Posts Tagged ‘Professional Trader’

Seven Trading Lessons from a Legend

Seven Trading Lessons from a Legend

51T1mODeqSL._SL160_Courtesy of Quint Tatro of Tickerville, writing at Minyanville

The late Jesse Livermore is considered one of the best traders of all time. His exploits have been chronicled in several books, with the most widely read being Reminiscences of a Stock Operator (Wiley Investment Classics)by Edwin Lefevre, originally published in 1923.

Livermore was wealthy and broke several times over during his tumultuous life, which ended in his suicide. His ability to make and lose millions garnered him many lessons which the trading community have enshrined over the decades since his death. Yet these lessons and rules remain as pertinent today as they were in the early twentieth century.

We’ll take a look at several of his trading rules to remind us why we must have a plan in place before trading a dollar of our hard-earned money.

(I must give credit to the Lefevre book mentioned above, as well as Jesse Livermore: World’s Greatest Stock Trader by Richard Smitten, for the following ideas.)

Lesson Number One: Cut your losses quickly.

Nowhere is this rule more apparent than in the modern-day crash our markets experienced in the fall of 2008. For those market participants who “bought, held, and hoped,” the gut-wrenching drop left them paralyzed, disillusioned, and angry at the market. They felt like they had no control and no choice as the losses spiraled down the rabbit hole. The primary culprits of this death trap are hopeful thinking and fearful paranoia.

As a market slides lower, a trader will rationalize his losing position by either doubling down (buying more at these now-cheaper prices) or at the very least, holding on because “there’s just no way this market can go lower.” If merely this one simple rule was implemented to “cut your losses,” the vast majority of traders would be light years ahead of the crowd.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified. Trading without an exit plan is like driving a car without insurance. You might go years without a major crash, but when the crash occurs (and…
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Winning with Advanced Market, Trading, and Risk Psychology

Winning with Advanced Market, Trading, and Risk Psychology

Courtesy of Damien Hoffman at The Wall St. Cheat Sheet

This is a guest post by Denise Shull from TraderPsyches.

blue-brainIn order to really understand either what went wrong in the credit housing bubble or to improve institutional or individual risk management processes, one really needs to take a step back and rethink their thinking. We tend to believe that we know how we think or even worse, that we know the best way to think (after all didn’t we go to college to learn to think?) but given the advances in brain science in the past decade it is clear that we really don’t know how it is we think.

Thinking is germane to analysis and decisions and in turn confidence and beliefs are germane to implementing a decision. I still can think of no better way to say it than Colin Camerer of Cal-Tech and his co-authors Lowenstein and Prelec when they said “It is NOT ENOUGH (emphasis mine) to know what SHOULD be done, one must also FEEL it.” Well invert that and you get that all doing has a feeling associated with it.

Now Damasio and Bechara showed us this from The University of Iowa and USC starting in the early 1990’s but word really hasn’t hit Wall Street (or Washington either btw). Behavioral finance observations confirm that we indeed feel better when we rely purely on mathematical formulas but the real world doesn’t always fit into an equation.

And guess what – our brains (particularly on risk) know it! On the majority of days, it works fine to do it the old way. But doing well in the middle isn’t what makes you the real money or saves you from the black swans – that requires knowing what to do when things DO NOT go according to plan.

The solution lies in using our “maths” within the context of consciousness about the foundational and relevant qualitative data. Our brains are good at pattern recognition – call it implicit learning or intuition – it is the same. The problem is we don’t value that data – partially because we don’ t know how. In fact not all that long ago it wasn’t blink and Malcolm Gladwell getting $100K to talk about

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Special Macro Chart Analysis by Master Trader Fari Hamzei

Special Macro Chart Analysis by Master Trader Fari Hamzei

Courtesy of Damien Hoffman at Wall St. Cheat Sheet

Master Quant Trader Fari Hamzei was scheduled to contribute a chart to this week’s installment of Chart Junkie, however he offered us a special proprietary treat we had to bring to you all alone:



This is our coveted SP1-MoMo Chart.  We have THREE components in an extremely overbought condition screaming a SELL to us all at once.

On the DAILY S&P-500 Cash Index (SPX) Chart (above), we see:

1) CI Diff, in the lowest subgraph, is now RED (crossed below 0);

2) CI reading is 27.5 !! This is an extremely high reading.  This is due to a very high ramp-up rate the market has traded at since Meredith Whitney woke us on that faithful Monday (July 13th) to remind us all that “in GS she trusts” — at least for this quarter; and,



3) Divergence between long-term [modified] Advance-Decline Line on the subgraph SP1 (above) and its short-term sister MoMo.  THESE DIVERGENCES always work out.  Note the previous three divergences: two bullish and one bearish, in mid-June, early March, and late November.

Bottom line: A pause is in order. In our humble opinion, at minimum to 954 (38% retracement) or down to the 937 area (50% retracement).

Good Trading to All!


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Demystifying High Frequency Trading

Demystifying High Frequency Trading

Courtesy of Damien Hoffman at Wall St. Cheat Sheet

High Frequency TradingThe media recently flipped the floodlights on the new black box de jour: High Frequency Trading (HFT). Only a handful of people who work closely with the exchanges truly understand HFT, so I asked for some color from my friend and top pro quant trader Fari Hamzei from Hamzei Analytics.

