A 10-Day Trading System

Life is really simple, but we insist on making it complicated. -- Confucius

There are many different systems and techniques that traders can learn to help themselves gain an edge in their trading. Some of these are complex, but they do not have to be complex to be good. The 10-day System is probably the simplest one you will ever learn, yet it can be very helpful, especially during choppy markets.

The 10-day System works on the simple principle that when the markets (especially the S&P 500 index) are at 10-day relative highs or lows, the trend will change direction temporarily. A 10-day low happens when the closing price of a certain day is lower than the close of the last 10 days. This usually results in a strong bounce in price within 5 days. A 10-day high happens when the close is higher than the close of the last 10 days. The 10-day high's results are a little more erratic, but often the results are downward or at least flat movement for the next 5 days.

Here is the 10-day System chart from the first few months of 2006.

The blue arrows indicate a buy according to the system, which is the morning after a 10-day low is reached, while the red arrows indicate a sell signal the morning after at 10-day high is reached. This chart is a good demonstration of how accurate it can be at times. During strongly trending markets, the results are not quite as good, but it is still usually pretty good for predicting short pauses, at least, in the trend.

The 10-day lows are, by far, more useful then the 10-day highs. Since 1980, the 10-day lows have been an accurate predictor of short-term gains on the SPX index about 62% percent of the time. Simply buying the morning after a low signal and holding for exactly 5 days each time, as described above, would have yielded a gain of around 120% for the 26 year time period, and that is without reinvesting profits.

While that, in itself, is impressive, it is definitely not the only way that you can use the system. The 10-day System is probably best used to direct your other trades. For example, if you swing trade stocks or options and notice that the 10-day System hits a high signal, you might avoid or cut back on your bullish trades for a few days.

Price Headley is the founder and chief analyst of BigTrends.com.

