COME INTO MY TRADING ROOM

TBlzx

You can be free. You can live and work anywhere in the world, be independent
from the routine and not answer to anybody.” With those words I began my
first book, Trading for a Living. One of my great pleasures in the years since its
publication has been meeting and becoming friends with people who became
free thanks to successful trading.

Several times a year I run a Traders’ Camp, a week of intensive classes at
remote resorts. I enjoy my campers’ successes. A stockbroker became a fulltime
trader, closed his business, and moved to Rio to pursue a life-long
interest in Latin women. A psychologist became such a successful options
writer that she paid for an early retirement for her husband and moved with
him to the Virgin Islands to become an expert in what she calls synchronous
hammocking. A man bought a mountain in Vermont and trades from the house
he built on its top. I wish all students could succeed, but it’s not that simple.

How many psychiatrists does it take to change a lightbulb? Only one - but the
bulb has to want to change.

To succeed in trading you need several innate traits without which you
shouldn’t even start. They include discipline, risk tolerance, and facility with
numbers. A big fat guy who is often drunk and can’t kick a cigarette habit is
unlikely to make a good trader - he lacks discipline.

TBlzx

A nitpicker who obsesses over each dime is too tense to live with market risks.
A daydreamer who cannot do simple arithmetic on the run becomes lost when In addition to discipline, risk tolerance, and ease with numbers, successful
trading requires 3 M’s - Mind, Method, and Money. Mind means developing
psychological rules that will keep you calm amidst the noise of the markets.
Method is a system of analyzing prices and developing a decision-making tree.
Money refers to money management, which means risking only a small part
of your trading capital on any trade; think of the way a submarine is divided
into many compartments so that it won’t sink if one section becomes flooded -
you have to structure your account this way. Psychology, trading tactics,
money management - you can learn these skills.

How long will it take you to become a competent trader and how much will it
cost? What rules do you set, what methods do you use, and how do you split
your trading capital? What should you study first, second, and third? What
markets should you trade, and how much money can you expect to make? If
these questions interest you, you picked the right book.

You can succeed in trading. It has been done before, and it’s being done right
now, today, by people who started from scratch, learned to trade and are
making a good living at it. The best ones make fortunes. Others fail, out of
ignorance or lack of discipline. If you work through this book, ignorance will not
be a problem, and you will hear me yell at you again and again, pointing you
towards disciplined, responsible, professional trading.Trading is a journey of self-discovery. If you enjoy learning, if you are not
scared of risk, if the rewards appeal to you, if you are prepared to put in the
work, you have a great project ahead of you. You will work hard and enjoy the
discoveries you’ll make along the way.
I wish you success. Now let us begin.

TBlzx

MALE OR FEMALE?
I find that the percentage of successful traders is higher among women. They tend to be less arrogant, and arrogance is a deadly sin in trading. The male ego - that wonderful trait that has been bringing us wars, riots, and bloodshed since time immemorial - tends to get heavily caught up in trading. A guy studies his charts, decides to buy, and now his self-esteem is involved - he has to be right! If the market goes his way, he waits to be proven even more right - bigger is better.If the market goes against him, he is tough enough to stand the pain and waits for the market to reverse and prove him right - while it grinds down his account.

Women traders, on the other hand, are much more likely to ask a simple question - where’s the money? They like to take profits and focus on avoiding losses instead of trying to prove themselves right. Women are more likely to bend with the wind and go with the flow, catch trends and hop off a little earlier, booking profits. When I tell traders that keeping records is a hugely important aspect of success, women are more likely to keep them than men. If you are looking to hire a trader, all other factors being equal, I’d recommend looking for a woman.

TBlzx

Buy low, sell high. Short high, cover low. Traders are like surfers, trying to catch
good waves, only their beach is rocky, not sandy. Professionals wait for
opportunities but amateurs jump in, driven by emotions - they keep buying
strength and selling weakness, bleeding their equity into the markets. Buy low,
sell high sounds like a simple rule, but greed and fear can override the best
intentions.

An intelligent trader looks for holes in the efficient market theory. He scans the
market for brief periods of inefficiency. When the crowd is gripped by greed,
the newcomers jump in and load up on stocks. When falling prices squeeze
the fingers of thousands of buyers, they dump their holdings in a panic,
disregarding fundamental values. Those episodes of emotional behavior dilute
the cold efficiency of the market, creating opportunities for disciplined traders.
When markets are calm and efficient, trading becomes a crapshoot, with
commissions and slippage worsening the odds.

Many intelligent people sleepwalk through the markets. Their eyes are open,
but their minds are shut. They are driven by emotions and keep repeating their
mistakes. It is OK to make mistakes but not OK to repeat them. When you
make a mistake for the first time, it shows that you are alive, searching,
experimenting. Repeating a mistake is a neurotic symptom.

[ 本帖最后由 TBlzx 于 2010-3-14 15:21 编辑 ]

TBlzx

Losers come in all genders, ages, and colors, but several stock phrases give
them away. Let us review some of the common excuses. If you recognize
yourself, use that as a sign to start learning a new approach to the markets.
Blame the Broker
To be a successful trader, you must accept total responsibility for your
decisions and actions.
Blame the Guru
Whether or not you listen to a guru, you’re 100% responsible for the outcome
of your trades. The next time you get a hot tip, drop it into your trading system
to see whether it gives you a buy or sell signal. You are responsible for the
consequences of taking or rejecting advice.
Blame the Unexpected News
Your trading plan must include the possibility of a sharp adverse move caused
by sudden events. You must have your stop in place, and the size of your trade
must be such that you cannot get financially hurt in the case of a reversal.
There are many risks waiting to spring on a trader - you alone are responsible
for damage control.
Wishful Thinking

TBlzx

Upper channel line = EMA + EMA · Channel coefficient
Lower channel line = EMA - EMA · Channel coefficient
A channel drawn in an uptrend tends to fit the peaks. Rallies in a bull market
are much stronger than declines, and bottoms seldom reach the lower channel
line. In a downtrend, a channel tends to track bottoms, while the tops are too
limp to rise to the upper channel line. It is unnecessary to draw two separate
channels, one for the tops and the other for the bottoms; just follow the
dominant crowd. In a flat market expect both tops and bottoms to touch their
channel lines.
When we are bullish, we want to buy value near the rising EMA and take
profits when the market becomes overvalued - at or above the upper channel
line. When bearish, we want to go short near the falling EMA and cover when
the market becomes undervalued - at or below the lower channel line.
When the EMA rises, it identifies an uptrend. It is a good idea to buy near that
EMA or slightly higher or lower, depending on the stock’s recent behavior.
At point A, EMA stands at 35, while the low point of the bar reaches 33 - a 2-
point downside penetration. At point C, the price low penetrates the EMA by
1 point, at D by 2.25, at F by 4, at point H by 0.75, and at J by 4. Those shortterm
bottoms keep alternating between shallow and deep - an important piece
of intelligence when you try to decide where to place your buy order. If the
latest penetration was shallow, expect the next one to be deep, and vice versa,
and place your buy orders accordingly.
The place to sell stocks purchased near the EMA is at the upper channel line.
Looking back, it is easy to see that buy-and-hold would have worked even
better in TARO, but the future is not nearly as clear at the right edge of the
chart. Buying value near the EMA and taking profits above value, near the
upper channel line, is safer and more reliable. Stock bought at A can be sold
at B, bought again at C or D and sold at E, and so on.
A trader can grade his performance, based on the percentage of the channel
he takes in profits on any given trade. For example, at the right edge of the
chart, the upper channel line stands at 97 and the lower at 69, making the
channel 28 points high. An A trader should get the minimum of 30% or 8.4
points out of the next trade, a B trader 20% or 5.6 points, and a C trader 10%
or 2.8 points.
At the right edge of the chart, prices are hitting the upper channel line. It is
time to take profits on stocks purchased in area J, near the EMA, and wait for a
pullback.
If you buy near a rising moving average, take profits in the vicinity of the
upper channel line. If you sell short near a falling moving average, cover in the
vicinity of the lower channel line. Channels catch swings above and below
value but not major trends. Those swings can be very rewarding. If you can
catch a move from the EMA to the channel line in bond futures, you’ll make
about $2,000 in profit on a $2,000 margin. If you can do this a few times a year,
you’ll find yourself far ahead of many professionals.