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Thursday, March 15, 2007

Random Links

Well, actually not really random as the links below come from blogs that I read on a regular basis. I'm highlighting a few of their posts here because they are too good to be missed!

1) TraderFeed
-Two Deadly Sins In Trading: The highly respected Dr Brett talks about 4 positive aspects of a trade example and also 2 deadly mistakes in trading. He sums it up nicely with this:

"Going with the overall trend, waiting for the right opportunity, letting markets show they're strengthening or weakening before you make your move, keeping stop losses close relative to potential reward, taking profits aggressively when you get an extreme move your way, trading large enough to make an acceptable income from one good trade per day"

This is the essence of trading and I can't agree more with him. In short:

-Trade with the trend: Many of my losers are usually against the trend, be it day or swing trading. Trading WITH the trend simply increase your set-up probability

-Be Patient: Patience is not my virtue, lol, but my trading experience has taught me that it PAYS to be patient with your set-up. Stay on the sidelines if there's no good trade and WAIT for CONFIRMATION before entry

-Manage Risk: Keep your losses small to preserve as much capital as possible to stay in the game long enough for you to master your trading skills. By doing so, you are buying time from the market to learn from the market.

While I understand where he is coming from on his last point on trading large enough to make an acceptable income, one has to be sure that taking a larger trade is still within your risk parameters. Never forget that!

-Aggressive profit-take in big moves: If you are a reader of Wall Street Warrior, you will know that he always partial profit take when there are 3 strong consecutive expansive price bars and re-adjust his stop loss to the mid point of the previous strong bar.

-What Individual Stocks Tell Us About Index Movement: Dr Brett's experience is that whenever fewer than half of stocks in a index participate in a move, that move is more likely to reverse than if there is broad participation.

-Soliciting Questions For CNBC Special Program Interview

As part of CNBC's Million Dollar Challenge, Dr Brett will be appearing on a special program Friday evening between 7 and 8 PM EST that will deal with trader/investor psychology. He is soliciting trading related questions and will pass them along for inclusion in the show. So here's your chance to take your questions on air! Be quick though as he will be appearing this Friday if I'm not wrong.

2)Trader Jamie (aka Wall Street Warrior)
Jamie has a classic post on trading opening gaps using dummy setup. He talks about the characteristics of such trading pattern (e.g Fib Ext, base, volume, 5 EMA etc). He is a very skilled day trade and I have learnt alot from him on day trading. Be sure to save this post in your library.

3)Afraid to Trade
-Momentum Precedes Price #1
-Momentum Precedes Price #2

In this series, Corey writes in great depth about how momentum precedes price and how you can trade using momentum divergence. Another educational post I recommend you keep in your trading library.


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