Traders' Library

Beer Margaritas :)

Happy Halloween!! A new twist on an old favorite... enjoy (responsibly)!!

How to Avoid Curve Fitting- Extended Testing

Selection today is from Steve Palmquist's ground-breaking book, Money-Making Candlestick Patterns: Backtested for Proven Results. If you trade with candlesticks, this is a must-have resource.

HOW TO AVOID CURVE FITTING: EXTENDED TESTING
A common suggestion by traders new to backtesting is to just combine all the filters that improve results and trade the resulting system. Sometimes it works and sometimes it does not. Just like everything else, the results of combining filters need to be tested. It is possible to keep adding filters to a trading pattern until most of the losing trades in a given time period have been filtered out. This is called curve fitting.

S&P500 Technical Analysis Update Oct. 31 2009

Waiting one day to sell was the correct decision on wednesday. I closed the position thursday at 1062.3 when price reached the 100-bar average on the 15 minutes chart. You could have closed at still a bit a better price near closing time, or even with a small loss on friday after the opening. But then it was clear that you had to close the long position. Since The SATS2 auto-trading expert already closed the position on wednesday, we have no open position anymore. We have to consider now the top of 1101.36 as the highest level reached and the index started a bigger downtrend correction. Very big if we started the [C] wave down or maybe just small if we get an extension of the up moving wave (C), which still can make a double zigzag move. In that case we even may have reached a temporary low already. An up correction should not move above 1080 for me to confirm the downtrend. I would advice not to take any position for the moment.

10/28/2009  Last UPDATE!

The index is breaking the stop level. Should we sell? I would wait and see until tomorrow and eventually sell when price is making an up correction which seems to be possible now. We are at a good support level, we are again reaching the median line of the longer term pitchfork and almost all indicators are reaching oversold levels. However if there is no recovery we will sell tomorrow. Since the SATS2 expert is red, the automatic SATS2 position is closed.

How to Trade the Inertia Indicator

This thoughtful and concise chapter on the Inertia Indicator is taken from Martin Pring's The Definitive Guide to Momentum Indicators.  Do you trade momentum? Leave us your thoughts in a comment or two...

The Inertia Indicator
THE CONCEPT 

The inertia indicator was developed by Donald Dorsey and is an outgrowth of Dorsey’s relative volatility index (see Chapter 34). The name inertia was chosen because of his definition of a trend. He states that a trend is simply the “outward result of inertia.” It takes significantly more energy for a market to reverse direction than to continue along the same path. Therefore, a trend is a measurement of market inertia. Dorsey asserts that volatility may be the simplest and most accurate measurement of inertia. The inertia indicator is simply a smoothed RVI [Relative Volatility Index]. The smoothing mechanism is a linear-regression indicator.

Don't Trust the Rally and more news

Don't trust the rally! (Kirk Report)***

Oct. 29 Stock Market Recap (Trader Mike)

Cash4GDP Updated (Planet Yelnick)

SPX 20/50 day Trap (chart addict)

NASDAQ launches iPhone App (Stocktwits)

Upside it is (Shark Report)

Follow ups and other fun facts (Random Roger)

Janis Joplin - Maybe (Trader Rock... since I'm dressed like a war-protesting hippy for Halloween!)

Ooooo-vechkin! Go Caps (ESPN)

Bahwlmer-themed Halloween, aka Baltimore for those not from here (Bmore Sun)

October 28 Market Analysis and Trading Plan

Timely Trades Letter™:

October 28, 2009
NASDAQ Outlook & Key Trading Levels:

The market remained in the recent narrow trading range just under the 2160 resistance area during Monday's session. On Tuesday the market broke below the range to retest and break below the ascending trend line, drawn through the lows of 03/09 and 07/13. Wednesday's session saw the market follow through on Tuesday's break of the ascending trend line, with the market dropping on strong volume and approaching the lower Bollinger Band. 

The trading plan was to trade lightly, if at all, on the long side using just a couple of positions to protect profits from the previous run while the market was below resistance and above the ascending trend line. The trading plan called for new short positions if the market broke below the ascending trend line. When the market broke the trend line on Tuesday, it was time to close any open longs and look for a few shorts. Reducing our long positions as the market approached the 2160 resistance area, and just trading a couple of small positions while the market moved sideways under resistance, protected previous profits which can be put to work again when the trading range is broken either way. In this case, the market decided to break below the ascending trend line which changes the focus to short positions and inversely correlated ETFs.

I Totally Cheated

by John Boyer, VP, General Manager of Traders' Library

 

Recently, I was thinking about trading. I came to this business from the publishing side—actually as a writer. After seeing hundreds of presentations, reading stacks of manuscripts, and hearing a lifetime worth of trading tips from the best in the business, I have been compelled to trade occasionally. Recently, in one of these moments, I had this idea of using the long and short ETFs to try play some of the movements in the Dow. (I have actually started paper trading this model and would be glad to let anyone know the details. Post a comment if you are interested.) Writing all the copy for the promotions we send out must have sunk in because I made two smart choices right away. First, I chose to paper trade the idea and see if it even comes close to being viable.

