Adjusting Stops in the Real-time Signals
Q: I was considering trading your signals using a different stop than you use. Tell me what you think.
A: Most traders will alter our methods (or others they may follow) to suit their own trading styles. That is why a successful trader can teach his methods without worry that too many traders will follow it. Very few traders will take a system and trade it as is, no matter how successful it has proven to be. The tendency is to "tinker," and that is what most traders will do.
We have numerous subscribers that trade the E-mini S&P, while our S&P signals are done trading the larger contract. We have suggested in the past that E-mini traders follow our entries, and adjust the exists to stay in for the longer moves when possible.
Also, see our suggestions for trading the E-mini with the Real-time Signals.
Trading Fat & Thin Candlesticks
Q: I was wondering if you could direct me to a source of information on a specific type of candlestick charting? I am looking for some details on the Fat & Thin Candlesticks, based on volume movements.
A: That technique is covered very well in a book called Volume Cycles
in the Stock Market: Market Timing Through Equivolume Charting, by Richard
W. Arms, Jr.
This technique is really good for determining the length of a move after consolidation (that is the best advantage that I see), also for determining potential reversals. Excellent technique, and simple to use.
You may also be interested in Richard Arms first book, "Profits in Volume: Equivolume Charting"
Size of a Move - 4 Points or 400?
Q: If the S&P was at 1261 and moved to 1265, would that be classed as a 4 point or 400 point move?
A: That would be four big points, also called "handles" and it is also 400 basis points, so both are correct depending on which terminology you are using. Big points value is $250 per point, basis points are $2.50 per point.
We use basis points in our reporting of our trade results. So when we say we made a positive 580 points (as in trading on July 3rd, 2002) results would be 580 X $2.50 = $1,450 - commissions @ $10 per round turn X 16 round turns, (your commisions will vary) = $1,290.
Money Management - Risk Per Trade
Q: What is the norm used for trading, i.e. how much would a beginner risk per point?
A: Money management rules also come down to the size of your account and then a mathematical formula. As a rule the maximum you should risk on any trade is 3 to 5% of your account balance.
Bulletin FAQs Section - Questions/Answers for
We received a letter from Ralph which explains his absence and provides us with an update as to his health.
Hi there daytraders! Just a note to bring you up to date on my health
Today, I have all treatment completed. ... Click here to read his entire letter
We wish Ralph well, and know he is happily on the road to recovery.
Using Price to Sales in Evaluating Companies and Making Stock
There have been numerous approaches to evaluating companies in the recent past with price/earnings the more favored until the recent market bubble that began in 1995. Price/earnings approaches have followed:
1930's: book value
Looking at Cash Flow
Today, with many companies "cooking the books," many thought
it would be advantageous to include cash flow and debt in evaluating a
company's stock. Cash flow is a more difficult number to adjust than many
of the other accounting derived figures but still not impossible. Many
companies provide tax options to corporate executives and employees. The
exercise of these options provides
Most accountants however are of the opinion that this cash flow is an
"unpredictable non-operating gain that investors should subtract
from operating cash flow." This sleight-of-hand allowed Lucent to
show a positive cash flow of $304 Million while they in fact had a negative
cash flow of $706 million in 2000. Expenses that are capitalized are also
likely to substantially distort the bottom
Revenues More Difficult to Manipulate
Though many balance sheet figures can be adjusted, fudged, and sanitized, revenues are very difficult to manipulate unless fraud is being committed. Many analysts are consequently favoring the price-to-sales ratio as a better guide to locating value in stocks. Stocks in this category that also had superior operating margins, and three years of positive earning growth include: Dole Foods, Tyson Foods, Costco, and Adolph Coors.
For these reasons, consider evaluating price-to-sales as a way to determine stock selection.
Timing of released reports is important information. We have noticed occasional "Economic Calendars" do not report the same time for the release of some reports. While this is disconcerting, there is no way to determine which source is the "right" one. Here is a list of various sites that report this information:
I started quite some time ago researching sites offering Free Real-time
Quotes as we are often asked about their availability. Originally there
were a few sites offering free real-time quotes, so I registered and then
kept track to see whether they sold my name to spammers. Most sites passed
that test, so again, I went back and now found that most of the original
sites are no longer
Now just prior to sending this issue I once again visited the sites to check that addresses were still accurate and I found that none are still offering anything even remotely close to free real-time. Not even the sites whose names include the words Free-Real-Time.
I've given up my search. I don't believe free real-time quotes exist. If anyone knows of any site offering this data for free, please let me know.
Meanwhile, some brokers are still offering the incentive of free real-time quotes if you open an account. Ask your broker or shop around.
Don't even consider day trading without a real-time data feed. Consider it part of the cost of doing business.
Financial News Websites Want You to Pay Up
Checking the news online has gotten expensive. Sites such as TheStreet.com are asking $19.95 a month (and up) for access to specific articles although from what I can tell these don't appear to be actual analysis and expected numbers such as those found at the DismalScientist.com but rather simply pieces written by journalists.