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The Trend is your Friend TRADERS’ BIGGEST PROBLEM Trading is an great way to make a living and/or accumulate large sums of wealth. As a trader you alone are responsible for all your decisions that you may take to make profits and/or losses in the course of your trading career. As a trader you alone will be responsible for all or any loss that you may make and on the other hand you do not have to thank anyone for your profits. You are the boss and you are not obligated to anyone expect yourself.  However there is a problem that most traders do not understand and that is that most of the time the market does not move in trends. The market only trends only 30-50% of the time. The rest of the time the market is sleeping or it does not have a discernable trend from which traders can make money. Professional traders make most of their profits in a trending market. By following trends over different time frames, traders can increase their profit making opportunity in trending markets and stay away from markets when they are not trending. The Trend is your Friend TREND AND TRADING RANGE  Traders try to profit from changes in prices: Buy low and sell high or sell short high and cover low. Even a quick look at a chart reveals that markets spend most of their time in trading ranges. They spend less time in trends. A trend exits when prices keep rising or falling over time. In an uptrend, each rally reaches a higher high than the preceding rally and each decline stops at a higher level than the preceding decline. In a downtrend each decline falls to a lower low than the preceding decline and each rally stops at a lower level than the preceding decline and each rally stops at a lower level than the preceding rally. In trading range most rallies stop at about the same high and declines peter out at about the low. A trader needs to identify trends and trading ranges. It is easier to trade during trends than in trading ranges. PSYCHOLOGY OF TRENDS AND TRADING RANGE An uptrend emerges when bulls are stronger than bears and their buying forces prices up. If bears manage to push prices down, bulls return in force, break the decline, and force prices to a new high. Downtrends occur when bears are stronger and their selling pushes markets down. When a flurry of buying lifts prices, bears sell short into that rally, stop it, and send prices to new lows. When bulls or bears are equally strong or weak, prices stay in a trading range. When bulls manage to push prices up, bears sell short into that rally and prices fall. Bargain hunters step in and break the decline, bears cover shorts, their buying fuels a minor rally, and the cycle repeats. Prices in trading ranges go nowhere, just as crowds spend most of their time in aimless mulling. Markets spend most of their time in trading ranges than trends because aimlessness is more common among people than purposeful action. When a crowd becomes agitated or excited, it surges and creates a trend. THE HARD RIGHT EDGE Identifying trends and trading ranges is one of the hardest tasks in technical analysis. It is easy to find them in the middle of the chart, but the closer you get to the right edge, the harder it gets. Trends and trading ranges clearly stand out on old charts. Experts show those charts on seminars and make it seem easy to catch trends. Trouble is your broker does not allow you to trade in the middle of the chart. He says you must make your trading decisions at the hard right edge of the chart! The past is fixed and easy to analyze. The future is fluid and uncertain. By the time you identify a trend, a good chunk of it is already gone. Nobody rings a bell when a trend dissolves into a trading range. By the time you recognize the change, you will lose some money trying to trade as if the market was still trending. Most people cannot accept uncertainty. They have a strong emotional need to be right. They hang on to losing positions, waiting for the market to turn and make them whole. Trying to be right in the market is very expensive. Professional traders get out of losing trades fast. When the market deviates from your analysis, you have to cut losses without fuss or emotions. THREE IMPORTANT TRENDS You may be asking yourself the question, "What is a trend and how long does it last?" There are countless numbers of trends, but before the advent of intraday charts, there were three generally accepted durations: primary, intermediate and short-term. The main or primary trend, is often referred to as a bull or bear market. Bulls go up and bears go down. They typically last about nine months to two years with bear market troughs separated by just under four years. These trends revolve around the business cycle and tend to repeat whether the weak phase of the cycle is an actual recession, or if there is no recession and just slow growth. Primary Trend Primary trends are not straight-line affairs, but are a series of rallies and reactions. These series of rallies and reactions are known as intermediate or medium term trends. The intermediate or medium term trend can vary in length from as little as six weeks to as much as nine months, or the length of a very short primary trend. Intermediate trends typically develop as a result of changing perceptions concerning economic, financial, or political events. It is important to have some understanding of the direction of the main or primary trend because rallies in bull markets are strong and reactions are weak. On the other hand, reactions in bear markets are strong and rallies are short, sharp, and generally, unpredictable. If you have a fix on the underlying primary trend, you will be better prepared for the nature of the intermediate rallies and the reactions that will unfold. In turn, intermediate trends can be broken down into short-term trends, which last from as little as two weeks to as much as five or six weeks. Market Cycle Model As an investor, it is best to accumulate when the primary trend is in the early stages of reversing from down to up, and liquidate when the trend is reversing from up to down. Second, as traders, we are better off if we position ourselves with the long side in a bull market since that is when short-term uptrends tend to have the greatest magnitude. By the same token, it does not usually pay to short in a bull market because declines can be quite brief and reversals to the upside unexpectedly sharp. If you are going to make a mistake, it is more likely to come from a counter-cyclical trade. If you're an intraday trader, you may think all of this does not apply to you, but really, it does. It is important to remember that even on intraday charts, the predominant trend determines the magnitude and duration of the shorter moves. You may not feel a three-hour rally is closely related to a two-year primary bull market move, but it is just as related as a five or six-day trend. Charles Dow, the author of the venerable Dow theory, stated at the turn of the century that the stock market had three trends. The long term trend lasted several years, the intermediate trend lasted several months and anything shorter than that was a minor trend. Robert Rhea, the great market technician of the 1930s, compared the three market trends to a tide, a wave and a ripple. He believed that traders should trade in the direction of the market tide and take advantage of the waves and the ripples to time your entry and exit. CONFLICTING TIMEFRAMES Most traders ignore the fact that markets usually are both in a trend and in a trading range at the same time! They pick one time frame such as daily or hourly and look for trades on the daily charts. With their attention fixed on daily or hourly charts, trends from other time frames, such as weekly or 10 minute trend keep sneaking up on them and wrecking havoc with their plans. Markets exist in several time frames simultaneously. They exist on a 10 minute chart, an hourly chart, a daily chart, a weekly chart, and any other chart. Traders often feel confused when they look at charts in different time frames and they see the markets going in several directions at once. The market may look for a buy on a daily chart and a sell on the weekly chart, and vice versa. The signals in different time frames of the same market often contradict one another. Which of them will you follow? Most traders pick one time frame and close their eyes to others – until a sudden move outside of “their” time frame hits them. A FACTOR OF FIVE When you are in doubt of a trend, step back and examine the charts in a timeframe that is larger than the one you are trying to trade. A factor of 5 links all timeframes. If you start with the weekly charts and proceed to the dailies, you will notice that there are five trading days to a week. As your timeframe narrows, you will look at hourly charts – and there are approximately 5 to 6 trading hours to a trading day. Intra day traders can proceed even further and look at 10 minute charts, followed by 2 minute charts. All are related by a factor of five. The proper way to analyze any market is to analyze it in at least two time frames. If you analyze daily charts, you must first examine the weekly charts and so on. This search for greater perspective is one of the key principles of the Traders Edge Multiple Time Frame Trading System. METHOD AND TECHNIQUES There is no single magic method to identifying trends and trading ranges. There are several methods and it pays to combine them. When they confirm one another, their message is reinforced. When they contradict one another, it is better to pass up the trade. Analyze the pattern of highs and lows. When rallies keep reaching higher levels and declines keep stopping at higher levels they identify an uptrend. The pattern of lower lows and lower highs identifies a downtrend, and the pattern of irregular highs and lows points to a trading range.   Draw an uptrendline connecting significant recent lows and a downtrendline connecting significant recent highs. The slope of the latest trendline identifies the current trend A significant high or low on a daily chart is the highest high or lowest low for at least a week. As you study charts, you become better at identifying those points. Technical analysis is partly a science and partly an art.   The direction of a slope of a moving average identifies the trend. If a moving average has not reached a new high or low in a month, then the market is in a trading range.   Several market indicators, such as MACD and the Directional system help identify trends. The Directional system is especially good at catching early stages of new trends. CONCLUSION When you trade in the direction of this long a trend, you are truly following the markets rather than predicting them. However trading with the trend is hard to do because a logical give-up exit point will be farther away, potentially causing a larger loss if you are wrong. This is a good example of why so few traders are successful. They can't bring themselves to trade in a psychologically difficult way. This article contains content from New Trading Dimensions, written by Bill Williams and Trading for a Living, written by Alexander Elder.

