As we come to the end of an interesting year in the markets I wish all of you a happy new year and much success in your trading in 2010.
Thursday, December 31, 2009
Happy New Year
As we come to the end of an interesting year in the markets I wish all of you a happy new year and much success in your trading in 2010.
Wednesday, December 30, 2009
Gann—28 Trading Rules
I’ve been reading a lot in Gann over the holidays, trying to make headway in understanding some of his obscure and bizarre ways of using numbers in his square of nine, etc. Regardless of what anyone thinks of that approach, the guy wrote some outstanding things about how to approach trading. I reread his 28 trading rules regularly. Here they are and we'd all do well to memorize and practice them in our trading.
1. Never risk more than 1/10th of your capital on one trade
2. Use stop losses
3. Never overtrade
4. Never let a profit run into a loss
5. Don’t buck the trend
6. When in doubt get out
7. Trade only in active markets
8. Do equal distribution of risks
9. Never limit your orders. Trade at the market
10. Don’t close out without a good reason
11. Accumulate a surplus. After a series of successful trades put some money into an account for emergencies
12. Never buy or sell just to get a scalping profit
13. Never average a loss. This is one of the worst mistakes a trader can make
14. Never get out just because you have lost patience or get in because you’re anxious from waiting
15. Avoid small profits and big losses
16. Never cancel a stop loss order after you placed it at the time you made the trade
17. Avoid getting into or out of the market too often
18. Be as willing to short as to buy. Let your object be to keep to the trend
19. Never buy because the price is low or sell because the price is high
20. Be careful about pyramiding at the wrong time. Wait until the asset is active and has crossed resistance levels before buying more and until it’s broken out of zone of distribution before selling more
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short
22. Never hedge. If you’re long one and it starts to go down, don’t sell something else short to hedge it. Take your losses and get out and wait for another opportunity
23. Never change your position in the market without a good reason
24. Avoid increasing your trading after a long period of success
25. Don’t guess at tops or bottoms. Let the market prove it. By following definite rules you can do this
26. Don’t follow another’s advice unless he knows more than you do
27. Reduce trading after the first loss. Never increase
28. Avoid getting in wrong and out wrong
1. Never risk more than 1/10th of your capital on one trade
2. Use stop losses
3. Never overtrade
4. Never let a profit run into a loss
5. Don’t buck the trend
6. When in doubt get out
7. Trade only in active markets
8. Do equal distribution of risks
9. Never limit your orders. Trade at the market
10. Don’t close out without a good reason
11. Accumulate a surplus. After a series of successful trades put some money into an account for emergencies
12. Never buy or sell just to get a scalping profit
13. Never average a loss. This is one of the worst mistakes a trader can make
14. Never get out just because you have lost patience or get in because you’re anxious from waiting
15. Avoid small profits and big losses
16. Never cancel a stop loss order after you placed it at the time you made the trade
17. Avoid getting into or out of the market too often
18. Be as willing to short as to buy. Let your object be to keep to the trend
19. Never buy because the price is low or sell because the price is high
20. Be careful about pyramiding at the wrong time. Wait until the asset is active and has crossed resistance levels before buying more and until it’s broken out of zone of distribution before selling more
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short
22. Never hedge. If you’re long one and it starts to go down, don’t sell something else short to hedge it. Take your losses and get out and wait for another opportunity
23. Never change your position in the market without a good reason
24. Avoid increasing your trading after a long period of success
25. Don’t guess at tops or bottoms. Let the market prove it. By following definite rules you can do this
26. Don’t follow another’s advice unless he knows more than you do
27. Reduce trading after the first loss. Never increase
28. Avoid getting in wrong and out wrong
USDCAD—didn’t get to Gehenna
Now wasn’t that sweet behavior for USDCAD, not wanting to quite dip to its uptrend line from November 2007. I have two long positions—one from 1.0394 and one from 1.0429. One’s up 122 and the other is up 156 pips as I write this at 9:48AM EST. Unfortunately, with the thin liquidity where moves can be exaggerated, it doesn’t mean the pair won’t drop again but obviously I’m profit stopped.
What I didn’t talk about yesterday was why I was buying at all. Why do I have any belief that the USD is turning up? If you’ve been following my little blog here since mid-October, you know I’ve been buying USDCAD when it dips. You could say, then, that I’m bullish. I try not to take those positions on trading—that is, I don’t log on each day saying “I’m bullish,” or “I’m bearish.” Rather, I try to stay aware to what the market is telling me. As Jesse Livermore allegedly said in Reminiscences of a Stock Operator
, “My one steadfast prejudice is against being wrong.” Since I will be wrong sometimes, I look for entry points that let me get out without too much pain if I am wrong. While I’ve made the case in prior blogs that I believe this market is basing, I’m going into my long positions at points where I can find a reasonable stop.