Damien: Fari, why is High Frequency Trading one of the hottest new topics in the financial media?

Fari: HFT firms deploy co-located servers at the exchanges/ECNs and Dark Pools. As a result, they take advantage of seeing some of the order flow using very high speed computers with very low latency. The computers execute trades ahead of both retail and institutional orders. The execution times are in milliseconds due to co-location.

HFT is an extremely profitable business — over a $20 billion run rate now. These days, HFT can account for up to 60% of the volume in certain equity names. HFT firms also get liquidity rebates from exchanges/ECNs for their order flow they provide to the exchange — about $0.005/share.

However, this is not market making. Rather, this is artificial volume creation. As evidence for this fact, please look at share trading volumes in Citigroup (C), Bank of American (BAC), and CIT Group (CIT). On some days their combined volume is 10% of all US equities! That’s unbelievable! We have three stocks out of over 5000 names with a constant bid/ask present in the three to five cents range!In addition to seeing the order flow mentioned above, HFT computers can see institutional flash orders.

The Associated Press reported that, “So-called flash orders allow certain members of Direct Edge, Nasdaq and BATS exchanges access (for a fee) to buy and sell order information for milliseconds prior to that information being made available to the public. High-speed computer software can take advantage of that brief period to allow those members to trade ahead of those orders — at better prices — and therefore profit from advanced knowledge of buying and selling activity.” Sen. Charles Schumer is fuming about this issue.

Damien: Is HFT the mystical black box de jour, or a fundamental change in the auction process?

Fari: HFT is a trading strategy, not a necessary component of the auction process. HFT is all high-speed algorithmically…
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Zero Hedge

More California Cities Seek To Defy Sanctuary City Laws Los Alamitos Rebellion

Courtesy of ZeroHedge. View original post here.

Several California cities are planning to defy Jerry Brown's "Sanctuary City" laws, following Monday's decision by the quiet Orange County town of Los Alamitos to disregard several state-wide statutes preventing, among other things, cooperation between local law enforcement and federal immigration authorities.  

As ...

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Phil's Favorites

After Tempe fatality, self-driving car developers must engage with public now or risk rejection


After Tempe fatality, self-driving car developers must engage with public now or risk rejection

An autonomous vehicle struck and killed a pedestrian on March 18. via AP

Courtesy of Andrew Maynard, Arizona State University; Jameson Wetmore, Arizona State University, and Thaddeus R. Miller, ...

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Insider Scoop

20 Stocks Moving In Wednesday's Pre-Market Session

Courtesy of Benzinga.


  • Proteostasis Therapeutics, Inc. (NASDAQ: PTI) shares rose 12.4 percent to $5.80 in pre-market trading after the company reported withdrawal of equity offering due to market conditions.
  • China Auto Logistics Inc. (NASDAQ: CALI) shares rose 10.8 percent to $4.40 in pre-market trading after surging 15.41 percent on Tuesday.
  • Fennec Pharmaceuticals Inc. (NASDAQ: FENC) rose 8.9 percent to $10.38 in pre-market trading a... more from Insider

Digital Currencies

Why accountants of the future will need to speak blockchain and cryptocurrency if they want your money


Why accountants of the future will need to speak blockchain and cryptocurrency if they want your money


Courtesy of Anwar Halari, The Open University

If you haven’t already heard of Bitcoin, you either haven’t been paying attention or you’re a time traveller who just touched down in 2018. Because by now, most of us will have heard of Bitcoin and some of us have even jumped on the bandwagon, investing in cryptocurrencies.

But despite its popularity, many people still don’t understand the technology that underlines it: blockchain. In...

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Chart School

Stall in Decline

Courtesy of Declan.

The good news for bulls was the lack of follow through on the selling. An argument could be made for bullish harami doji in some key indices with stops on a loss of yesterday's lows.

The Semiconductor Index held on to breakout support in what looked to be a successful defense by traders in what could still be a pullback buying opportunity. There was a MACD trigger 'sell' which was a follow-through from Friday - leaving only stochastics in the green. However, relative performance remains in bulls favor. Long opportunities...

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Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China; SF Sucks, Bitcoin Rocks

By VW Staff. Originally published at ValueWalk.

PayPal cofounder Peter Thiel in a wide-ranging interview on President Trump’s trade tariffs, China’s economy, technology regulations and his outlook for bitcoin.


Check out our H2 hedge fund letters here.

Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China

Peter Thiel On Leaving Silicon Valley For Los Angeles

Billionaire investor Peter Thiel argues Silicon Valley is is a ‘totalitarian place’ where people are not allowed to have dissenting views.


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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)


"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...

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How your brain is wired to just say 'yes' to opioids

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.


How your brain is wired to just say ‘yes’ to opioids

A Philadelphia man, who struggles with opioid addiction, in 2017. AP Photo/Matt Rourke

Courtesy of Paul R. Sanberg, University of South Florida and Samantha Portis, University of South Florida


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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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