Product Review: Applying Breakthrough Trading Tools from InvestorFLIX

Paul King, February 27th 2006

In this DVD which is a recording of a presentation given by Cynthia A. Kase, there is a great deal of useful and unique information about the application, improvement upon, and use of some common technical trading tools. The discussion builds and extends upon Cynthia’s excellent 1996 book 'Trading With the Odds'. The main reasons that this book was not on our recommended reading lists were that it is a little difficult to understand because of the statistical and technical nature of the indicators discussed, and also used proprietary indicators that were not well explained or divulged.

In this presentation the reasoning behind the use of the indicators, and more details about their calculation and application are revealed so that it is possible to take away some tangible and useful methods for improvement on the standard technical indicators.

Key concepts that are discussed include:

Adaptive trading techniques that take current market conditions into account
Range as a proxy for volatility
The exponential rather than linear nature of markets
Why the market determines risk

With an emphasis on profit taking and entries, this presentation is quite mathematical in nature and some of the slides are hard to read, but what Cynthia is trying to say is definitely worth putting the effort in to understand. Improvements and usage to the following technical indicators is discussed:

Moving averages
Momentum indicators
Bollinger Bands
MACD
Elliot Waves

For any technical trader familiar with the standard indicators who wants to go beyond them, this presentation is a good source for your own areas of additional study into technical analysis. I recommend reading up on the indicators listed above (and also about mathematical standard deviation and normal distributions) so you are familiar with how they work before watching this DVD.

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Product Review: Mastering High Risk Decision Making from InvestorFLIX

Paul King, February 24th 2006

In this DVD which is a recording of a presentation given by Charles Faulkner, use of Neuro-Linguistic Programming (NLP) techniques and their applicability to decision making in trading are discussed. For anyone interested in how we can learn to make better decisions in trading this is a very useful presentation.

Firstly Charles covers common patterns and mental attitudes that exceptional traders share. This includes factors in the following areas:

Unconscious patterns
Personality alignment
Measurable and quantifiable evidence
Indicators
Emotions, beliefs and mindsets
Trading Strategies

In discussing top traders and how he has modeled their behavior Charles explains some key traits that are essential to successful trading. These include:

Top traders have a separation of understanding and action
Top traders attach to actions not emotions
Top traders concentrate first on managing risk
Top traders have excellent discipline

In order to have trading discipline it is essential to have well-formed goals and some of the key factors that contribute to a well-formed goal include:

Stated in the positive
Is congruent with your beliefs
Uses ‘Away From’ motivation
Utilizes mental rehearsal
Has specific entry and exit evidence

One particularly useful NLP technique that is demonstrated in the presentation is about creating a decisive mind which helps to resolve any negative emotions or conflicts about trades you are about to make, and this is well-worth your time to study and perfect.

In summary, this is a useful, interesting, and informative presentation on decision-making in trading.

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The Art of Trading #1

Paul King, February 21st 2006

Sun Tzu described the art of war in 13 chapters. The applicability to trading of each of these chapters will be considered in terms of either the counterparty to your trade as the enemy, or yourself as the enemy. In some instances where there are really no direct analogies to trading (for example in ‘Attack by Fire’) more general principles will be described that are more relevant to trading, but in the same context as Tzu’s work. In each chapter, English translations of the writings of Sun Tzu are shown in bold italic.

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Product Review: Market Wizards Insights from InvestorFLIX

Paul King, February 17th 2006

Once you get past the cheesy music, the obvious plugging of Jack’s books at the start (which are excellent by the way, and on our recommended reading list here), and a not-very-useful introduction, this one and a half hour DVD of a presentation Jack gave to over 500 traders has some great and useful insights into trading. Most of the material is in the context of what Jack learned as he wrote the Wizards books.

Some of the key subjects that he covers in the presentation include:

Trading your personality
Trying to achieve perfection
Why markets are not random
What is NOT important in trading
What IS important in trading
What beliefs are common to all successful traders including:

It is OK to lose
You need an edge to make money
A method is critical
You need to work hard at the right things
Good trading is effortless
Risk control before you enter a trade
Discipline
Independence of thought
Confidence
Patience

The questions and answers and the interview with Jack at the end also have some key information that is not included in the books and provides useful insights. Overall an interesting and useful presentation given in an entertaining way that is well worth the $19.95 monthly fee to access all of the InvestorFLIX content all on its own.

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What is a Mistake?

Paul King, February 14th 2006

It is easy to beat yourself up for making that ‘stupid losing trade’, but is that really a mistake if you followed your trading rules, entered when you should have, used the correct position size, added to or reduced your position size when you needed to, and exited when you should? Losing trades, weeks, months, and even years are a normal part of trading, and it is much more useful to define a mistake in a way you can a) detect it, and b) fix it so it should not happen again.