via- http://www.tradersedgeindia.com/trend_is_your_friend.htm

via-

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Nifty Future - Real Time Chart!

Nifty Future - Real Time Chart!

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Millionaire Traders - Ebook

Millionaire Traders How - Everyday People Are Beating Wall Street at Its Own Game

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Risk Management For Traders

One of Sun Tzu’s most famous quotes is: “Every battle is won before it is fought.” The phrase implies that it is planning and strategy that wins wars and not the battles themselves. Similarly, successful traders commonly quote the phrase: “Plan the trade and trade the plan.” Just like in war, planning ahead can often mean the difference between success and failure.

Stop-loss (S/L) and take-profit (T/P) points represent two key ways in which traders can plan ahead when trading. Successful traders know what price they are willing to pay and at what price they are willing to sell, and they measure the resulting returns against the probability of the stock hitting their goals. If the adjusted return is high enough, then they execute the trade.

Conversely, unsuccessful traders often enter a trade without having any idea of at what points they will sell at a profit or a loss. Like gamblers on a lucky or unlucky streak, emotions begin to take over and dictate their trades. Losses often provoke people to hold on and hope to make their money back, while profits often entice traders to imprudently hold on for even more gains.

Take-Profit Points, trading greed, trading fear, trading emotions, financial behavior 

A stop-loss point is the price at which a trader will sell a stock and take a loss on the trade. Often times, this happens when a trade does not pan out the way a trader hoped. The points are designed to prevent the “it will come back” mentality and limit losses before they escalate. For example, if a stock breaks below a key support level, traders often sell as soon as possible.

On the other side of the table, a take-profit point is the price at which a trader will sell a stock and take a profit on the trade. Often times, this is when there is limited additional upside given the risks. For example, if a stock is approaching a key resistance level after a large move upwards, traders may want to sell before a period of consolidation takes place.

How to Effectively Set Stop-Loss Points, long and short term moving averages, adjusting stop loss, fundamental events, earnings report, FDA decision, volatility 

Setting stop-loss and take-profit points is often done using technical analysis, but fundamental analysis can also play a key role in timing. For example, if a trader is holding a stock ahead of earnings as excitement builds, he or she may want to sell before the news hits the market if expectations have become too high, regardless of whether the take-profit price was hit.

Moving averages represent the most popular way to set these points, as they are easy to calculate and widely tracked by the market. Key moving averages include the five-, nine-, 20-, 50, 100- and 200-day averages, and are best set by applying them to a stock’s chart and determining whether the stock price has reacted to them in the past as either a support or resistance level.

Another great way to place stop-loss or take-profit levels is on support or resistance trendlines that can be drawn by connecting previous highs or lows that occurred on significant, above-average volume. Just like moving averages, the key is determining levels at which the price reacts to the trendlines, and of course, with high volume.

Calculating Expected Returns

Setting stop-loss and take-profit points is also necessary in order to calculate expected return. The importance of this calculation cannot be overstated, as it forces traders to think through their trades and rationalize them. As well, it gives them a systematic way of comparing various trades and selecting only the most profitable ones.

