The art of selling a losing position is a key skill in the science of risk management. When you are in a trade that is losing money you have to know when it is time to exit and accept the loss. In theory stop losses and keeping your losses small are simple in concept but […]
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A risk management process for a trading system is not just math but also includes human psychology. The psychology of execution is just as important to profitability as the trading dynamics of the entries and exits of a trading method. Humans have fear, greed, and egos and these elements can interfere with the process of
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There is some negativity in society about being a trader, in this post I would like to explain the positive side of being a trader and why a trader should be proud of what they do. Some say “A trader doesn’t create or produce anything”. That is wrong. In the history of civilization it was
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Jim Simons was one of the most successful hedge fund managers in history. He was a trained mathematician and quantitative trader and the founder of Renaissance Technologies. His hedge fund specialized in diversified system trading using individual quantitative models derived from statistical analyses of historical price data. His primary models were on pattern recognition. Jim
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Chart patterns are visual representations of the behaviors of buyers and sellers around different price levels. Chart patterns are bullish when a chart is making higher highs and higher lows, they are bearish when they are making lower highs and lower lows, and range bound when they have defined support and resistance levels and no
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A trading journal is the book a trader writes about their own trading. A trading journal records decisions made in the market so you can see any errors in discipline, risk management, or process. If you can measure it, you can change it. If you are mindful of your behavior you can learn from your
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Here is a list of the seven most popular reversal candlestick patterns used in technical analysis to determine a high probability area on a chart for a reversal of a current trend. These patterns show a shifting in power from buyers to sellers or sellers to buyers through the price action of the candle being
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Here is a list of trading strategies used by different types of traders to make money in the markets. Day trading: Day traders open and close their trades inside regular market hours. Day traders avoid the risk of overnight gaps but can only profit from intraday price moves. They close their positions by the end
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Exponential moving average crossover signals are one way to capture trends on a chart by entering a long trade when a shorter term moving average crosses over a longer term one, then exiting as the shorter term moving average crosses back under the longer term one. The inverse of this are moving average cross under
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Here is a list of the largest companies by market cap today based on their publicly traded equity as of October 12, 2020 and listed for trading in the U.S. On this list there are five NASDAQ listed stocks and four NYSE listed stocks and one company that trades on the OTC market because it
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What is a long-legged doji candlestick pattern? The long-legged doji candlestick pattern has both long upper and lower shadows (wicks) and generally has a closing price near where it opened in the time frame of the candle. The long-legged doji candlestick can signal extreme indecision in the current market with a large trading range but
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Munehisa Honma (本間 宗久) 1724-1803 is known as the father of the candlestick chart. He is believed to have been a rice merchant in 18th century Japan who traded the Dojima Rice market in Osaka. . In 1710, a Japanese rice spot market was transformed into a futures market for rice. This market used coupons
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A martingale strategy is a betting method designed for games where the gambler wins a 50/50 bet like a coin flip wins landing on heads and loses on tails. This strategy betting structure has the gambler double their bet if they lose so the first win would recover all previous losses and get back to
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The “magic formula investing” system parameters and principles are used by Joel Greenblatt in his approach to value investing to outperform the market. In his book ‘The Little Book that Beats the Market’, Greenblatt writes that this system buys cheap stocks of 30 companies that have high earnings yield and also a high return on
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This is a guest post by Michael Dehoyos. Trading can be a daunting prospect to someone completely new to it, which is why so many people trust companies to invest and trade for them. However, by giving over your portfolio to a company, you’re also giving up a certain level of control over your own
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Nicolas Darvas was a professional dancer in the 1950s that developed a trend trading system for stocks that turned his $36,000 into $2.25 million between 1956 and 1958. He used price momentum near all time highs with buy stops and trailing stops to trade the highest momentum stocks during one bull market to compound money
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The Kelly Criterion is a scientific gambling method using a formula for bet sizing that mathematically calculates the proper position size for placing a bet based on the odds. The Kelly bet size is calculated by optimizing the projected value of the wealth logarithm, which is equivalent to maximizing the expected geometric growth rate of
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A spinning top is a single candlestick pattern that has a body in the middle of two longer wicks. A spinning top chart pattern is a signal that neither buyers or sellers have control of price action in the time frame of the candle. The spinning top candle shows that price ended up closer to
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Portfolio backtesting is the process of using historical price data to analyze and backtest the returns of a group of stocks, exchange traded funds, or mutual funds in the past. A complete portfolio backtest of your watchlist can visualize the risk of correlations, optimum percentage of capital exposures, drawdowns, and potential for diversification to hedge.
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Bill Ackman is ranked as America’s 21st richest hedge fund manager with a current net worth of over $2 billion. He is ranked #391 on the Forbes 400 wealthy list. Bill Ackman is a self-made billionaire through operating the hedge fund he founded in 2004, Pershing Square Capital Management. He rose to fame for his
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