Monday, August 21, 2006

Follow-Up Email About Market Reversals

Here's the follow-up to the previous email question I received about coaching along with my response...

On 8/20/06, Name Blanked Out To Protect the Innocent ;-) wrote:
Thanks for your time to email me back. Are you going to the trading room class. This class really interests me because you can see them trading and do what they are doing. I think I would learn a lot at that one because I'm better at seeing it and doing it, also they say they make a lot of money at that class which would be nice to see some profit. Also the market looks like it just went back into an uptrend and is bullish rather than bearish and trades are harder to find with the switch taking place wondered if you had the same opinion.

I'm highly considering going to the trading room class, but I'd like to have more money in my account when I get there. I'd like to have over $25k in order to avoid the pattern day trading restrictions. I also plan to attend the Advanced Trading P.I.T. The HITS class really has my attention, but I think I'd like to take their Advanced Technical Analysis class first. Well, that and the HITS class requires > $200k in your account to be able to employ the Institutional tactics. My plan isn't set in stone quite yet, and attending a class that isn't offered online is a bit too much of a hardship for me at the moment. I still need my job and the money that pays the bills, and taking off for a few days isn't an option for the next couple months.

There are signs about market reversals. They seem to be slightly clearer on the broad market charts and I'll be posting some of the chart analysis work on the markets to my blog very soon. Basically when you start to see the swing lows (or swing highs) weakening, it's time to reevaluate your market outlook. During such transitional times you can look through your watchlist for the next direction and see if there are any good setups. During such transitional times, you probably need to keep your stop-loss a little looser and accept that additional risk. Certainly the trade can still go against you and a volatile, switching market isn't the easiest to navigate, but you have the potential for some nice reward. Simply being a sheep and only following the trend isn't necessarily the best way either although it's "safer" if you really wait for the stock to come to you and pay attention to reversal signs (weakening swing highs/lows, exhaustion gaps, extended range candles, etc...). Bottom line is that there are signs the market is turning, but it takes some practice to spot them. Even when you spot them it just may mean that you should NOT trade until you have confirmation of the new trend. It's a highly personal decision and interpretation, but remember one of the most powerful abilities you have as an individual trader is that you do not have to trade. You can keep your money out until you see a trade that you just can't pass up.

I'm a detail oriented guy (just in case you couldn't tell from my blog) and I've taken to the following books for further information/motivation behind what TMTT teaches: Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy and Trading for a Living: Psychology, Trading Tactics, Money Management by Dr. Alexander Elder. Basically I'm looking to these books for a bit of the why behind the what. TMTT does a nice job of compressing the information down to get you successful asap, but I like to know the motivation behind the rules. I'll post some thoughts on each book soon as I continue to read.


Anonymous said...

I am considering paying the $399 fee for the 3-day workshop, software, and on-line fees. While attending the seminar the "additional expensive classes" were not mentioned. My question is "Will the 3-day class, the software, and $40 per month subscription be enough to get started using their system, or is the 3-day class a long sales seminar?". I would be inclined to invest more haviliy in training if I can get enough out of the initial 3-day training to help fund the in-depth course(s). Also, has anyone seen a software tool or on-line serviec that can provide the technical analysis the Trade Center offers? Further, can a few of the books recommended by Larry and and a $100 software tool get me as much or more of a start than the 3-day seminar?

I appreciate any feedback on these questions based on your first-hand experiences with the TMTT classes.

Trader Taocode said...

You do learn some things in the 3 day course. However, what's taught in the 3 days is merely an overview of what is possible using various investment strategies (trading, covered call writing, options, etc...). It's really just enough evidence to convince you that they do have more to teach you. Make no mistake, the sales pitch is throughout the workshop.

Markets are a complicated creature and you can learn enough to be a danger to yourself and your account. I really like the Trading for a Living book as a good entry point. It cuts through the hype and brings truth into the light. For example: the market works by the majority of people losing their money trading. The market attracts all sorts: intellects, gamblers, sharks, but mostly losers. Education can certainly help improve your success rate, diligence, practice, and patience will be the weapons of a professional.

I am not here to sell you what TMTT teaches. Elder's book is cheap and gives you psychology, technical analysis and enough to get you started, or at least enough to know if it's something you'll be interested in doing. With that said, I thoroughly enjoyed the TMTT classes and still consider them to be of tremendous value.

For tools, there are various tools out there, including many that are free with your brokerage account. Interactive Brokers provides some charting tools, however I primarily work with The Trade Center and Trade Seeker, both from TMTT. Even Yahoo's finance site: gives you some charting and technical analysis tools completely free of charge.

Hope that helps!