Traders' Library

Forward Performance Testing

From our friends at PowerZone Trading...

 

Forward performance testing, commonly referred to as paper trading, is an important step in evaluating a trading system. Once we have determined that the performance metrics look reasonable in our backtesting with both in- and out-of-sample data, we are ready for forward performance testing.

 

Forward performance testing is the simulation of actual trading. Trades are taken on paper only, so any profit or loss is hypothetical. The trading plan should be followed exactly, including how the orders are placed. Many trading platforms, such as NinjaTrader and TradeStation, allow users to trade simulated accounts. Traders are able to watch live market data and place realistic trades, without risking any money.

 

One of the biggest challenges here is simulating a real trading atmosphere. Obviously it is much easier to play than to commit: trading for pretend and trading for real are two different animals. But we want to try to create the same types of pressure we feel when trading with real money. Here are some ways to keep your paper trading realistic:

Trend Reversal Patterns Learning video

This is my latest Technical Analysis training course learning video part8 about price trend reversal patterns. Bottom reversal patterns and top reversal patterns with the head and shoulders, complex head and shoulders, triple and double tops and bottoms, rounding bottoms and V-formations.

Enjoy,

 

Sylvain Vervoort
http://stocata.org/

S&P500 Technical Analysis Update August 29, 2009

The index is consolidating above the resistance of the previous top, now giving support. There has been little or no price change last week. I have reviewed the Elliott wave analysis on the monthly and weekly charts and on this daily chart. For the moment we are still in an up move either making a wave {C} or a wave {3}. I am afraid that the correct count will only become visible with time. For now both counts remain possible. Personally I am in favor of the correction wave solution. This means that after the top of this wave {C} and as a consequence also the end of correction wave [B], there will be a wave [C] down to a level of 650. No panic yet, for now price is still up and if it is a wave {3}, we still have a long way to go. We stay in the trade and keep a stop at 995 with the idea to capture as much profit as possible. The expert continues with a green color.

Meet Trader Jean Folger of PowerZone Trading

Jean Folger, co-founder of PowerZone Trading, is an experienced stock and futures trader. She is co-author of Make Money Trading: How to Build a Winning Trading Business.

The following short excerpt comes from the ebook, High Profits in High Heels: Secrets from Today's Top Women Traders. To read the rest of Jean's article, download your FREE copy today.

"...When I began trading, I was intrigued with the idea of expanding my knowledge of investing. Up to that point, I was a buy and hold investor, and I was interested in taking a more active role in the markets. My goals were not exclusively financial: in addition to making a decent living, I wanted a challenging career that allowed creativity and flexibility, both in terms of how I approached the business and how I was able to schedule my time.

Twist on a Classic Drink

A drink near and dear to my heart (named creatively "The Costa Special"); thanks mom and dad. Spritz up your Friday evening with this easy twist on a classic drink:

Rocks (aka ice)

Canadian Whiskey (we like Seagram's)

7-up

splash of fresh OJ to finish it

 

Give it a swirl and enjoy! Yup, it's really that easy! Have a great weekend. I'm off to Nags Head, North Carolina (hopefully without any more tropical storms!)...

Brand New Palmquist Course: New Money-Making Trading Systems

As you know, we're focused on education on this blog. But there are times when I feel it is my duty to let you know about a new product that I find particularly exciting. This is one of those times...

The Las Vegas Forum traders and I have been looking forward to this weekend! That's because it is the official release of the new Steve Palmquist course, New Money-Making Trading Systems: Advanced Results from 6 Simple, Proven Strategies. Taped at the Las Vegas Forum in June, this six-hour course reveals the results of Steve's extensive tests on Bollinger bands, declining volume pullbacks and retracements, as well as volume accumulation and distribution... among other things.

I've worked with Steve for a number of years now and I can attest to his research methods, his thoroughness, his ability to teach, and his approachability. He's a great guy who makes a lot of money trading (when he's not on his boat as often tells me). And, now he's decided to hand you his methodology. Pretty sweet deal if you ask me. Order your copy today!

BTW: The traders who attended the Vegas forum get this course (plus Dale Wheatley's) for free! Just a hint that you should consider attending our next forum....

Jack Schwager's Complete Guide to Mastering the Markets- Reviewed!

G' Mornin' ! Today I have Radu Haraga's Seeking Alpha review of Jack Schwager's course, Jack Schwager's Complete Guide to Mastering the Markets. This is one of my favorite courses; check it out....

http://seekingalpha.com/instablog/375714-radu-haraga/18624-jack-schwagers-complete-guide-to-mastering-the-markets-a-book-review

Enjoy the day!

Forex Trader Kathy Lien and Her 5-Step Plan for Traders

The following is an excerpt from High Profits in High Heels: Secrets from Today's Top Women Traders. Here we are introducing forex trader Kathy Lien. Kathy is an internationally published author and the Director of Currency Research of FX360.com and GFT. Enjoy her article and don't forget to download your free copy of this ebook right here on this blog!

