Catching up on guidance from a master trader in four quick minutes.  Click the links to watch the one-minute videos and get grounded with a solid approach to trading.

Lesson 5 encourages focus.

Lesson 6 is my favorite. Click here to follow up with more information on how to get this step done right!

Lesson 7 is a simple technique to keep the “odds in your favor”.

Lesson 8 is arguably the most necessary ingredient to good trading.

Previously posted Market Minute lessons and commentary:

Lesson 4: Psyched up for the big trade? Don’t be!

Lesson 3: How About Doing What Works?

Lesson 2: What Time is Good for You?

Lesson 1: One Minute Towards Successful Trading

(BackTesting Blog is an INO.com affiliate)

Tags: INO, trading

Watching the football teams psych up for the playoffs today, I’m reminded how big a factor emotion can be! In sports and many other competitve endeavors we strive to pump ourselves up emotionally to win. Check out this video by Adam Hewison to see how dangerous those same emotions can be to your trading.

Adam Hewison’s  Minute 3 video (click here to watch) suggests traders choose between technical and fundamental information for their trading decisions.

I have to ask:  How about using what works?

We have the technology now to check out how well each of the different types of data performed in the past.  You can look at the track record of experts writing newsletters, back test technical indicators, back test fundamental numbers like Earnings Per Share (EPS), Price/Earnings, and most of the key statistics of a company.   Services tell how well seasonal predictions correlated with actuals, and even programs to data-mine for dates a market “always” moves.

With all that at our fingertips, we’re in a great position to estimate the quality of data source, and cherry-pick the data sources that demonstrated their effectiveness — or at least avoid the ones that are complete hooey.

However, our human brains are wired for stories.   Both fundamental analysists and technical analysists can weave compelling stories.  Unfortunately, at times the juiciest stories are not based on the strongest data.

Perhaps the key question is:  Do you want to make your decisions based on objective data with a known track record, or do you want to remain a sucker for a good story?  Adam Hewison is right in that you need to decide what type of information you will use to trade.

Tags: behavior finance, fundamental, INO, technical

 In the 2nd Market Club Minute, Adam Hewison talks about a key decision you need to make as a trader - choosing a time frame.   Click here to watch his 1-minute video. 

One way to facilitate that decision is to list the types of traders and their time frames:

• Buy and Hold Investor - forever
• Active Investor - longer term of a year or more but has a plan to sell eventually
• Position Trader - catch one leg of a trend, hold trades for weeks or months
• Swing Trader - get in for a quick pop and out within days
• Day Trader - doesn’t hold overnight
• Market Maker - constantly offers a bid and ask price

Understanding yourself is essential.    Understanding the different risks and rewards of trading in each of these timeframes gives you a framework to find the optimal spot for you.  A good place to find out more is the BackTesting Report Baseline - click here to download it directly (no registration required).

(BackTesting Blog is an INO.com affiliate.)

Tags: INO, timeframe

 I just watched a video lecture by Jack Swager, author of trading classics Market Wizards and The New Market Wizards.   If you haven’t heard of them, in each book Schwager interviews top traders and picks their brains about trading, the markets, and what made them successful.

The reasons these works are revered as classics is not because he gets the Market Wizards to reveal their ”magic” strategies.  In fact not one says explicitly how to profit trading and they all have different methods.   What we do get is insight into what makes them tick.  See below for a partial list of traders mentioned in the video.  Its a very accomplished group.

In the lecture, Schwager pulls together the common traits of these elite traders and distills them into critical success factors.  All are important ingredients for success.  The one I want to highlight as critical is Schwager saying that none of the wizards would do something like “la-de-da today looks good to buy bonds”.   They all had some sort of pre-planned strategy, that strategy gave them an edge in the market, and they knew what to do with it.  Schwager also pointed out that by entering the market without a plan, the amateur trader can do worse than chance.

Schwager touches upon the paradox that trading seems easy yet requires a tremendous amount of work to master - I can definitely relate!

 The video (and the books) are somewhat dated.  I doubt the traders Schwager mentions are today getting chart books delivered to their homes on the weekends.   These days, the web and services like Market Club offer charts on about every market that moves so we can all pour over thousands of charts like the masters.   Or, we can program our computers to scan for us.   Schwager’s comments on computerized trading is another area that is outdated.

Even so, many of the traits and behavioral patterns that made these traders great can offer us timeless lessons towards success.    Here’s who I heard Schwager cite as Market Wizards: Jim Rogers, William O’Neil, Ed Seykota, Michael Marcus, Marty Schwatrz, Paul Tudor Jones, Monroe Trout, Linda Raschke, Van Tharp, William Eckhardt, Stanley Druckenmiller (worked with George Soros).

Click here to watch this complimentary video  

(Disclosure: BackTesting Blog is an INO.com affiliate and an Amazon Associate.)

Tags: Ed Seykota, INO, Jim Rogers, Paul Tudor Jones, strategy, trading, Van Tharp

At the Trader’s Expo I watched portions of presentations on two different back test tools: TradeStation and Wealth Lab.   The most striking differences between them were not in functionality but in following.   The TradeStation talk in the exhibition theater area was packed, with people standing to watch.   Wealth Lab was discussed in a private room with very light attendance.

The difference in venue is not the root cause.  The (new) owners of Wealth Lab, Fidelity, restrict access to only customers trading in excess of 130 times per year with Fidelity.  If this limited access is a marketing ploy to get more active traders for Fidelity, I’d hazard a guess that its not working.

Too bad Wealth Lab is kept locked away because it sounds like it has features which are lacking in TradeStation.  Portfolio simulation, for example, is a capability often requested by TradeStation customers which is already available in Wealth Lab.

TradeStation, on the other hand, offers futures and forex which Wealth Lab does not support.  It also appeared as though Wealth Lab required more effort than TradeStation to set up the data for even basic back tests.

 As it stands, I’ve put TradeStation to work for a lot of back tests and didn’t see enough compelling capabilities in Wealth Lab to go through the pain of both switching software and lining up 130 trades per year at Fidelity.

What about you?  Which tools are you using?

Tags: back test, backtesting, TradeStation, Wealth Lab

In my previous post I mentioned that I found interesting videos from Adam Hewison.  Click here for a timely example which includes MACD divergence analysis of the S&P 500 near the end of the video.  (no registration required to view the video)

Tags: MACD, MACD divergence, SPY

 I get Google alerts on every MACD blog posting which is quite a lot. Most are not noteworthy and some are downright off base, but every once and awhile, a really good post on MACD comes along. That happened most recently when I came across a well-done video by Adam Hewison using MACD and MACD divergence. I liked it well enough to see what else he had to offer and now have some goodies to share with you. See the guest blog post below from Adam Hewison. You can sign up for his free email trading course by clicking here.  I’ve taken the first lesson so far and thought it a succinct and timeless lesson. 

First of all I want to thank you for having me as a guest today!

My name is Adam Hewison. You might want to Google Me to confirm what I am about to share with you.

There are plenty of people out there that create “exclusive email courses” with little or no credentials to actually backup their teachings. So, I think it’s right that I share a little bit about myself with you before we even start.

I was a former floor trader on the IMM, IOM, NYFE and LIFFE as well as a risk manager of a large, multinational corporation in Geneva, Switzerland. I also have written books on forex trading and trend following. In 1995, I founded INO.com and later co-founded MarketClub. I’ve been in the trading biz for over three decades and have seen it all. I created this course as a way to give back and share trading tips and techniques that I still use in my trading today.

Click here to begin.

In my Free Mini Email Course, I will show and explain the tools and strategies you need to increase your success rate in the marketplace.

(1) The importance of psychology in price movement

(2) How to spot mega trends

(3) Understanding of technical price objectives

(4) How to picture price objectives

(5) How to trade with moving averages

(6) How to use point and figure trading techniques

(7) How to use the RSI indicator

(8) How to correctly use stochastics in your trading

(9) How to use the ADX indicator to capture trends

(10) How to capitalize on natural market cycles.

Plus, you will you will learn all about fibonacci retracements, MACD, Bollinger Bands and much more.

Just fill out the form and we’ll get you started right away.

Click here to begin.

Every success,
Adam Hewison
President, INO.com & Co-Creator, MarketClub

Tags: free, strategy, trading

StockFinder® may be my new favorite tool, but its not without quirks. While creating custom indicators, scans and layouts for BackTesting Report subscribers, I came across its shortcomings with the MACD.   The screenshot above shows a StockFinder layout with 2 MACD of different parameter settings.  The candlesticks on the price chart are color-coded green for buy signals, red for sell signals by one MACD strategy, and blue for a different MACD strategy’s sell signals.

The two main problems with StockFinder’s built-in MACDs are:

1. When you insert a MACD or MACD Histogram, they come up with simple moving averages by default instead of the standard exponential moving averages.  You need to click on them and on the right of the edit menu, change from simple to exponential moving averages. 

2.  If you change the parameter settings, say from 12-26-9 to 19-39-9, the MACD signal line still does a 9-bar moving average of the default 12-26 MACD line.   You need to delete the signal line and recreate it as a 9-bar exponential moving average of the current MACD line.

StockFinder also takes a few extra clicks to get the MACD lines and MACD Histogram in the same pane.  They need to be added individually and take up too much space if left in separate panes.

StockFinder doesn’t come with Appel’s Histogram but I found it very easy to add as a custom indicator in StockFinder’s Real Code.   For example see the StockFinder screenshot below, which shows Appel’s Histogram in an implementation of a MACD strategy excerpt from Gerald Appel’s Technical Analysis Power Tools for Active Investors.

In conclusion, StockFinder can do useful and powerful things but be sure to tweak the settings if you put a MACD on its charts.

Tags: Appels Histogram, MACD, MACD Histogram, Stockfinder

July 13, 2009:  BestFreeCharts.com is renamed to FreeStockCharts.com and this post has been updated accordingly.

FreeStockCharts.com makes nifty charts like StockFinder.

Click here for a quick little set of instructions for plotting the MACD and MACD Histogram on FreeStockCharts.com

Overall, I found FreeStockCharts.com very straightforward to use.   It is limited to the basic charting but offers real-time data from BATS.    The interface is very similar to StockFinder, which I like, but the free tool doesn’t have the scanner, backtester, custom indicators, and industry groups which make the paid tool extremely useful.

Tags: BestFreeCharts, MACD, MACD Histogram, Stockfinder