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     nihonjin
Member
Username: nihonjin
Post Number: 24
Registered: 05-2007Rating: N/A
Votes: 0
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| | Saturday, December 29, 2007 - 06:35 pm: |  
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I have been trading with a small account for 2 years now and I am happy to have made a small profit over that time. I suppose I am a Position Trader if a label must be used.
I try to monitor my own trading style and improve my methods of trading on a regular basis. I keep a journal of my moves and why IO did what I did. I try and read my journal too! That makes me wince on occasion.
I have yet to find the trading method that I feel completely at home with. I know the elements that I want, but have not yet put them together in quite the way I want.
This is at the bottom a psychological problem. I do not find any problem buying stock or when I make the decision, selling it, but deciding on whether to let the stock breathe or to kill it is a big problem sometimes.
None of the stop loss methods seem to quite fit the bill and I have found myself stopped out a little too often. Now I do not set any stops, which sounds like heresy but I feel happier.
I only trade long and use a breakout strategy to decide entry into a trade with Bollinger Bands on a candlestick chart, supported by Ease of Movement and an Equivolume chart.
I watch stocks of interest using weekly charts. When things are looking good I switch to daily charts to try and catch the best time.
When a stock crosses inside the lower band and volume is rising on the Equivolume chart and there is a cross over on the Ease of Movement to the positive side I enter a trade.
The basic idea is to follow the trade across the BB and up the top band. I exit when volume is heavy and Ease of Movement indicates a squarish box ratio as the stock drifts back inside the top band.
I always try and sell close to the top band because this means you are making an excess profit relative to the deviation from the norm. Whether you are making a real profit is another matter entirely. If volume is low I will let the trade ride. That is where my own doubts surface!
How long should I let the trade run? What happens if there is a gradual rise or fall in price? To get out of this dilemma I step back to weekly charts and see how the price is moving in relation to the BB midpoint. I do not want to keep a trade that crosses completely over the centre line or falls back to the bottom line. You could say I have an implicit stop loss in place because this is my absolute stop loss limit. Even so it is not always easy to take the decision to kill a trade if the price action is not confirmed by the volume measures.
I do not use any indicators except for the Ease of Movement now. I was using stochastics but found them to add no value to my analysis. Bollinger Bands give a measure of volatility and Equivolume + Ease of Movement cover the volume aspect of a trade.
In the coming year I want to get back to price action and so I will try using Point and Figure charts as an extra filter.
I enjoy trading and wish I had started many years earlier. Like many others I would endorse not worrying about the money. Treat everything as if you were playing a game and evaluating the moves as best you can.
The market wins because it has an edge! Traders blink first.
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carolyn
Member
Username: carolyn
Post Number: 45
Registered: 09-2002Rating: 
Votes: 2
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| | Sunday, December 30, 2007 - 08:24 am: |
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Hi Nihonjin,
Sounds like you have made a big journey in 2 years. Congratulations on your approach and your self analysis. Don't worry about being stopped out 'too often', if they are for small amounts of loss. It is keeping the losses small that is one part of the equation.
You may find that reading 'Licensed to Profit' by Chris Shea useful. He outlines a good mental approach to taking setting and taking stops, which seems to be an issue with you. He sees the taking of stops as essential, and to think of it as the 'rent' for being in business.
Reading and applying his methods have been a revelation to me, even though I have been trading for a long time. I particularly like his method of analysing your trading data, using an Excel spreadsheet. It is an extremely effective way to see exactly how you are going and what needs to be done to correct errors in your style.
Good luck
Carolyn
PS. As trading is a mainly psychological pastime, maybe you should rethink the message at the bottom of your post. Trading is about having your own edge and winning, not giving yourself messages that the market has the edge and wins!! Small thing, but the correct self talk is vital in getting and keeping your own mental edge.
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nihonjin
Member
Username: nihonjin
Post Number: 25
Registered: 05-2007Rating: N/A
Votes: 0
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| | Sunday, December 30, 2007 - 06:54 pm: |
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Thanks Carolyn, I don't decry stop losses but with a small account trading commissions add up quickly.
The message is a reminder to me not to blink first and kill a trade too quickly, but to use my volume indicators correctly to confirm or refute the message coming from the price.
I will check up on the book you recommend, but it will have to wait until I have finished The Definitive Guide to Point and Figure by Jeremy du Plessis which I have ordered for my New Year reading.
I already use Open Office to analyze my trades. I calculate the %b and Bollinger Band widths since Incredible Charts does not have them as indicators yet.
I also print out prices as a circle because I think that the left/right slope gives a false impression of price action. In the interview with William Eckhardt in The New Market Wizards, Eckhardt says,
"Some of these are simple (45 degree angles), and some are harebrained (drawing regular pentagons on the chart), but what they all have in common is the use of angles on a bar chart. Many of the trading technique compendia, even some that claim sophistication, treat such ideas.
There's a simple consideration that absolutely invalidates all such angles-of-a-certain-size methods in a single swipe; the size of an angle on a bar chart is not invariant to changes of scale."
By plotting prices around a circle you remove the psychological influence that an apparent slope has.
The market wins because it has an edge! Traders blink first.
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peter1
Member
Username: peter1
Post Number: 209
Registered: 12-2005Rating: N/A
Votes: 0
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| | Sunday, December 30, 2007 - 08:35 pm: |
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Wow, that's different. I am very interested in seeing an example of one of your price circles. Would you please post an example?
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nihonjin
Member
Username: nihonjin
Post Number: 26
Registered: 05-2007Rating: N/A
Votes: 0
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| | Thursday, January 03, 2008 - 05:14 pm: |
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Hi,
I show 2 examples of using circular charts. This 1st example shows the last 3 months highs and lows for British and American Tobacco. The chart goes clockwise and you can see clearly how the price has steadily spiraled up over the time. The blue line is the high and the red is the low. By looking at the width of the gap between the prices you get an impression of the range as well.
The second chart shows the same company's opening and closing prices across the same time period. The blue line is the opening price and the red is the closing price. Again, the chart goes clockwise.
With smaller data sets you can add price labels if you want, but I use these sparklines as a reference in my stock journal and they preserve all the important information in a compact and easily appreciated manner.
The market wins because it has an edge! Traders blink first.
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efficiency
Member
Username: efficiency
Post Number: 45
Registered: 12-2002
Rating: N/A
Votes: 0
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| | Friday, January 04, 2008 - 01:35 am: |
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Can't resist Nihonjin.
Trading between the Bollinger Bands is all good and fine. Reasonably consistent. But....you used the word "small".
You seem to disregard when a price climbs the upper (or lower) Bollinger Band. Less frequent and defies statistical expectations. Obviously more movement/more money as price seeks a new "equilibrium".
Really a function of bandwidth. Contraction leads to eventual expansion.
Attached is a chart. Default 20 days/1.5 standard deviation of Altria (fka Phillip Morris). The first one I had that came up with a recent move.
The narrowest bandwidth in 6 months coupled with an ADX < 20 generally precedes reasonable swing moves. Of course, the direction remains to be seen.
As for hard stops; being stopped out reflects statistical deviation beyond your expectations. They also telegraph to the specialist/market maker where you are. Clusters of stops allow for picking up inventory. Mental stops measured in ATR's gives a framework for decisions.
As for the circular charts.............? I'm "here" for the money.
(Message edited by efficiency on January 04, 2008)
(Message edited by efficiency on January 04, 2008)
(Message edited by efficiency on January 04, 2008)
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