***

“Trading is a Man’s Game,” but is that really true?  If you walked onto the floor of the New York Stock Exchange or the Chicago Mercantile Pits that may seem the case. If you enter the electronic trading floors of big banks like Citigroup, JPMorgan Chase, or Goldman Sachs on the other hand, things are quite different.  Although still male dominated, it is clear that gender has become less of an issue in a world where how fast you can click a button is far more important than how loud you can yell. Women are sitting alongside men and not just as their trading assistants.  In fact, gender only becomes a problem if you let it be one.  Don’t be mistaken, as a female who has worked both as a market maker and prop trader at JPMorgan Chase, I know that women have to work harder to achieve the same level of success as men; but, at the same time, I do not believe in the glass ceiling. I have met countless successful women in finance and trading who make me believe that if there is a glass ceiling, it is only as thick as you perceive it. 

Bernanke News, Trader Interviews, and More...

For your Tuesday reading pleasure... a fine selection:

Don't be stubborn! (Dash)

Christopher Wood Interviewed in Barron's (Controlled Greed)

The Markets on Bernanke: An Unmitigated Postitive (WSJ)

Trailer for Capitalism: A Love Story (Infectious Greed)

Final Surge (Yelnick)

The Next Shoe to Drop in Banking: Options Strategy (SA)

Conversation with Howard and CME (stocktwits)

Sequential Breakout Trading in BioTech (chart addict)

Your Trading Edge Interview with Charles Kirk (the kirk report)

Morning Flips (shark)

Relatively Unchanged after Multi-day Rally (toni hansen)

Aug. 24 Stock Market Recap (trader mike)

Screaming Trees- Love or Confusion (Trader Rock)

Uncovering Your Trading Rules (Dr. Brett)

Reversal Characteristics and Candlesticks (Stock Bandit)

Technical Picture- Weak Close (wall st. warrior)

Them Crooked Vultures! (dave grohl, john paul jones, and josh homme)

Go RAVENS!

Options Trading Forum Sessions-- Online NOW!

Greetings and happy Monday everyone. I have returned from a very successful trip to Chicago for our Options Trading Forum! I hope that all of the traders in attendance had a great time-- I know I did. Thanks also to Jim Bittman, Marty Kearney, and Peter Lusk of the Options Institute at the CBOE for presenting some great options material. And another huge thank you to John Henek and the Online Trading Academy for providing us with a great classroom.

If you missed it, don't worry-- we have made the sessions available online! By signing up, you'll have access to all 9 options seminars right in your Traders' Library account. It's easy and good for your portfolio... so sign up today!

Now, time to start plotting the next Forum. If you have ideas on speakers, topics, or locations, please let me know! I'll be posting some pictures in a few days. Until then, ciao-

Pork Chops with Peaches - Recipe for the Weekend

Hi everyone, hope the weekend is going great! Here's a little something in case you're looking for a nice dinner this evening. You may grill these pork chops outside or cook them on the stove. Either way, the peaches do the trick.

Moving Averages Learning Video

Have a look at my newest YouTube Technical Analysis learning video part 7 about price moving averages. The simple, exponential, weighted and TEMA triple exponential moving average. The importance of the 50 and 200-days moving average and how to limit the lag in an average.

Enjoy,

Sylvain Vervoort
http://stocata.org/

S&P500 Technical Analysis update August 22, 2009

As expected last week, the correction finished already on monday. We touched our selling advice at 980 near the closing on monday with very low volume. So it was clear that we had to wait another day to see if it would be confirmed. Tuesday we opened above 980 and that was the lowest point of the day. So, still no selling. The rest of the week price went up with increasing volume. We have a higher high now and the index may test support of the previous high. However it looks like we are going to continue higher in the direction of 1120 (see weekly chart).

The First Pullback- A Simple Lesson from Velez

The following is an excerpt from Oliver Velez’s Strategies for Profiting on Every Trade.  Be sure to check out all of Oliver’s books and DVDs at www.traderslibrary.com.

THAT FIRST PULLBACK
This will be a very simple yet powerful lesson. It is one you can begin using immediately. You may have heard of this concept but perhaps are not aware of the simple power it holds. It is a concept taught throughout Pristine. In the seminar, we go into great detail about handling the stages of the market. After that, we discuss the advanced topic of how to handle the transitions that occur to lead from one stage into another. Understanding the transitions can lead to the highest degree of market mastery. While there is much to comprehend in this area, I would like to show you two examples of how to handle a transition from a sideways consolidation to an uptrend.

Big Pharma Supports Health Care Reform

By Kevin Grewal, Editorial Director at www.SmartStops.net

Despite all of the controversy surrounding the Obama administration’s health care reform bill, there is a good chance that some version of the bill will be passed by year’s end and America’s biggest pharmaceutical companies are supporting the bill.

