Reading market strength and weakness

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John Forman - The Essentials of Trading author

Here’s something I sent to my mailing list the other day. I figured it was worth posting for blog readers as well.

I’ve got a trade proposition for you. I’ll help you if you help me. Sound like a fair deal?

For your part, I would like some help from you with my on-going fund raising efforts. If you don’t know what I’m talking about, I’ll take a second to explain. Otherwise, you can skip ahead to what I’ve got to offer you for the assistance.

Several years ago I started a youth volleyball club program in Rhode Island. I’d been involved in coaching and managing club programs for a few years prior to that, but wanted to develop something which would more widely benefit girls (and later boys too) in the state. If I remember correctly, we reached 7 girls teams and 3 or 4 boys teams at the peak of my involvement. Our coaches and parent volunteers were fantastic and our teams were always extremely competitive - winning several regional championships and competing very well in a number national level tournaments. It was a program we were all very proud of, and justifiably so as it had a major impact on volleyball in the state.

I ran the club for five years, at times coaching teams myself as well (I was also a college coach during that span). A couple years ago, however, I stepped away from volleyball to get back into the market full-time once more. The new employment meant a move away from the area, so I couldn’t stay involved with the program in any direct fashion anymore.

The club continues on, though, and I try to support its efforts (and other Rhode Island volleyball teams) as much as I can. Mostly that means financially. The cost of gym space, uniforms, equipment, and all the other stuff that goes into running a program continues to rise to finances are really tight. I’ve been applying the vast majority of the revenues I’ve taken in from my courses and other efforts to volleyball expenses for some time now. My goal is to raise $100,000 toward that objective. I use my knowledge of trading and the markets to serve that purpose.

With that in mind, I’ve got something new in the works. It’s something I will provide to you in exchange for your help in reaching my goal.

What I’m offering is a new course I’m putting together. The focus of it is on how you can gauge the strength or weakness of the markets using fairly simple charting methods. Basically, I’m going to walk you through things you should look for in whatever market(s) you trade to let you know what the underlying situation is in the market. Timeframe doesn’t matter. As long as you can use bar charts you’re good to go.

The techniques I’m going to share are the ones I use every day to advise professional and institutional traders, so this is the good stuff! It’s based on pretty easy support and resistance concepts, which I will share with you in detail.

This is not an indicator based methodology. It isn’t specifically a system either. The idea of what I’m doing here is giving you something you can use to improve your trade selection by helping bias you in the right direction.

I expect the course will be ready for you this weekend. It will be presented in video format, and naturally you will be able to ask me any questions on the material you might have. Click the link to pre-order for just $40.

Pre-Order Here Now

Make sure you get on the list before the release this weekend. Once I have the full course put together and have a better idea of it’s real value I’ll no doubt be moving the price up because I’m pretty sure I’ve way under priced it at this point.

I’ve received a couple of questions:

“Would this be using daily charts or intra-day? Or doesn’t it make a difference?”
 
It doesn’t matter. Charts are charts. The same patterns repeat whether you’re talking about minutes or months.
 
“Will there be more than one video?  How will we access them?  Will we be able to view and review them at our will?  Can we download them?”
 
I can’t say at this point how many videos the course will cover. It’s going to depend on the final length. I tend to prefer not to go much more than about 30 minutes to a video file, though, for the sake of download time and user attention span.
 
As for access, I’m planning on making them downloadable so that you can have them for unlimited review.

“How does this compare to the price distribution (Market Profile) course you did earlier? Is it similar material?”
 
While I do expect to use a little price distribution charting to highlight some of the points I plan on making, the thrust of the material will focus on basic charting which can be done with bars. Actually, I’ll be using candlestick charts, but not because I’ll include any candle specific methods. I just find them a more rapid read than regular bar charts.

If this course interests you, make sure you get on the list before the release this weekend. Once I have the full course put together and have a better idea of it’s real value I’ll no doubt be moving the price up because I’m pretty sure I’ve way under priced it at this point.

Pre-Order Here Now

Ten Things That Trip Up System Traders

Dave over at StockTickr posted 10 Ways New Automated Traders Get Tripped Up today. It’s a great post with a lot of very good insights, not just for those seeking to trade in an automated fashion. Any trader can get some value out of his comments. Here are the 10 “ways”:

1. Trading Too Large, Too Soon
2. Trading Strategies that Trade Too Frequently
3. Doing No “Forward Testing”
4. Blaming the Money You Lost on the Backtest
5. Not Comparing Actual Results with Backtested Resultss.
6. Using Market Orders for Entry without Reason
7. Ignoring Slippage and Commissions
8. Not Spending Time Learning Why Some Unprofitable Strategies Backtest so Well
9. Manually Overriding Your Automated System
10. Not Understanding that It’s a Marathon Not a Sprint

Go visit the actual post to read Dave’s comments for each of the points, and to see the bonus he tacked on as well. Very good stuff!