I entered both these positions at points where I could have a reasonable stop. I’m now profit stopped and we’ll have to see what happens. The illiquid market could result in my trades being stopped but I can’t lose any money at this point so why should I worry? There are worst ways to go into the end of the year.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
What I didn’t talk about yesterday was why I was buying at all. Why do I have any belief that the USD is turning up? If you’ve been following my little blog here since mid-October, you know I’ve been buying USDCAD when it dips. You could say, then, that I’m bullish. I try not to take those positions on trading—that is, I don’t log on each day saying “I’m bullish,” or “I’m bearish.” Rather, I try to stay aware to what the market is telling me. As Jesse Livermore allegedly said in Reminiscences of a Stock Operator
, “My one steadfast prejudice is against being wrong.” Since I will be wrong sometimes, I look for entry points that let me get out without too much pain if I am wrong. While I’ve made the case in prior blogs that I believe this market is basing, I’m going into my long positions at points where I can find a reasonable stop. I entered both these positions at points where I could have a reasonable stop. I’m now profit stopped and we’ll have to see what happens. The illiquid market could result in my trades being stopped but I can’t lose any money at this point so why should I worry? There are worst ways to go into the end of the year.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Tuesday, December 29, 2009
USDCAD—slouching towards Gehenna
OK, I know I said I wasn’t trading but I can’t help but peek at the markets, especially as I update my charts in preparation for the New Year.
Yesterday, I saw that USDCAD had dropped, taking out my final long at +10 pips. This isn’t unexpected as thin December markets can cause extreme moves. The last time I wrote about this pair (long ago on December 18), its downtrend line from August had repelled it a fifth time. It then proceeded to sink to its current level.
Will it continue to drop? Unanswerable, that, but more to the point, is it worth risking a buy? I’m always worrying about the downside so the real question is where I could place a stop. Unfortunately, there’s not a lot of support until you get to the 1.0272/66 October 19 and 20 lows. After that, of course, is the wretched low of 1.0208. At 1.0367, today’s low, one would have to be willing to risk anywhere from 100 to 160 pips (actually a bit more as I’m not going to put the stop right on the prior low.) That’s not awful, depending on one’s point of view but it might be a bit much for some traders.
Another way of finding a stop number is to look at the uptrend line from the 2007 low. It’s coming in at 1.0347. This isn’t too bad. So yes, I can risk a buy using just below that trend line as my stop point.
Another thing to note on the daily chart is how the pair is coiling inside a symmetrical triangle. After three months, I’d expect that this would resolve soon, either upwards or downwards. Something to look forward to, for sure.
Here’s the daily chart showing the move from November 2007:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Yesterday, I saw that USDCAD had dropped, taking out my final long at +10 pips. This isn’t unexpected as thin December markets can cause extreme moves. The last time I wrote about this pair (long ago on December 18), its downtrend line from August had repelled it a fifth time. It then proceeded to sink to its current level.
Will it continue to drop? Unanswerable, that, but more to the point, is it worth risking a buy? I’m always worrying about the downside so the real question is where I could place a stop. Unfortunately, there’s not a lot of support until you get to the 1.0272/66 October 19 and 20 lows. After that, of course, is the wretched low of 1.0208. At 1.0367, today’s low, one would have to be willing to risk anywhere from 100 to 160 pips (actually a bit more as I’m not going to put the stop right on the prior low.) That’s not awful, depending on one’s point of view but it might be a bit much for some traders.
Another way of finding a stop number is to look at the uptrend line from the 2007 low. It’s coming in at 1.0347. This isn’t too bad. So yes, I can risk a buy using just below that trend line as my stop point.
Another thing to note on the daily chart is how the pair is coiling inside a symmetrical triangle. After three months, I’d expect that this would resolve soon, either upwards or downwards. Something to look forward to, for sure.
Here’s the daily chart showing the move from November 2007:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Monday, December 28, 2009
A Gann Quote
I'm not trading this week because of illiquidity in the market due to the holiday season. What I am doing is cleaning my desk (awash in charts) and catching up on reading. I wanted to share this quote from Gann. It's in his Master Stock Market Trading Course and also other of his writings.
Many people believe it is wrong to buy at new high levels or sell at new low levels but it is most profitable...because when you do buy at new high levels or sell at new low levels you are going with the trend of the market and your chances of making profits are much better than any guesswork or buying and selling on hope or fear.
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