Look at this interesting Wolfe Wave Set up on the weekly Russell 2000 E-mini. Could the market be turning around? We will have to wait and see.
Archive for January, 2008
Wolfe Wave Set Up
Tuesday, January 29th, 2008E-Mini Russell 2000 Point and Figure Chart
Thursday, January 24th, 2008
Trading Robots
Wednesday, January 23rd, 2008I have been asked by many of you about these stock , futures , and forex trading robots that are advertised on the web.
Even though I have never used one of these trading robot services, my personal opinion is that any trading system that is a black box , (a system that doesn’t let you know how the stocks are picked) are not a good idea.
The problem with Black Box systems (or trading robots) is that they don’t teach you how to trade.
They hand you over their picks and you need to rely on the service to keep investing.
So even if the picks are making you money, what happens if the service stops one day. You are stuck, with no future.
My personal theory is that I will not invest in anything that doesn’t educate me and further my knowledge of the market and trading
I want to learn how to fish so I can catch my own fish.
Sincerely,
Michael MeAngelo
Stock Market Sucks
Monday, January 21st, 2008From: Way West of Wall Street
Dear Friend & Subscriber,
I read some interesting statics this weekend that I thought I would share with you.
A lot of people are saying the Stock Market Sucks . Yes, the stock market sucks right now and the year has started off very badly, but take a look at these numbers below.
This proves that buy and hold is only a good strategy depending on when you exit the market.
The numbers below represent the annualized total returns from December 31, 1999 to December 31, 2007 as a percentage:
Nasdaq -4.70
S&P 500 1.66
Cash 3.24
DJI 3.95
10 Year Treasurys 6.45
30 Year Treasurys 8.77
Pretty interesting.
If you had a buy and hold strategy using Index funds for the Nasdaq and S&P 500 for this time frame, you are correct, the stock market sucks .
You would have been better off in cash or a treasury note.
Sincerely,
Michael MeAngelo
Indicator Junky
Monday, January 21st, 2008From: Way West of Wall Street
Dear Friend & Subscriber,
Are you an Indicator Junky ?
An indicator junky is an online trader that has too many indicators running at one time creating information overload causing the trader to panic and enter or exit the trades at incorrect times.
An indicator junky usually cannot trade without all of their indicators running at the same time.
After my article on TradeStation, I received many questions on the indicators that I use.
I believe that Great Traders use indicators to make trading decisions. Notice I said, “use” and not, “rely on”
The funny little secret that no one talks about is that indicators always lag. They are based on real time market data so by definition, they all lag the market.
The other little secret is that all indicators work and all indicators do not work. I will admit that some are better than others but sooner or later they will generate incorrect signals. It is just the way the market works.
If someone is trying to sell you an indicator with a 100% track record run. Run away as fast as you can.
There is no such thing unless the indicator has been optimized with specific historic data. This should make you run away even faster.
I am a firm believer in the 7+2 theory of human psychology.
Many studies have been done to confirm that the human’s mind can really only handle between 5 and 9 inputs or sources of information at one time.
I recommend keeping your indicators between 5 and 9.
When you are looking at your trading platform, if your price chart is just a sliver on your screen, it is usually a good indication that you are an indicator junky and have too many indicators up and running at the same time.
One thing that many online traders that are first starting to trade do not realize is that many of the indicators measure the same thing. They may look different due to speeds and color settings but a momentum indicator will measure momentum.
If you have one momentum indicator up and running, you usually do not need another one telling you the same piece of information. Trend indicators measure trend so once again, you don’t need more than 1 or 2 of these indicators running at the same time.
Now that I have given you my opinion, I will say that I use the same indicator with different settings to provide entry and exit signals for my trading. This is acceptable since the indicator is measuring data over different time frames.
If you have specific questions, please let me know.
Sincerely,
Michael MeAngelo
Trading Books That I like and recommend
Friday, January 18th, 2008Many of you have asked about books that I like and recommend.
Here is a partial list that I will be expanding as I have time.
- 1. Trade like a Hedge Fund
- 2. The Four Pillars of Investing: Lessons for Building a Winning Portfolio
- 3. Bollinger on Bollinger Bands
- 4. Mastering the Trade
- 5. How to Use the Three-Point Reversal Method of Point and Stock Market Timing
- 6. Come Into My Trading Room: A Complete Guide to Trading.