My definition of a trading mistake that needs to be identified and fixed is one of the following circumstances:

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Trading and Investing Web Service Review: InvestorFLIX

Paul King, February 12th 2006

Do you want to study lots of investing and trading movies, CDs and courses but don’t have the cash to purchase them all? Would you use a service that costs less than $20 per month, but gives you access to a large catalog of trading materials from leading authors?

InvestorFLIX is exactly what you are looking for. They have a large collection of investment and trading DVDs and you can get access to all of them for a fixed low monthly subscription fee with no contract and a money-back guarantee.

A selection of the content that I particularly think is worth the subscription fee individually includes:

Market Wizards Insights by Jack Schwager
Applying Breakthrough Trading Tools by Cynthia Kase

InvestorFLIX has no contract so you can cancel at any time, and even offers a 30 day money-back guarantee so there is nothing to lose if you don’t think the service is worth the subscription fee after you have tried it for 30 days.

I will be reviewing selected exclusive content from this investment and trading DVD-by-mail service in future blog entries. Visit InvestorFLIX to find out more.

DISCLOSURE: PMKing Trading is a subscriber and an affiliate of InvestorFLIX.

Contact Us for more information.

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Does Your Trading System Really Work?

Paul King, February 10th 2006

So you just completed development of your first trading system or method, tested it historically and you are ready to risk your hard-earned cash on it. Wouldn’t you like to find out if it is really a profitable system before you risk your own cash?

Trading is made of many inter-connected domains including the markets, your technology, your system or method, and your personality. Historical testing can only go so far in determining whether a system is really robust, and technology and personality have a big impact on the end results. See my article ‘The Main Caveats of Backtesting’ for more on this...

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The Art of Trading

Paul King, February 9th 2006

Every day in the markets there is a war going on. It is a battle between the bulls (buyers) and the bears (sellers). The relative strength of the two sides dictates the prices for every instrument traded on every exchange in the world.

The markets are the battlefield where the war takes place – not the enemy. In trading there are 2 enemies: One is on the other side of every trade you do. They are the buyer when you are a seller; and the seller when you are a buyer. Their current belief is exactly opposite to yours: when you believe prices will rise (so you buy) they believe prices will fall (so they sell). Their purpose is to take some or all of your trading capital for themselves and win the war.

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Product Review: The Psychology of Trading Series by Van K Tharp

Paul King, February 3rd 2006

This set of CDs (7 audio, and 1 supporting data) from the Van Tharp Institute is a recording of a series of telephone conferences that Van Tharp held, which includes guest speakers from each area of expertise. The CDs deal with subjects that are more psychological in nature rather than dealing with the ‘science’ of trading, so they are interesting and informative, and can be applied to all kinds of life situations not just trading.

Here is a special point that I learned from each CD. I’m sure that when I listen to them a second time I will pick up even more information.

Disc 1 - Discipline

Rather than simply checking one’s fitness for trading each day as part of a discipline routine, why not ‘pre-program’ yourself to be in a good state for your self check instead. This is basically ‘rigging the game’ in your favor.

Disc 2 - Beliefs and Mental States

‘Whatever you want you should give it away’ can be used as a very powerful idea.

Disc 3 - How to Fix Mistakes

The 10 Tasks of trading that can be used as a way to ensure discipline and prevent mistakes from being made.

Disc 4 - Games We Play

The trading game you are playing even if you don’t realize it has 12 levels to it and the ones at the top are where the rules of the game are being determined. Passive income is the path to ‘win’ the money game.

Disc 5 - Self-Sabotage

There are 3 models of self-sabotage and they can affect your trading without you even knowing.

Disc 6 - Goal Setting

Having an ‘Imaginary Advisor’ can help you set and complete your life goals.

Disc 7 - Personality Types

Understanding your personality type can help you enhance your strengths and understand your weaknesses when it comes to trading.

Disc 8 - Data CD

Some very useful additional material that goes into more detail about some of the subjects covered in the other discs.

Visit the Van Tharp Institute for more information about this excellent CD series.

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When to Ring the Cash Register

Paul King, February 1st 2006

Knowing when to take profits is one of the more challenging aspects of trading. Dealing with losses is easy – when the price trades through your stop loss point then just get out. Knowing when it is the right time to take profits is more difficult. The ideal answer is ‘when the trade is not going to go any further in your favor’ - but this is impossible to tell and we must use a more pragmatic approach.

One way of thinking about an open winning position is to try and estimate the future expectancy of the trade. If you can estimate values for the following formula using experience and testing, then you can determine whether it is still a high-reward-low-risk idea:

Future Expected Move in Trade’s Favor * Probability of Future Positive Move minus

Future Expected Move against the Trade * Probability of Future Negative Move

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