Video documentary of the Crash of 1929, and other things

I was recently pointed to an interesting documentary video of the Crash of 1929. If market history intrigues you, give it a viewing. Just be aware that it’s nearly an hour long, so you’ll need to have some clear time to get through the whole thing in one sitting.

The Financial Philosopher is at it again. His Thinking Outside of ‘The Game’ post is one which will definitely make you ponder some things.

Brett Steenbarger’s latest post is Greatness in Life and Trading. As always, he makes some very insightful comments about approaching things in life, to include trading.

Brett also recently linked to a good post on the Options for Rookies blog entitled Premature Celebration. It’s on the subject of over-confidence. I, for one, am very familiar with that. It repeatedly kick me in the tail, and not just in trading.

Some interesting posts from fellow bloggers

Here are some very interesting posts by other bloggers which I found interesting.

Cross-Talk: Trading Coaches as Whores - Brett Steenbarger makes some excellent points here about both how the reality is that some folks just are not cut out to be top level traders. This is something folks in trading education tend to shy away from, especially coaches. Obviously, they’re financial interest is in people thinking they can achieve greatness. It’s the classic conflict of interest. This is a big reason why I have always made sure any coaching arrangement I’ve entered into has had very specific objectives and isn’t just some rambling engagement with no definition. I’ve written on this subject before (Trading Coaching and Mentoring and Trader Development: The Value of Coaching and the Difficulty of Finding One)

Dow 300 Point Days and Volatility Clustering - This is an interesting discussion of a topic which has been making the rounds among some bloggers in recent days. The post shows some nices statistics on the difference between Bull and Bear markets. It’s always work studying price action, as I discussed in The Essentials of Trading.

Making The Plan Your Own - This posts hits a couple of points that I try to harp on right on the head.

I Think We Have Turned the Corner Due To the SEC Decision - I’m not sure I necessarily agree that this particular action has turned things around. He makes some good points, and it stablizes a portion of the market, but there are a number of much wider issues still plaguing the money and credit markets. Confidence and the willingness to take risks are just not anywhere near back to “normal” levels.

Are there any ETFs for trading gold, oil, and soybeans?

Dave Mabe from Stock Tickr passed along a question he’d seen that he thought I could answer.

Are there any ETFs that trade 99% equal to crudeoil, soybeans and gold future contracts?

I’m not sure whether the inquirer is asking if there’s an ETF which includes all three of those commodities, or whether the question is if there are ETFs which track each of those commodities seperately. I’m going to answer based on the idea of three seperate ETFs because I can’t imagine there’s one which is includes all three together and almost nothing else.

For gold the SPDR Gold Trust (GLD) is basically a gold tracking stock. It’s not based on the futures, but rather the spot rate, which should serve the purpose just fine.. It’s priced based on the value of 1/10th of an ounce of gold.

In terms of crude, the United States Oil Fund, LP (USO) is probably the most popular pure oil futures play. It regularly trades more than 10 million units daily. It’s pricing, unlike the GLD, is not directly comparable to the price of oil.

As for soybeans, I’m not aware of an ETF which focuses specifically on that particular commodity. There are a number of Agricultural ETFs, one of the most popular of which is PowerShares DB Agriculture (DBA). It includes futures on a number of different commodities.

For a full list of ETFs (and there are a lot of them) visit Yahoo’s compilation here.

Rogue Trader Video Worth Checking Out

Brett Steenbarger was recently included in a video taped by France 24. The focus of the video was on the subject of rogue traders, obviously inspired by the Jérôme Kerviel events. Part of the filming took place at a prop shop where Brett does some advisory work on the coaching side. (and yes, it’s in English)

The video features Joseph Jett who has for more than a decade been fighting to clear his name in regards to accusations made against him while he worked for Kidder Peabody. Jett told his side of the story in his book Black & White on Wall Street. I read the book back when it was originally published and found it very interesting. There are some quite technical parts (Jett was in the fixed income market in some complex strategies), but most of the book is fairly easy to read.

A Really Interesting Stock Analysis and Trading Tool

One of the guys I work with came across an interesting new web site: http://finviz.com/

While i haven’t had a great deal of opportunity to kick the tires on it, from what I’ve seen so far this FinViz has some really nice features. One of the cooler ones is a map feature which allows you to see at a glance what’s going on by sector based on a whole bunch of different performance and valuation measures. It’s a very handy at-a-glance type of tool.

The site also features a pretty intense screener, though not one which features much in the way of technical analysis elements. There are actually quite a number of pre-fabricated screens which are readily available at a click as well.

Most of these features are available directly on the site. There are some others which require registration. I have not gone down that path as yet.

Like I said, I’ve only just started playing. If you’ve got some further experience with the site, or you know of others like it, definitely share your knowledge in a comment!

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