This can be calculated using the following formula:

[ (Probability of Gain) x (Take Profit % Gain) ] + [ (Probability of Loss) x (Stop Loss % Loss) ]

The result of this calculation is an expected return for the active trader, who will then measure it against other opportunities in order to determine which stocks to trade. The probability of gain or loss can be calculated by using historical breakouts and breakdowns from the support or resistance levels or by making an educated guess for experienced traders. 

The Bottom Line

Traders should always know when they plan to enter or exit a trade before they execute. By using stop losses effectively, a trader can minimize not only losses, but also the amount of times a trade is exited needlessly. Make your battle plan ahead of time so you’ll already know you’ve won the war. 

via http://www.anirudhsethireport.com/risk-management-for-traders/

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Educative, Lucrative SAR (Stop And Reverse)

Everyday When you read the SAR with the stochastics & Rsi and trade as per the green(Buy) and Red (Sell) dots as they begin to appear, you can eliminate some whipsaws and take sizeable profits in each trade.

Alternatively when the trend is down, trade only the red dots and vice versa.

If you know in advance the likely targets, critical levels or a completion of a wave structure( Fives or ABC), you can then book out before the trend reverses.

Try this exercise diligently and see your profits growing. Trade with the trend. If you are trading a counter trend, trade small & with strict SL and for a very short duration.

And don't go around trumpeting your triumps but just keep to yourself and trade consistently and gratefully say a "thank you to your favourite GOD", thereby keeping your feet firmly on the ground and heads bowed down to receive the bounty consistently.

Below is today's intrachart with " 4 trades" of sizeable profits. Even if you had traded the one whipsaw, you still would have ended up mighty happy with your performance.

via - http://tradeinniftyonly.blogspot.com/2008/11/educative-lucrative-sar-stop-and.html

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Force 5min trading system

Force 5min trading system

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Steven Primo's simple trading strategy

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LIVE SGX NIFTY CHART

LIVE SGX NIFTY CHARTS

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Fibonacci Retracement and Extension Calculator

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38 Steps To Becoming A Trader

Here is an excellent article I read some time ago and recently rediscovered. It accurately describes the process most traders go through on their long and winding path to success.

In my own experience, not all traders go through every step, and not every step is met in the order presented here. In fact, this can be quite an iterative process with the trader getting stuck in a loop and repeating certain steps time and again until they either realize the problem for themselves, or are given a nudge from a more experienced hand.

I don’t know who created the original list, but should the original author read this and get in touch, I will gladly credit them for their efforts!

Update: A reader has kindly emailed me to inform me that the original article was published in 'CTCN' by "Anonymous Trader".

1. We accumulate information - buying books, going to seminars and researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realize we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence.

Fear starts setting in.

8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.

Most people will give up at this point, as they realize work is involved.

15. We get serious and start concentrating on learning a 'real' methodology.
16. We trade our methodology with some success, but realize that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when it comes time to execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear), and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

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Penny Stocks A Profitable Roller Coaster

New investors are being drawn by the appeal of what is known as penny stocks because of the low price and the potential for quick financial growth which can soar as high as as one hundred percent or more in just a few days. But, on the down side, severe loss can occur just as quickly and many penny stocks can lose all of their value in the long term market. Some people will warn you that penny stocks are too high risk to invest in and that new investors should do their homework to be aware of the risks that are involved in penny stocks. These risks include limited liquidity, little or no financial reports, and, of course, fraud.

But, many new investors have had a great deal of good fortune with penny stocks. Even though a penny stock has fewer shareholders, and it will not trade as many shares per day as a larger company, penny stocks can still afford a newbie in the trading game an excellent opportunity to make a lot of money quickly that maybe invested in other strong companies.

As with any type of stock, a sudden change in the demand of a certain stock can lead to a great deal of volatility in the price of any company stock. This lack of liquidity with penny stocks can send a stock price soaring up very quickly, but it can come crashing down just as quickly. So making sure that you closely watch the penny stock market can help you make some shrewed investments that can have some very high payoffs.

Even with the lack of liquidity and volatility of penny stocks they can still be an ideal investment for many people who have the desire to increase their personal financial holdings and get the feel of trading and investing the stock market. Finding a good and reputable stock firm is the best idea for starting to deal in penny stocks. This helps to minimize financial loss and helps to avoid any fraudulent penny stocks that have become a common area for online scam artists.

So, if you have the desire to jump into the world of the stock market, but don’t want to invest a lot of your hard earned cash try penny stocks. They can be well worth the effort for short term income growth and lead to bigger and better things.

