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Strategies & Market Trends : Strictly Buy and Sell Set Ups -- Ignore unavailable to you. Want to Upgrade?

To: chowder who wrote (6855)	1/5/2006 9:57:32 AM
From: chowder	Respond to of 13449

The Foundation For Success ... January 4, 2006 .................. I know most traders and investors are busy setting their goals for 2006, and I believe any accomplishment of a goal involves some simple but critical building blocks. I believe successful trading boils down to these critical factors: 1) You must have an Edge - Become an expert at one type of pattern in the markets and then to exploit that pattern when it reappears. We generally look for opportunities with a 3:1 reward-to-risk ratio or higher. For us at BigTrends.com, our edge involves technical Accelerations on the upside and the downside, plus the ability to spot extremes in fear and greed via our sentiment indicators. We are constantly testing other systems to improve our edge in the markets. Can you define your edge in writing? 2) Disciplined Execution - Once you have an edge, you have to be able to execute. I personally like the systematized approach, as it takes your ego out of the game and allows you to focus on how well you are executing your trading plan. Can you say that your trading plan allows you to define how you will execute your way in and out of both good and bad trades? 3) Effective Money Management - Overly aggressive investment allocations can ruin even a good system with excessive drawdowns, while overly conservative allocations of capital will not optimize your total returns. Have you tested your method to determine the appropriate amount to risk per trade? 4) Have a Plan and a clear Preparation Process - If you're not prepared, by creating a written trading plan of your goals, and knowing specifically how your battle-tested trading method dictates your entries and exits, you give yourself no chance to confidently execute the plan. If you're flying by the seat of your pants, your emotions will take over and force you into a reactive mentality (for example, selling only after a significant decline). Do you have a written trading plan and a defined preparation process (outside of market hours)? 5) Accountability - No matter what approach you use, you must believe that YOU are the ultimate one who is personally responsible for getting investment results. This gives you an internal locus of control that gives you a greater ability to make quicker decisions that can help you get to your goals. I believe a regular review of your trading results is an important part of keeping yourself accountable. DO you have a regular review process for your performance? 6) Commitment - You must have a determination not to quit when things are not going your way. I have learned in life that those who succeed in any endeavor have made a commitment to seeing it through both good times and bad. Certainly you must also define your maximum risk tolerance and make sure you do everything in your power to keep your equity in an overall uptrend. Commitment is enhanced by continuous testing of new ideas and regular monitoring of your existing approach. Do you have a certain amount of time set up for future R&D testing plus a defined process for monitoring your positions? BigTrends.com (This message is linked to previous articles.)

To: chowder who wrote (6855)	1/10/2006 5:13:13 AM
From: chowder	Respond to of 13449

Delete, read next message.

To: chowder who wrote (6855)	1/12/2006 6:11:58 PM
From: chowder	Read Replies (1) \| Respond to of 13449

Most Charts Are Ambiguous ... January 12, 2006 ................................ In response to many of your questions you've been e-mailing in, today we'd like to address a topic that seems to be a hot button with a great number of you. You'd like to know about the trade selection process. But based on your questions, it really sounds more like you're looking for a way to make sure you're actually finding the top opportunties. The solution really is simple, but too often overlooked. You have to have have some sort of methodology or system to find the best opportunities. It doesn't need to be a complicated system - it just needs to show positive results over time. In fact, the best trading systems are usually quite simple. Besides profitability, the only other thing your system needs is a means send you a signal, to let you know to place a trade. While this may sound like common sense, too many traders seem to forget these basics. You must have an edge: Ever notice that the market seems to zig just when it's completely obvious that it should zag? The market's direction typically defies conventional logic about half of the time. There's nothing wrong with using assumptions and logic to make market forecasts. However, you must absolutely concede to the fact that an assumption or a logical conclusion may be wrong. We're human, and as such, we're going to be swayed by fear and greed. That fear and greed, though, can warp our logic so much that we'll rationalize anything - even the wrong thing. When that happens, our logic becomes flawed and we become less profitable traders. So how does one get around the problems that fear and greed can create? A trading system! Most readers may be assuming that by 'system', we're saying that you need a highly complicated piece of software that can test certain trade signals, and dozens of charts on your computer screen. These things are nice if you're a highly active investor, but you don't really need them. All you really need is a method that you know works for you. These may be moving average crossovers, momentum signals, or sector-based strength signals. It doesn't matter which one you use - you just have to become proficient at one of them and trade it consistently. In fact, one of the most famous trading systems is Bill O'Neil's "CANSLIM" method. You don't even need a computer to use that one, and it's a very passive method. The point is, logic can be flawed, but a trading methodology can overcome flawed logic. You must be able to receive a trade signal from your system: If you only remember one thing today, remember this - most charts are ambiguous. It's especially critical that the pure technical traders understand this. These market technicians are completely reliant on chart data. This can be a problem, since at any given time, about 90 percent of charts are neither bullish nor bearish. How many times have been looking for trades, and started to hunt just by looking at individual charts? You start with the symbols you know, then you go to the news to see if anything looks hot or cold to the media. After you look at twenty or thirty stocks, boredom and frustration set in, and you just start picking ones that look like they'll do. That's a mistake - you softened on your trade criteria and may have bought or sold a stock for a poor reason. You want to limit your trades to those 10 percent of stocks that are actually doing something. So how does one do this? You have to have some method of receiving trade signals from your proven system. It's extremely inefficient to look for stocks that fit your criteria. Rather, you want these stocks to present themselves to you. This will not only save you time and frustration, but will provide you with opportunities you may have never seen on your own. There are plenty of ways of getting the data, but the point is this - give yourself an efficient way to actually get the data you need. Bottom Line: Systematic signals and signal scans go hand-in-hand. By taking fear and greed out of your selection process, you won't suffer from the problems of flawed logic. And by freeing up your time and focus spent on hunting for trades, you can focus on trade management. BigTrend.com (This message is linked to previous articles.)