But here's a few emails he's been sending out lately.
The most pervasive element in the market is trend; there are more advantages to be garnered from trend than anyplace else.
Fundamentals and Smart Money are often early, sometimes wrong. Trend is never wrong, it just is.
There are two parts of trend we can chip away at for our advantage. The first is that trend persist and in fact is the law of gravity of the markets. Prices follow trend.
Trend is all pervasive, it lasts much longer than we usually imagine. Align yourself with trend and you have your advantage.
But... there is also anti-trend or reversion to the mean (technicians call this overbought/oversold). Reversion to the mean is equally real and powerful.
My resolution to all this is that one needs two or three trend indicators. The first is for the time period you want to trade... let's say that's 40 days.
Against the 40 major trend, prices will always be reverting to THE CENTER POINT of the 40 days, so you need a 20 gauge to suggest when the major trend will enter a reversion to the center of the 40 day trend.
Lots of ways to do this. My RnR system many of you have learned is one attempt to take advantage... I do not have all the answers, but I hope I can get you to always ask yourself, "What is the trend of the time period I am trading?" This means you cannot attempt to sell highs and buy lows without bucking the law of gravity of the market place. In a 3 month up move each of the 66 days can be argued to be the top. Only one will be the real one. Those are bad odds; 1 in 66 of being right! No advantage there.
Stop trying to defy gravity... there is your advantage.
Your response to this series of thoughts has been a very pleasant and encouraging surprise. Look to hear from me from time to time with what I hope are good thoughts, which are not easy to come by.
An apology is due; when I began this on New Years Day my intention was to send 2 or maybe 3 emails. I didn't consider that we would be announcing my forecasts for 2007 report in a few days, so you will be hearing from me again. It was not intended to be that way, I am sorry for ruffling any feathers. Now would be the time to request removal from our list if you so desire.
Hold those Good Thoughts
Larry
The most consistent short term advantage for stocks and bonds has been the bias to rally at the end and start of the month. Most traders know this, but in their hunger to trade and "know all" they pass right over an obvious advantage.
Yesterday I mentioned that I do not think intellect or emotions have much to do with being a successful trader.
When a trader assumes, or is told he or she must be a certain way, it means that they have an entirely new battle on their hands; trying to be something that they are not. I think we need to be what we are and build our trading style around that; some great traders are very emotional and some are ice cubes.
What works for me may not work for you... and vice versa.
Now, about getting an advantage in the game..
I do not find any long lasting advantage to be found in the myriad of chart techniques (point and figure, candlestick, Gann, etc). All charts do is reflect what was... we need to know what will be. To the extent that a chart can predict the trend, it will have value. Most of us get so wound up in the minutia of charts and lines that we miss the big picture, and the big trades.
As I see it there are three major sources to find an advantage; the first is the Fundamentals of the market, then comes what the Big Boys are doing (Commercials, Insiders, Smart Money, etc) and lastly, never to be forgotten... Trend.
Before this little series is over I will cover those topics... but there's a more important one coming tomorrow.
Larry
PS: There is not any direction to these epistles or a sales pitch coming... I'm just sharing some thoughts here, no need to reply to them.
<47925>
Today I'd like to tell you what I think the number one reason is for market failure.
Of course, as pointed out yesterday, you first need to have an advantage in the came. But, having that is not enough.
Having an advantage does not mean you win on every trade, just as Las Vegas does not win on every spin of the wheel. But how do they build those palatial casinos when they also have losing streaks?
This is an easy one to answer. They closely control all potential losses. Their eyes in the sky cameras, as well as the Pit Bosses, always keep an eye out for cheaters. Each table also has a limit a player can bet, which means the casino has a limit to how much they can loose.
Traders that cannot accept losses are destined for failure. Losses are part and parcel of this game... get used to taking them, don't let them take you by allowing losses to get larger, stops to back away. There is only one way to control all this. Never let any trade get more than X dollars away from you. X will vary with the trade and the trader, but just like the casino you must limit your maximum loss.
Tomorrow I'll get back to getting an edge in the game
Larry Williams
<47925>
Edited by dcengr, 05 January 2007 - 10:16 PM.
