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Quite of few of you have posted asking for some guidance in finding simple
methods. I decided to post back to the list.
I want to be thoughtful in my reply. Let me start out by saying that
because something is simple doesn't mean that it is easy. To come to my
simple style of trading, I have literally looked at hundreds of thousands
of bar charts. My specialty is the bonds. For a period of almost 10 years
I watched, traded and analyzed every tick that the bond market made. In
short, I learned to read and see the bar chart for what it was.
To find simple methods... you have to understand the chart (and understand
that no matter how hard you study the chart there will still be plenty of
times when the action and the setups are still unclear). When the chart
isn't clear, there isn't a trade there. You must come to understand that
every little tick and every little wiggle that a market makes doesn't
necessarily mean something. I tell people all of the time that if you are
living and dying and agonizing by the tick.... something is wrong.
In my personal trading, I use bar charts from five minute to monthly. I
use one oscillator (an exponentially slowed and smoothed stochastic)across
all time frames. I don't pay much attention at all to the news and I don't
really care about my big picture opinion (which I always keep for my
clients). In short, I am looking for setups and I don't really care what my
or anyone else's opinion in regard to a market is.
Many of the old masters had it right. Bar chart action and setups from 100
years ago are almost identical to those that are found today. Wyckoff,
Schabacker, Edwards and Mcgee...Fibonacci targets and Replacements... if
you wait for the setups, this stuff works and works well. It isn't sexy and
doesn't make for exciting seminars, but it is sound, good work.
Frankly, I wasn't always this way but now, when I see people applying
mathematical thingamajorbies out to 47 decimal places and neutral fuzzy
polynomial filters and spending weeks finding the right oscillator... it
just makes my eyes glaze over and my knees feel weak. Im not saying that
these things don't work. I have seen guys make money with some of the most
complicated god awful systems and methods... but as long as they are
comfortable with it so am. Frankly, there are lots of ways (many of them
very good) to skin the trading cat. I have found an approach that I
understand and that appeals to me and fits my personality.
I love to take day and swing trades. When the one oscillator that I use
gets overbought in the hourly perspective I start watching for bearish
setups and reversals that occur in the 15 minute perspective that have a
chance to turn into swingers (two to four days). By the way, before you
start asking me for the oscillator... don't bother. I would be happy to
give it to you (its just the old CQG stochastic), but any simple oscillator
will work. There is nothing special about what I use. BUT: I understand my
oscillator, what its strengths and weaknesses are and when it is likely to
work and likely not to work. Frankly, the oscillator is the last of my
crutches. It is simply a visual aid that saves me a couple of seconds of
thought.
One of my favorite trades is one of the simplest ones. I wait for a market
to become overbought or oversold, I watch for a buying/selling climax or
ending action in the perspective of one higher degree, and wait for a
retest. I don't anticipate that a retest is going to result in a reversal
so I typically use a trigger to stop me into the market. Monday in the
bonds provided a good intraday example.
Friday the bonds traded all over the board, but the upshot of it all was
that my little oscillator was deeply oversold in the hourly perspective.
Bonds had bounced off of weekly support on Friday, rallied sharply and then
spent the balance of the day setting back toward the early Friday low. The
angle of setback was less than the angle of the prior decline, the price
spread on the set back was narrower and the tick volume was lighter. In
short, supply was not as strong as it was on the initial push to the low.
If the market was going to rally (and there was a lot of doubt in my mind
that it could), the combination of deeply oversold and strong support would
probably be enough to turn it higher for a few hours.
The set back to the low left in place a very well defined decline. I was
able to run a trend line along the highs of several hours worth of 15
minute bars as the market set back. If price pushed above this line, the
odds that the market had mounted a successful retest of Fridays low would
skyrocket. Markets tend to wash out prior lows and run stops. I knew the
trade would be even stronger and more likely to work if the market set a
marginal new low, then pushed higher and took out the trend line. I placed
a stop a 2/32 above the downtrend and moved it down a time or two through
the morning.... Price slipped below Fridays low by 6/32 and the rallied
strongly, took out the downtrend and triggered my entry stop. The market
blew through the trigger, never put the trade in jeopardy for more that
3/32 after filling me and subsequently netted 15/32 on the day.
These same kind of trades set up in all perspectives across a great number
of commodities and shares. Again, nothing fancy....
I know that this isn't exactly what you had in mind. But it at least gives
you a starting place. Test - Retest - Trigger into thrust.... Strong
thrust from a high or low, buy/sell the breakout of the first bull/bear
flag that forms on the intraday chart..... watch for three drives to a high
or low, run a trigger line beneath them and enter on the break.... Watch
confluences of support and resistance for reversal bars and use the
reversal to trigger in with a stop just above the high or low.... These
are the kind of classic trades that work over and over and over again.
Most of all, get out your bar charts and a ruler. Work from risk back to
reward. Study the classics....
One last thing... Whenever possible I attempt to systemize discretionary
trading tactics. There are several setups, like the one in the
illustration that can be set up in an almost completely non- discretionary
manner. I have spent a ton of time taking as much of the decision making
progress out of my own hands as possible. Once I recognize a tradable
setup, I put my little set of rules to work.... I am stopped into the
market, I immediately know where my initial stop is going to go. The
largest part of my discretion then comes in the trade management end.
One last last thing... you don't need a huge number of setups to work with.
Three or four basic patterns across several futures markets and a few of
the more active shares will make a pretty decent living.
Hope this helps,
Good luck,
Stewart.
Attachment Converted: "c:\eudora\attach\Example.gif"
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/From ???@??? Tue May 11 08:48:58 1999
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Date: Tue, 11 May 1999 05:59:36 -0700 (PDT)
Reply-To: ggray@xxxxxxxxx
Sender: owner-realtraders@xxxxxxxxxxxxxx
From: gary gray <ggray@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: Stock Market Crash - 34,34,34,34,34,34...
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Interesting Peter...
I don't know if you are prasing Jean or mocking him??
The time stamp brings back awesome memories. The market slide in March
1997 is a time when I did really well shorting the mkt. I made $60,000
in March alone. I don't remember the exact strike but I also bought
Jan'98 SnP puts at 3/8 (in March after selling Apr puts) and sold them
in October '97 at 2 3/4. What a different world now. The premium
situation at the really distant (pricewise) options is unruly. If Jean
is right June 2000 SnP 1000 puts are a real deal at 45!!!) Can you
imagine??? $4,500 for one put 300 points out of the money with a year
to go. In '97 I paid $375 for the same opportunity. When the SnP fell
10% (500 Dow point drop that day in Oct) I got a seven to one return.
If Jean is right and the SnP drops to say 800, the 1000 put will be at
200. A four to one return for a drop that big!!! don't think so. Boy
has the game changed. Take one thing to the Bank.. "They" didn't
institute new trading collars without the intent of using them....
Just think a 1,000 point down day followed by a 2,000 point down day.
When??? When the 1st tactical Nuke is detinated or bio agents are
dispersed (remember Nostradomus... "1999 the seventh month a great king
of terror will rain from the sky")
Regards,
Gary
--- PGREC@xxxxxxx wrote:
> In a message dated 5/10/99 8:45:47 PM Eastern
> Daylight Time,
> jcomeau@xxxxxxxxxxxxxx writes:
>
> << My name is Jean Comeau from Quebec, Canada and I
> am a commodity trading
> advisor (CTA) registered in Chicago. I have studied
> the stock market in a
> technical way for over 25 years and with a detailed
> technical analysis
> which follows, I have come to the conclusion that a
> stock market crash this
> year (l999) is inevitable. >>
>
> Below is another older e-mail from Jean Comeau.
>
> Peter Greco
>
> Subj: MAJOR TOPS ON DOW JONES INDUSTRIAL AVERAGE.
> Date: 97-02-18 23:39:23 EST
> From: jcomeau@xxxxxxxxxxxxxx (JEAN COMEAU)
> Sender: owner-realtraders@xxxxxxxxxxxxxxxxxxx
> Reply-to: realtraders@xxxxxxxxxxxxxxxxxxx
> To: realtraders@xxxxxxxxxxxxxx (RealTraders
> Discussion Group)
>
> I have been receiving emails from realtraders for
> about 3 weeks. I have
> read them and really did enjoy. This is a wide range
> and a vast variety of
> opinions, informations on ways of trading and/or
> produts to experience or
> use for our requirements. Most important of all,
> this ever flowing (water
> fall) of renewed resources and knowledge from all
> sources come from human
> beings who's main goals are caring for others.
>
> Now,let us personnaly, add our grain of salt:
>
> DOW JONES INDUSTRIAL AVERAGE: 20 years of
> researches and calculations bring
> US up to two possibilities of MAJOR TOPS occurring
> for the DOW, now...
>
>
> 1) One is 7115 to 7125 (most likely)
> 2) One is 7250 to 7280
>
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