All stock trading activities cost a fee and they have a certain amount high level of monetary risks especially for the unwise and inexperienced stock traders and/or investors seeking a quick and easy way to make a lot of money in a short period of time. Also, stock traders and investors will have to deal with the costs of commissions, taxes and fees to be paid for the brokerage services. There is a myriad of fiscal obligations that must be observed, as well as the taxes that are charged by a particular state on the transactions.

Many companies offer courses in stock picking, and many have reported a great deal of success through technical and fundamental analysis. But many economists and academics have stated that because of what is known as efficient market theory it is unlikely that no matter the amount of analysis that one can do, it will not help an investor make any gains above the stock market itself.

via- daytrading.net

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M A N V S M A R K E T

M A N V S . M A R K E T | b y R O B B O O K E R

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Day Trading Gaps, Market Profile, Ergonomic Day Trading, technical indicators

via - http://www.SchoolOfTrade.com

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How to use doji cndlestick patterns

Doji:

The doji is a characteristic figure whose opening level is equal to the closing level. Indeed, one can interpret this figure as one in which UT Bulls and Bears have delivered a battle after which there was no winner.

Interpretation:

If the trend prior to the appearance of a doji is bullish (bearish), it means that buyers (sellers) during the firing up (down) because their buying frenzy (Panic selling) was very strong.


But beware, a doji should under no circumstances be regarded as a trigger signal to buy or sell, it shows only a hesitation in the market.


It represents a meeting point between bullish and bearish that depending on the configuration of time may be followed by a reversal, or a continuation of the status quo, so it is important to study the environment in which the doji appears rather that the latter himself.

Thus, it appears after a large white candlestick (black) that comes with a unidirectional pattern, the signal is very strong and announced, with high probability a reversal if the ongoing closure of Candlestick following are beyond the distal doji (see graph below) or a continuation of the trend if the ongoing closure of Candlestick following are beyond the upper end of the doji (see graph below), the only market force that managed to emerge d an area of uncertainty.

However, if a doji forms after a series of candlesticks with small bodies, we can consider that it gives no signal.


Note: When a doji is formed on a trough (peak), and is therefore synonymous with reversal, it is highly likely that these levels become a support (resistance).


The different types of doji


The long-legged doji or high wave

For this type of doji, there are again three alternatives:


The doji cross gives a bullish signal when it appears after a downtrend, while the doji cross inverted gives bearish signal when it appears after an uptrend.

The doji water-carrier in turn, demonstrates the strong market indecision.


The gravestone doji in


The opening price on the lowest of the UT and although they manage to score new highs, sellers regain control before the end of the battle and forcing the prices to recede to their opening level. This configuration gives a very bearish signal when it occurs during an uptrend. More shade, the stronger the signal is bearish. Indeed, consider the shade high as an area offering significant.


The dragonfly doji in or doji dragon


The opening price on the highest of the UT and although they manage to mark a new low, buyers regain control before the end of the battle and carry prices to their opening level. This configuration gives a very bullish signal when it occurs during a downtrend. More shade is low, the signal is more bullish. Indeed, consider the shade as a low area demand.


The doji without wick



This is a particular doji that appears almost exclusively on very illiquid markets. For such a doji appears, it is no exchange is made or that the carry trade is all one and the same price on the UT. It really does not start signal on the direction of the market but that it's a market that lacks liquidity and it is therefore more risky to enter it because it will be difficult to leave without leave feathers.
Doji: Application to the trading and investment:

The range of doji shows key levels which when crossed (upwards or downwards) by following the latter candlesticks are points of entry or exit privileged.

In the case of a reversal to the downside, we'll wait to closing under the low end of the doji to place a sell order. In the case illustrated, it will be realized by a sale at the opening of the second black candlestick. The protective stop is placed just above the upper end of the doji, which corresponds to the point of invalidating the hypothesis.

In the case of a continuation of the increase, we will wait to close above the doji's upper extremity to place a purchase order. In the case illustrated, it will be materialized by a purchase at the opening of the second white candlestick after the doji. The protective stop is placed just below the low end of the doji, which corresponds to the point of invalidating the hypothesis.

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Adam and Eve chart pattern

The dip in Adam and Eve is a variant of the double bottom. So a figure of reversal, it generally occurs after a downtrend. This figure takes the form of a double bottom it is different in that the first bottom is shaped like a "V" and the second bottom in the shape of "U".

via- Candlestick Course

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