If you have subscribed to the NEoWave Trading service for a long-time, you’ve noticed my trading style has transformed the last 2 years. For the first 20 years of my career, all NEoWave (and old WaveWatch) services focused on “predicting” markets using wave theory. Because of the detail I attempted to achieve with my forecasts, the process might consume as much as 12 hours of my then 15-20 hour work day. If structure was clear, the second step of the process involved designing a trading strategy that took into account all possible preferred and alternate scenarios. If a position was warranted and activated, the third step involved managing that trade using stop-loss orders and profit objectives based on my presumptions of wave structure and the outlook which it implied. While on rare occasions that approach worked spectacularly well (such as the 2000 – 20002 period in the S&P), it left much to be desired at least 50% of the time.

After pursuing the universally accepted 3-step process (Forecasting, Entering, Managing) for nearly 20 years, 7 years ago I began to question its validity. Why? Even though my forecasting abilities over the prior 20 years had improved several orders of magnitude, improvements in my trading were only incremental. That perplexed me for two decades and was extremely frustrating. How could my forecasting improve so much and my trading so little…what was I missing?

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The trading rules by Aleksandr Yermachenko (aka ataman).

Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.

Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.

Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.

Short rallies not sell-offs. When markets drop, shorts finally turn a profit and get ready to cover.

Don’t buy up into a major moving average or sell down into one. See #3.

Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.

Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old traders’ wisdom is a lie. Trade in the direction of gap support whenever you can.

Trends test the point of least support/resistance. Enter here even if it hurts.

Trade with the TICK not against it. Don’t be a hero. Go with the money flow.

If you have to look, it isn’t there. Forget your college degree, trust the money flow.

Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.

The trend is your friend in the last hour. As volume cranks up at 3:00PM don’t expect anyone to change the channel.

Avoid buying at the open except when the Market falls before the open. They see YOU coming sucker.

1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.

Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers come to the rescue above it.

Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.

Big volumes kill moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.

Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.

Bottoms take longer to form than tops. Greed acts more quickly than fear and causes stocks to drop from their own weight.

Beat the crowd in and out the door. You have to take their money before they take yours, period.

In this article the author looks at the Seven ‘Sins’ of Trading and what action we can take to avoid them.

By studying at the most frequent reasons for failure, we can avoid making the same mistakes as the crowd, and thus turn these negative points into positives. In this article, I will be looking at the seven most common mistakes I see made by traders.

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Although traditional trendlines are notoriously subjective, it is possible to develop trendline-drawing rules and trading guidelines that can be applied consistently and objectively.

Technicians use trendlines to identify trends and determine when they end or reverse. The only problem with traditional trendlines is they are subjective — 10 traders could look at a chart and draw 10 different trendlines. Proper trendline application and analysis require consistent, objective rules.

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Identifying chart patterns is simply a system for predicting stock market trends and turns!

Hundreds of years of price charts have shown that prices tend to move in trends. (I’m sure we’ve all heard the saying, ‘the trend is your friend’.) Well, a trend is merely an indicator of an imbalance in the supply and demand. These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine possible future trend developments.

Research has proven that some patterns have high forecasting probabilities. These patterns include: The Cup & Handle, Flat Base, Ascending and Descending Triangles, Parabolic Curves, Symmetrical Triangles, Wedges, Flags and Pennants, Channels and the Head and Shoulders Patterns. In my opinion, these are some of the best patterns to trade.

This section is designed to introduce you to some of these chart patterns, as well as teach you to identify repetitions in the market qualities, to make timely and more accurate decisions when predicting market trends.

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Every off-floor trader would like to get a feel for how things really are on the exchange floor. Mastering Market Profile may help you get it.

Worried that you’ll never be able to compete with the floor traders? After all, they’re right there in the middle of the action. They’re privy to information that off-floor traders see late or maybe never. Once you start using Market Profile, however, you may find yourself with more information than the floor trader. No longer will floor traders, decked out in their colored jackets, frantically gesturing and scrambling to make themselves heard and seen by other traders, seem chaotic, intimidating, or bizarre. Instead, with the use of Market Profile, you will see the order in the markets.

J. Peter Steidlmayer developed Market Profile in the 1980s in conjunction with the Chicago Board of Trade. Traders who use it say that they get an in-depth understanding of the market, contributing to improved trading. Many factors can be monitored from Market Profile.

Market Profile is not an indicator in the typical sense. It does not provide buy/sell recommendations but acts more like a decision-support tool. It organizes the data so that you can understand who is in control of the market, what is perceived as fair value, and the direction of the price move. It is possible to extract enough information from Market Profile for you to position your trades more advantageously.

Market Profile is useful for the pit trader as well as the offfloor trader. The indicator can help the off-floor trader get a better sense of the market; prior to the introduction of Market Profile, only floor traders had access to this information. Although all references here refer to using futures contracts, Market Profile can be used just as effectively for other tradables. Software vendors such as Cqg and WindoTrader provide Market Profile displays for equities.

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1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.

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At some point, if they last long enough, all traders discover that successful trading is not the inevitable result of a good trading strategy or system. If all we needed was a good system or indicator we would all be successful traders. Yet clearly we are not, far from it, there are very few traders making their living consistently from the markets.

Technical analysis is a vast and well researched subject. Many minds have poured their heart and soul into searching for the holy grail of trading: the system, strategy or indicator that will yield to them unlimited wealth and glory. Yet with all this depth of knowledge readily available, trading profits remain as elusive as ever.

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A large number of traders that I work with express the feeling that they are somehow sabotaging themselves: repeating the same mistakes day after day, giving back valuable profits in a fraction of the time it took to earn them. Their intuition is that there is some kind of pattern to what they’re doing; they’re repeating the same mistakes again and again. They realize that they’re not mentally ill and don’t have a history of out-of-control behavior, so they are understandably confused as to why they can’t stop shooting themselves in the foot.

In this article, I will summarize a few ideas central to brief therapy, a discipline which uses very active techniques to accelerate change processes that might otherwise take months or years. Brief therapies have been subjected to considerable research scrutiny, and the consensus is that they are highly effective in changing emotional and behavioral patterns over a period of weeks, especially among people who do not have chronic, diagnosable mental health problems. A summary of this research, as well as a thorough description of the how-to’s of brief therapies, is included in a text for beginning therapists that I recently co-edited. Applications of brief therapy to trading can be found on my free website and in my book The Psychology of Trading. All of those sources are linked below. This article will focus on ways that traders can serve as their own brief therapists.

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