What is the best?

I was asked this question a few weeks ago and would like to offer some pointers.

The question is coming from someone who is struggling to find the right strategy and finds charts very confusing.

The question is hard in that the answer to his or her question is a different answer to the one they are seeking. What I mean by this is that the best combination of technical analysis simply doesn’t exist.

Let’s take two traders.

(more…)

…and how losing traders are exactly the same

In 1998 my parents won the state lottery (Tasmania, Australia) to the tune of just over $509,000, which was ten times their annual combined earnings. However, in four short years after winning the money, they were dead broke. They had gone from living in their own home with a mortgage, a job each and a little left over money at the end of each month, to bankruptcy and having to live in government housing. The whole ordeal split them apart. It took six more long years before they were able to reunite.

So what happened?

(more…)

1. Is there someone out there in the market trying to drive me broke? 2. Realistically, I think the question I would like to have answered is how the single largest volume trader of any instrument makes their bets on. TA or Fundamentals? I’d cry if it was Fundamentals since I’m a technician.

I here this question a lot; are the large players in the market fishing out the small guy, and maybe yes it does happen but this shouldn’t deter you or intimidate you either. The markets are still markets and that will never change. What one must remember is that if you enter a trade long and place a stop loss at a certain point you have done two things. You have told the market you feel this instrument is undervalued and will appreciate, and you have also told the market the price at which you are willing to sell your holding.

I feel this is where a lot of people get stop losses confused. If I purchase a house and then decide to sell it, I’m not placing a stop loss, but I am telling the market that at this price, I am willing to sell my house. A stop loss is no different. You are telling the market that at this price you are willing to sell and so if a buyer comes along who is willing to buy at the same price then so be it. All the broker is doing is fulfilling both of your wishes.

(more…)