Day trade with Daytrader's Bulletin

Daytrading Newsletter
for Active Traders

Jun/Jul 2002 Vol. 7 - Issue 1
ISSN: 1529-7985

 
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Newsletter for Active Traders
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D A Y T R A D I N G N E W S L E T T E R F O R
A C T I V E T R A D E R S ========================================================

+ Tips, Tricks & Techniques - Recent Questions/Answers
+ Health Update on Ralph Russell
+ Price to Sales in Stock Selection
+ Economic Calendar - Release of Market Reports
+ Free Real-time Quotes - Not to be Found
+ Will you Pay for Online News?
+ Spotlight on: Winning Technique #5 - Have No Directional Bias
+ S&P 500 - 840 Level Here We Come
+ Down Day? Try the Wall Street Follies
+ OnTheOpen - Free Pre-opening Commentary
+ Software & Computer Tips
+ Links & Resources for Traders
+ Trading Results 2002 Year-to-date

========= Tips, Tricks & Techniques for Daytraders

For all the Q & A posted see our FAQs section

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.

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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.

The book is out of print, but you may be able to find a copy from an online book seller. Try Bibliofind (now part of Amazon.com) or Fat Brain (now part of Barnes & Noble).

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"

Basic Candlestick Charting tutorial

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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.

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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.

Daytrader's Bulletin FAQs Section - Questions/Answers for
General Trading; Bulletin Signals; Overnight Update; Technical
Analysis; Novice Trading & Subscription Options

======== Health Update on Ralph Russell

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
escapades and the medical gymnastics of getting older.

The reason I am not doing the Nasdaq service is an issue that came up from having almost completely lost my voice. I had an enlarged thyroid removed on March 19th. It was covered with malignant large cell type B non-Hogkins growths or nodes. I knew something was wrong with me for several months but had no idea what the cause.

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.

========= Price-to-Sales in Stock Selection

Using Price to Sales in Evaluating Companies and Making Stock
Selection

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
1950's: return on equity
1970's: dividend yield
1980's: earnings before interest, taxes, depreciation and amortization

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
a tax benefit that increases cash flow.

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
line. American Software slashed its capitalized costs by 62% in 2001 and its once positive cash flow turned negative. Its share value tumbled in the process.

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.

+++-------------- Daytrader's Mentor --------------------+++

Have you taken seminars, read books, traded through a few accounts,
and still can't quite make sense of it all? The answer you seek
isn't in more information but in devising a trading system you can
call your own. Trading a good system enables you to learn to trade
with confidence and begin making money in today's markets.

Working one-on-one with a skilled professional trading mentor is
the answer. Overcome your limitations, break through to the trader
you know you can be.

Click here for details on the Daytrader's Mentor

+++------------------------------------------------------+++


=========== Economic Calendar - Release of Market Reports

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:

Tip@WallStreet

Briefing.com

The Online Investor

TheStreet.com
Follow the navigation from Research/Tools > Economic Calendar
The direct url changes often.


========== Free Real-time Quotes - Not to be Found

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
offering free at all.

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.


=========== Will You Pay for Online News?

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.com’s 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.

=========== Spotlight on Winning Technique #5 -
                          Have No Directional Bias

Our Nov/Dec 2000 Issue of The Newsletter for Active Traders,
included the 10 Winning Techniques of Successful 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:

1. How many signs (indicators, etc.) are in favor of my position?

2. How many signs (indicators, etc.) are adverse to my opinion?

3. Which is weighted more heavily?

4. Relax -- breathe.

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 will
help you stay in a good trade longer, and exit a wrong trade sooner.

As Ralph Russell says, "The market is always right."

=========== S&P 500 - 840 Level Here We Come

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 940.

=========== Down Day? Try Wall Street Follies

Mark Poyser's Wall Street Follies presents the 40 Bear Types


FREE TRIAL REAL-TIME SIGNALS

Anyone can have a full week's trading with our Real-time Signals,
if you haven't already had a trial in the past six months.
All new free trials to the Real-time Signals have access to both
the S&P 500 and the Nasdaq 100 Signals. You will also receive the
Overnight Updates for both markets as well as Mentor Updates that
are published during your trial.

http://www.daytradersbulletin.com/html/free_trial.shtml

If you have recently had a free trial and liked what you saw,
now is a great time to subscribe.
https://daytrade.securesites.com/sub/amform.htm

========= On The Open for S&P 500 and/or Nasdaq

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 policy applies.

========== Software & Computer Tips

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 Instructions

At a glance instructions: Right click on any file you want to download and choose Save As. When the dialog box opens, choose Save.

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SENDING TROUBLE REPORTS VIA E-MAIL

I often get e-mails that look like this:

>> To: support
>> From: 13456@somesite.com
>> Subject: Help

Message: Help me!

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
get the problem resolved. This is true on any web site.

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.


========= Links & Resources for Traders

Daytrader's Bulletin - Links to Sites of Interest for Daytraders & Investors

Categories include:

Education & Training Sites
Brokers & Advisors
Daytrading

News & Magazines
Exchanges
Commodities

Data/Quote Vendors
Simulated Trading & Betting Sites
Software and Tools

Trading Resources
Option Trading Tools
Tax Resources

Technical Analysis
Private Placement Investments
Stock Market

Forex

Add your site or advise us of a site

========= Year-to date Trading Results for 2002

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.


========= Disclaimer

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
discretionary funds. There is a risk of loss in trading futures.

========= Prior Issues - Read our back issues

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