New feature-- click your favorites

Hi there-- Typepad has given us the ability to mark our favorite posts. So look for the new feature at the bottom of every post and click to make your personal article get all the glory! Enjoy--

Vegas Forum - seats filling fast

Hi there blog readers--

Consider this your PSA for the afternoon. Our Traders' Library Trading Forum in Vegas on 11/22 is filling up fast. We have limited this event to the first 25 traders, so I would suggest making your arrangements this week. For those attending the Moneyshow's Traders' Expo, our event is separate and you will need to register on our site. However, this is a great excuse to extend your weekend if you will already be out there!

Remember, you will get great education sessions from Carley Garner, Bennett McDowell, and Gary Anderson, plus breakfast and lunch, plus great networking opportunities, plus free DVDs of each session after the event. All we're asking is $49.95 so that the event is limited to serious traders only. Hope to see you all in sunny Las Vegas! -- Jody [ps: have questions-- just email me!]

http://www.traderslibrary.com/conferences/tlforum2009vegas/register.html

Contrarian Dynamics during Rallies by Gary Anderson, 35-yr market veteran

Please meet one of our speakers for this November's Traders' Forum! Winner of the 2003 Charles H. Dow Award, Gary Anderson  is a 35-year market professional. As an advisor to the pros, Equity Portfolio Manager, is a daily commentary read by an international clientele of banks, mutual funds, hedge funds and financial advisors. A principle of Anderson & Loe, Inc., Gary has been featured in Barron’s and his work has been published in Technical Analysis of Stocks and Commodities and is regularly quoted in the Wall Street Journal and Investors’ Business Daily.

Article taken from his Equity PM 10/26/09 newsletter:

In the first chart I have shaded contrarian rallies from 2001 to 2003. During each the Spread fell as price rose, our indication that the rallies lacked momentum. Nevertheless, over the period shown several of these momentum-less rallies booked significant gains. So why do we avoid rallies when the Spread is falling? A rally is, after all, a rally. What is the difference between a rally driven by momentum and a rally which exhibits no momentum? And why does it matter? These questions are timely because we have just witnessed another big rally from the March low, one which has demonstrated little if any sustained momentum.

Free Webinar with Noted Trading Expert Toni Turner

You’re Invited!

Finding High Probability Trades with ETFs

Who: Toni Turner
What: FREE Exclusive Webinar
When: October 29th, 2009 | 8 PM EDT
Where: Click Here to Register

Topics covered in this high-energy, information-packed seminar include:

· Benefits of trading ETFs—why they can be easier and more profitable to trade than stocks.

· What you must watch to trade ETFs successfully

· How to juice your profits safely with leveraged ETFs

· Toni’s latest tricks and tips for trading sector ETFs—strategies she uses in her own ETF trades.

· How to avoid the most common mistakes traders make when trading leveraged-inverse funds.

We anticipate a full house, so pre-register NOW to guarantee your spot for this special event!

Register Now!

The Economic Storm - The Seed of Greed

Lane Mendelsohn, VP of Market Tech and visionary for TraderPlanet.com, has a brand new book, and we wanted to give you a sneak peek! Titled, The Economic Storm: Understand It, Survive it, Make Money When it Passes, this book is a quick way to improve your trading.

Take a look, from chapter 2: What Do We Do?

The Solution (Greed and Fear)

In the late 1990s, the technological boom was creating new horizons that seemed limitless. Alan Greenspan, then Federal Reserve Chairman and one of the strongest supporters for repealing Glass-Steagall, described the resulting market bubble as "irrational exuberance." This prescient phrase pointed to the eventual collapse of the high-tech bubble, but, remember, that bubble began somewhere as a seed. We call that seed greed, and when it sprouts, it flourishes like a weed. At first, the lush covering pleasantly seduces us to its rich and luxurious feel. We like the wide, green mat it forms as it begins to cover all that was brown and void. We like it and revel in it, to the point that we fail to see that the beautiful green has spread its tendrils, reaching in, tangling about, and eventually strangling off the life flow of the energy that gave birth to it.

Baked Trout with Shiitake Mushrooms, Tomatoes, and Ginger

Feeling like you need something new for the dinner table-- try this Asian-inspired fish!

Learning video: Bottom Reversal Patterns in Candle Charts

With this video we have a look at the candlestick bottom reversal patterns. We will discuss bullish patterns with the engulfing pattern, piercing line, bullish counter attack, bullish harami, morning star, hammer and inverted hammer, three white soldiers and more.