Pharmaceutical companies are expected to pour nearly $150 million into advertisements supporting the reform and it makes sense.  One reason is because the main focus of the industry has warped from being one that tries to sells pills to the masses to one that markets extremely expensive treatments to small groups of sick people.

Take a company like Merck (MRK), for example, who came out with Zocor, a blockbuster drug which provided the life saving benefits of lowering cholesterol, or Pfizer’s (PFE), top selling cholesterol drug Lipitor.  To benefits of these drugs, in conjunction with the ability of these companies to actively market the drugs on television, led to a golden age of profits for these companies.  It was a good ride while it lasted, but it is all coming to an end with the expiration of patents and the emergence of generic drugs.

Why Trade Naked Puts?

The following excerpt is from Naked Puts: Power Strategies for Consistent Profits by Ernie Zerenner and Michael Chupka. Check out a copy today :)

From Chapter 1: An Introduction to Options and the Naked Put Strategy

DOES THIS IMAGE LOOK FAMILIAR?  If you have ever researched or traded options, you are probably familiar with the covered call strategy and the risk-reward chart.  An investor who applies to trade options through a brokerage firm is allowed to trade covered calls as a Level I investor.  This is because covered call investing is arguably the most conservative options strategy an investor can use in a portfolio to increase returns, add protection, and generate income.

Is The Economy In Recovery Mode

By Kevin Grewal Editorial Director at www.SmartStops.net

An index of leading economic indicators that is meant to predict economic activity for the next three to six months was recently released and indicated that growth in economic activity will begin soon, but is the index correct?

The index, constructed by the Conference Board, covers ten indicators including everything from interest rate spreads to consumer expectations and of these ten, six increased in July.  This overall increase in the index marked the fourth consecutive month-to-month increase and pushed the anticipated six-month growth rate to 3% through July, the highest growth rate since mid-2004. 

The positive indicators in the index included interest rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, index of supplier inventories, stock prices and manufacturers’ new orders for nondefense capital goods.  Of these indicators, the real driving force behind an economic recovery is initial claims for unemployment insurance.  Granted the pace of initial unemployment claims have been slowing down, but the overall unemployment rate is still extremely high and the numbers continue to fluctuate.  One could only wonder whether companies just are unable to hand out more pick slips without significantly impacting operations or are things really heading in the right direction.

Efficient ETF Executions

The following excerpt was taken from Deron Wagner's course book and DVD package called Sector Trading Strategies.

From Appendix B: Efficient ETF Executions

The most important thing I have learned for getting good ETF executions is to always follow each ETFs respective index and use it as the basis for making entry and exit trade decisions. For example, if I am trading BBH, the Biotech Index HOLDR, I will always follow and chart $BTK, which is the symbol for the Biotechnology Index. If I am trading SMH, the Semiconductor Index HOLDR, I follow $SOX, the symbol for the Semiconductor Index. If I trade QQQ, I follow $NDX. Get the idea?

Is the Correction Real of Just Memorex?

Excerpts From Dominick’s Daily Energy Market Analysis Issued Each Morning
By Dominick A. Chirichella

Dominick A. Chirichella is a director and senior partner for the Energy Management Institute, http://www.energyinstitution.org , and has been involved in energy & commodities markets for almost 40 years. EMI provides higher learning for energy professionals with comprehensive, fully accredited, energy education programs from basic to advanced level. It also provides critical business information services and thought leadership in the energy segments of Oil,  Gas, Power, Alternative Fuels, soft commodities and metals. For more info visit our website (www.energyinstitution.org)Contact him at dchirichella@emimail.org.

***The correction continued on Monday with the eye of the storm focused clearly in the global equity markets which then spread to the currency markets forcing energy participants to once again focus on the fundamentals and when they do that the only action they can take is selling action. The equity markets were rattled a bit by the latest consumer confidence number released in the US on Friday suggesting that the American consumer did not look like it was ready to go on a spending binge. The US economy has dug itself out of most economic downturns in the past on the back of consumer spending. In addition with the US is a major importer of almost everything many manufacturing centers around the globe (like China, Singapore, Japan, etc.) are also very dependent on the spending habits of the US consumer. This mentality started a much needed downside correction in everything that as of this writing seems to be subsiding and in fact this morning equities are higher, the dollar is on the defensive and oil and natural gas are in positive territory.

Hey CHICAGO!! Options Trading Forum This Weekend!

Our popular Options Trading Forum is happening THIS WEEKEND in Chicago! I'm stoked! Friday and Saturday we will be featuring educational sessions with Jim Bittman, Marty Kearney, and Peter Lusk of the Options Institute of the CBOE. Register now and we'll find you a perfect chair to learn options trading from some of the top minds in the industry. Plus, you'll get a DVD copy of every session, which will retail for over double the amount of the event. Even though we've filled the room, I wanted to give you this one last chance.....

Here's what are traders are getting ready for: