The trend is your friend. – Market Saying The trend is an expression of probabilities. The most closely followed trend is the trend of prices. But, as we shall see, the trend of the Spread has an important bearing on...
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How to Win Trading the Markets
When I first started speculating in organized markets, I quickly ran a $40,000 initial stake into $22 million. My technique was simple: I bought gold at $290. Each time it went up $10, I pyramided and added to my holdings with my...
Learn How to Lose to Win Over Time
‘If you’re in a hole, stop digging.’ Traders do not begin trading because they expect to lose. Nevertheless, losses are the rule rather than the exception for new traders. Every successful spread trader first...
Character: Self-Control and Commitment
Module 7 – Execution Character Character is destiny. – Herodotus In previous chapters we examined tools and techniques of analysis, the business of selecting good trades. In this chapter we take up execution, the business...
The Janus Strategy
The chart below shows the results of strength-following and contrarian strategies over a period of twelve years, from early 1987 to mid-1999. The target universe is composed of a diversified list of group indexes. The protocol...
The Nature of Contrarian Markets
During contrarian markets, strong hands sell into strength and buy into weakness. To stay on the side of strong hands, adopt a contrarian strategy when the Spread is falling. Reduce or eliminate positions in stocks which have led...
The Nature of Strength-Following Markets
Rising strength-following markets are the best of times. If contrarian markets are a time of tilling and sowing, then strength-following markets are a time of harvest. When both prices and the Spread are rising, the most...
Trendlines 1
The trendline is the most overused and least understood tool available to the trader. Anyone with a straight-edge and a pencil can draw straight lines on a chart, a process made even simpler by the introduction of computer...
Caution
Module 6 – Trader’s Toolkit Caution I have included the present chapter reluctantly. There is a risk to learning the use of mechanical indicators before the student has mastered the principles taught and demonstrated in earlier...
Trendlines 2
The most important thing to keep in mind about any trendline you draw is this: you are not the only trader drawing it. For that reason, the action of a stock in the area of a well-placed trendline reveals much about the quality...