearlessly chase new positions as prices rise. Momentum is very sexy but will destroy promising trading careers. While classic swing strategy requires precision and methodology, momentum trading demands emotional control. The greed-fear axis exerts tremendous force during dynamic price movement and clouds careful preparation and natural timing. Not sure you believe this statement? Have you ever exited a profitable momentum trade but then lost it all on the next position by doing the same thing that made all that money in the first place? Hmm, we thought so. Although the eyes see rising price with few pullbacks, there are many ways to lose money going long in a hot market. Initial gains can be dramatic for new momentum traders. Beginners luck and innocence often combine to make those first weeks or months very rewarding. But results change quickly. Momentum traders at all levels lack sound risk management. Their focus on the big gain dulls their awareness of the big loss. Insiders adjust quickly to the momentum crowd and skew their timing with price violations in both directions. Participants start buying tops and selling bottoms with regularity. Or they believe they can survive by holding old winners through violent selloffs but still exit with a profit. Sharp trends print wide range bars and many gapping moves. This volatility increases risk and inhibits safe entry-exit planning. Swing traders rely on sup-res to define execution and reward targeting. Momentum markets often display no common landscape features at all. This requires entry with without clear violation level that proves that the setup was wrong. In this blind environment, arbitrary stop losses may be the only way to keep the speculator out of intense danger. Momentum trading can be mastered. Three disciplines will break destructive habits and reprogram trading for success: ú Abandon the adrenaline rush: Forget the excitement. Profit depends upon detached and disciplined execution. ú Learn the numbers: The nature of price movement must be ingrained deeply enough to allow spontaneous decision-making during the trading day. ú Cross-verify: Objective measurements must filter unconscious bias. Reduce momentum risk through 3-D charting. Identify reward for the time frame of interest. Confirm that the stock shows no important divergences that might signal the end of the move or an impending reversal. Then guide execution and position management through the chart in the next lower dimension. When a strong trend explodes on the daily view, use a 60-min bar to pick out low risk entry and define natural exit points. For intraday positions, control the 5-min bar breakout by using a 1-min chart to locate the natural swings. Successful momentum strategy requires solid tape reading skills. Demand on the time and sales ticker reveals the inner workings of rapid price movement. Both retail (small lot) and professional (large lot) traders need to participate in a sharp trend or it will fail. Watch the crowd response to sup-res numbers very closely. If you can't feel their urgency to get on board, perhaps it isn't there. When the action pushes into uncharted territory, use round numbers to gauge demand. Multiples of 10 provide strong resistance in place of classic sup-res. Understand the motives of big players that drive fast markets and ride their coattails to gain a needed edge. And if you see big lots move against a rally, be prepared to join them. Time of day tendencies create profit and danger zones. As the market opens, overnight imbalance and fresh retail cash trigger volatility that resolves through price change. Insiders guide stop gunning exercises and fade trends through the lunch hour's negative feedback. The final hour arrives, just in time to resolve many complex themes with sharp breakouts or breakdowns. And through it all, intraday buying and selling oscillates in an orderly 90-min cycle. Technical analysis uncovers momentum secrets as it exposes insider deception and herd emotions. Verify all shock events through both patterns and indicators. Proper application will reduce entries associated with false breakouts and invoke natural risk management. Always trade by the numbers and not the news. Use their cold logic to painlessly exit momentum positions and move on quickly to the next opportunity. Physics teaches that an object in motion tends to remain in motion. Profits depend on this well-understood mechanism. Moving averages set to multiple time frames reveal trend velocity through their relationships with each other. Measure this acceleration-deceleration with a classic MACD indicator or apply MA Ribbons to see if they spread or contract over different periods. For obvious reasons, always seek acceleration cross-verification before momentum trade execution. Swing traders apply original tactics to each phase of the Pattern Cycle. At new highs, they execute momentum setups that rely on sound risk management. When market conditions change, they move swiftly to fresh ideas that reflect the new inefficiencies. Always opportunistic, they seek the next profit like the predator looks for vulnerable prey. Momentum strategies fail through most market conditions. Stocks trend only 15% to 20% of the time. Constricted ranges bind price during the rest of its existence. Trading longevity requires diverse skills through both trending and congested markets. Be flexible enough to shift from one strategy to the other as feedback loops alternate between positive and negative. In other words, adapt tactics quickly to changing market conditions rather than wait for those limited times when the environment favors a few comfortable setups.

To: Dan Duchardt who wrote (7242)	3/11/2000 2:52:00 PM
From: OZ	Read Replies (2) \| Respond to of 18137

There is nothing new in Wall Street. There can't be because speculation is old as the hills. Whatever happens in the stock market today has happened before and will happen again. -Edwin Lefevre 1923 Dan, I agree with all that you posted today with the exception of your statement that the above quote will be proven false. What about the current market is so different. I realize our technology is different but the same overreaction that exist today existed in 1923 and even back to the tulip craze. In the book "Reminiscenses...." Livermore frequently made 10 to 20 points on 1-3 day trades. That was in pre 1930's dollars. That is like a 400 plus point runup today. The emotions of greed and fear that drive the market today are exactly the same as it was then and will always be. I would like to hear your opinion on what makes this market different. Ironically, one of the things that has not changed is the very fact that someone always thinks that the current bull/bear market is "different this time". TIA, OZ