I'm not sure why they think anyone would be willing to pay such a hefty fee for regular articles and then I read their claim that, "This article and other commentary on TheStreet.coms RealMoney tells you how and where you can make money now." That suggests they are providing actual investment advice.
Interestingly one of their primary reporters for RealMoney, Herb Greenberg, said in an earlier column, "Investing exclusively based on what you read in this column can be hazardous to your financial health." (TheStreet.com March 16, 1998) Say again?
Next up comes CNN.com. If you want to check out the latest video of a helicopter crashing into Mt. Hood or watch any other breaking news when you click the link to the video you'll be greeted by the happy news that you'll now be paying for the privilege of seeing the tiny, poorly lit, grainy video feeds.
Since when would anyone pay every TV channel separately? The fun of seeing the news on my computer loses its appeal when I have to keep opening my wallet.
2000 Issue of The Newsletter for Active Traders,
No. 5: Successful Traders have no directional bias. They let the market
dictate which direction to trade.
Sometimes, especially after an especially long string of winners, some traders will begin to think they are smart. They believe their inner dialog about where market will go, and begin to get cocky. This is typically the beginning of a large drawdown and can be devastating mentally.
As soon as you decide that *you know* the market's direction, you are likely in trouble. If you start to predict the market your need to *be right* may override your ability to stay focused on the task at hand. The tendency is to see only that which validates your idea of direction. You'll miss the subtle signs, and the obvious signs, that you are wrong.
To stay present in the market, constantly ask yourself:
Stand up. Take a step back. Look at the bigger picture. Be willing to change your mind. You don't know what the market will do next. You should have a strong expectation with the flexibility to change your thinking depending on what the market presents to you. Experience is your best guide when reading the market's signs.
The market is like the sea, calm one minute and fierce the next. You must stay alert to its signals. Watch the waves, see the sky, feel the weight of the wind, and hear the intensity of the whole. An expert seaman doesn't get angry with the sea.
See your trading screens in the same manner. Use all your senses. Watch
for the signs and when you see a signal, speak to yourself in a calm manner,
asking the above questions. When you feel the trade is right you'll pull
the trigger. Follow the same procedure while you manage the trade. This
As Ralph Russell says, "The market is always right."
Charles' comments on the Head-and-Shoulders
in our April/May issue is still valid. He then said to watch the important
940 level which is where we find ourselves right now. Keep your eye on
Mark Poyser's Wall
Street Follies presents the 40 Bear Types
OnTheOpen allows anyone to receive our Pre-Opening Commentary. Subscribers receive this information first in the Real-time Signals. You too can obtain this valuable pre-market information outlining our analysis of the market's probable open, gaps, reports, what happened during the overnight session and what you might expect to happen for the first hour or two of trading, delayed just slightly.
While we are not able to predict the future, our analysis of the overnight markets can be waiting in your in-box every morning, and save you time doing your own pre-market analysis.
Sign on for free. This e-mail list is sent once a day on trading days
only, and is used for this mailing purpose only. Our usual privacy
PDF FILES WON'T DISPLAY
Q: I am on free trial. When I try to open your Overnight Updates, all I have ever got is a blank screen. Please comment.
A: Depending on your computer and Internet connection, some PDF files take longer to completely "load," so make sure to give it plenty of time. You can tell the file is still loading if you move your mouse pointer toward the top of your screen (off the blank part of the page). If the file is still loading it will then show the icon that represents the computer is busy, such as the hourglass.
Wait at least two or even three minutes before you give up on a file loading, and if it is an e-book or something very large, wait even longer.
Alternatively, follow the instructions on how to download the file and keep a copy on your own hard drive. It will then open more quickly and be available if you want to review it again.
Link for Download
At a glance instructions: Right click on any file you want to download and choose Save As. When the dialog box opens, choose Save.
SENDING TROUBLE REPORTS VIA E-MAIL
I often get e-mails that look like this:
There is no name, no indication of which page or whether they are trying
to access an area for subscribers or on a free trial. I don't know what,
where, who, which or how. If the support staff has to first solve the
mystery of what is wrong, and who is sending the message it takes much
longer to send a reply and
For a quick resolution to any trouble online, always send as much information as possible such as the exact address of the page you are trying to access.
Also, give us your name and/or your user name if you are trying to access the Real-time Signals. Most of those problems are easily solved and the more information you give us the quicker we can help.
S&P 500: Our cumulative net result (after all expenses) up to and including July 11th, 2002 on our $30,000 model account is $40,760. This is a 136% year-to-date return.
Nasdaq: Our cumulative net result from the beginning of this account's
trading on May 6th, 2002 up to and including July 11th, 2002 on our $15,000
model account is $6,460. This is a 43% year-to-date return after only
two months of trading the E-mini Nasdaq!
These results are posted after each trading session in the Overnight Update and also can be viewed on our Cumulative Net Results page for the S&P 500 and the Nasdaq. Look to the left of either page for a quick link to the other market.
It is our sincere desire that our web site and Real-time Signals service
is an informative and educational resource for you as a trader. Please
be aware that you may trade in front of us, with us, or after us and that
it is imperative that you make your own trading decisions based on your
specific risk tolerance and
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