 

Sylvain Vervoort
http://stocata.org/

S&P500 Technical Analysis update Oct. 24, 2009

As expected in our last week comment we had some price reaction this week. Price remained above our stop level so, we are still in the long trade. If price is making an extension of the (C) wave before reaching our 1120 target level, I would expect a little more reaction for the creation of an ABC extension. I do not think that we have already started a longer term reaction down. You can however never be sure, so I will continue to hold a stop at the buying level of 1057.5. That is a reaction to the level of the uptrend line and the level of the modified ATR trailing stop. A closing price below that point will need very strong arguments not to close the position. The SATS2 expert is green and here we will only close the position on the first red bar. First support is at 1076, the low side of the previous window. There is no change in the closed trading results.

Global Profit Opportunities, Chuck Hughes

Many international stock markets currently offer better profit opportunities than the US stock market. Many foreign economies such as China and Brazil are growing at a much faster rate than the US economy and as a result foreign corporate profits are growing at a much faster rate. The infrastructure build out in developing countries is leading to strong demand for energy, basic materials, bank financing and wireless communications resulting in healthy corporate profits and price gains for many foreign stocks.

Learn how to take advantage of these global profit opportunities by investing in the Emerging Market ETF.

*courtesy of chuckhughes.com

Tops, Crude Realities, Market Recaps, and Las Vegas

Stocktwits TV

Finding stock ideas (dash of insight)

Process drilldown (random roger)

We may have just topped (planet yelnick)

Oct. 21 Recap= A key reversal day? (trader mike)

Market recovers Wed losses (toni hansen)

Wall St. breakfast (seeking alpha)

Crude realitities (big trends)

A lesson on concentration (the chart addict)

Arbitrage in baseball (infectious greed)

Jimi Hendrix- Catfish Blues, BBC session (trader rock)

Davis Matlock by Edgar Lee Masters (poetry foundation)

Vegas One-day Trading Seminar! Nov 22

Get the yellowtail roll at Tao, Vegas [for when you are out for our show...] 

October 21 Market Analysis and Trading Plan...

By Steve Palmquist, excerpt from the Timely Trades Letter.

Timely Trades Letter™:

October 21, 2009:

NASDAQ Outlook & Key Trading Levels:

The market moved mostly sideways since the last Letter. It has been testing the 2160 resistance area during this period on generally below average volume. Below average volume movement in a narrow range when the market is near horizontal resistance is normal, and indicates the market has not yet decided on its next move. 

The trading plan was to add long positions if the market moved up above resistance on increasing volume, and to just stick to a few probing positions if the market continued up on below average volume. The market did poke its head slightly above resistance a few times during the last weeks probing action, but the volume was light and there was no follow through after these tests of resistance. Because of the low volume, and lack of follow through, I followed the plan and did not add more trading positions, and instead stuck to just a few feeler positions as noted in the last Letter.

Even though the market showed little movement since the last Letter, we saw strong movement in some of the setups that provided opportunity for the few feeler positions I was looking for. The ATLS accumulation pattern triggered and moved up ten percent, the KNOL flag pattern triggered on twice average volume and moved up strongly during Wednesday's session, the COP accumulation pattern also triggered and established a profitable position, the WAG pullback pattern also triggered and provided another profit opportunity. As noted in previous Letters, when the market is uncertain I focus on accumulation patterns because that is where the money is flowing. I need to see strong volume on pullback pattern triggers in this type of environment to make them interesting.

Earnings keep the equity bull alive...but tired

October 21st, 2009

Carley will be speaking at a Trader's Library event in Las Vegas during the Trader's Expo, check it out: http://www.traderslibrary.com/conferences/tlforum2009vegas/index.html

A handful of better than expected earnings from the banking sector kept the rally intact.  Morgan Stanley, US Bancorp and Wells Fargo all impressed the market with their bottom line results.  However, there were also higher than expected loan losses.

Since July 13th of this year,  there have only been 6 periods of 2 or more down days.  Of those, only 2 of those periods were 4 down days and one of those periods only accounted for a pullback of 3 S&P points.  Three of the periods were 35 to 38 points. 

Come to Vegas November 22! One-day Traders' Forum! Free DVDs!

You are cordially invited to Las Vegas with me!

Please join Traders' Library and three of the top trading pros in the business, Bennett McDowell (Traders Coach), Gary Anderson (Equity PM), and our own blog contributor Carley Garner (Commodity Options) for a great day of trading education out in snazzy Las Vegas!

We're charging $49.95  and limiting seats to 25 active, technical traders. There will be breakfast, lunch, trading manuals, and the best part: You will get a copy of each session's DVD for FREE (over $400 value)! Hope to meet you there! Those who have attended our past forums can tell you, this event is not to be missed! As we often say around here, do it! Do it now! You can thank me in person :)