- 7. Trading for a Living: Psychology, Trading Tactics, Money Management
- 8. The Lazy Person’s Guide to Investing: A Book for Procrastinators, the Financially Challenged, and Everyone Who Worries About Dealing with Their Money
- 9. The Seeds of Wealth.
- 10. Stock Market Logic: A Sophisticated Approach to Profits on Wall Street
- 11. Riding the Bear: How to Prosper in the Coming Bear Market
- 12. Stock Trader’s Almanac
- 13. The Moving Balance System: A New Technique for Stock and Option
- 14. The RSL Market Timing System: How to Pinpoint Market Turns in Mutual Funds, Futures and Options
- 15. Just One Thing: Twelve of the World’s Best Investors Reveal the One Strategy You Can’t Overlook
- 16. Candlestick Charting Explained: Timeless Techniques for Trading Stocks and Futures
- 17. The Complete Guide to Market Breadth Indicators: How to Analyze and Evaluate Market Direction and Strength.
- 18. Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the Far East.
- 19. Beyond Candlesticks: New Japanese Charting Techniques Revealed.
- 20. The Psychology of Trading: Tools and Techniques for Minding the Markets
- 21. Trade Your Way to Financial Freedom
- 22. Day Trading With Short Term Price Patterns and Opening Range Breakout
- 23. Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game
- 24. Market Wizards
- 25. The new Market Wizards
- 26. Stock Market Wizards
- 27. The Complete TurtleTrader
How many days is the stock market open per year ?
Wednesday, January 16th, 2008Time: 9:15
From: Way West of Wall Street
Dear Friend & Subscriber,
Some people wonder how many days the stock market is open in the United States. This is a very useful number because many of the online day traders want to calculate how much money they need to make per day, to replace their current salary.
The numbers below represent standard stock market hours which usually span from 9:30 to 16:00 Eastern Standard Time.
Some futures markets will trade up to 16:15 Eastern Standard time.
The markets are usually open for the normal trading session Monday Through Friday.
I have not included after hours trading, pre market trading, currency (FOREX) markets, international markets or GLOBEX.
So lets take a look at the number of trading days in 2008 by month:
January: 21 days
February: 19 Days
March: 19 Days
April: 23 Days
May: 21 Days
June: 20 Days
July: 22.5 Days (The 0.5 is because July 3rd ,2008 is a half day for the market)
August: 21 Days
September: 21 Days
October: 23 Days
November: 18.5 Days (The 0.5 is because Nov. 28,2008 is a half day for the market)
December: 21 Days (I counted the .5 day on Dec. 24, 2008 and the .5 day on Dec 26, 2008 as 1 day)
This brings the total number of trading days in 2008 to: 250 trading days in 2008.
So if you wanted to replace a salary of $100,000 per year before taxes, we could need to do the following math:
$100,000 divided by 250 trading days equals $400 dollars per day.
The trader would then need to have an average net profit of $400 dollars per day in 2008 (after commissions, software, data services, taxes and other overhead is factored into the picture.)
Many traders do not trade every single day for a wide variety of reasons, but at least you know the maximum numbers of days you could possible trade in 2008
Trading Magazines and other Media That I like to read
Tuesday, January 15th, 2008Time: 14:42
From: Way West of Wall Street
Dear Friend & Subscriber,
Here is a list of the magazines , television shows , and papers that I like to read that keep me up to date on what is going on in the world and in the market:
1) Active Trader Magazine
2) Technical Analysis of STOCKS & COMMODITIES
3) SFO ( Stocks , Futures and Options ) Magazine
4) Trader Monthly
5) Wall Street Journal online
6) Investors Business Daily
7) Money magazine
8 ) INC Magazine
9) Fortune Magazine
10) Forbes
11) Fast Money ( CNBC )
Online Trading Software What I use TradeStation
Friday, January 11th, 2008Time: 11:02
From: Way West of Wall Street
Dear Friend & Subscriber,
You will need to make a list of functions and services that you will need before you purchased a data feed and charting package.
Because Online Trading Software is a very personal decision, what I like about the software may not be what you need or are interested in.
The bottom line is that you must have a list of criteria and select the best company based on your list. Do not start shopping before you have this list because you will be sucked into features and functions that you will never use.
Ok, let’s move forward.
This article will explain what Online Trading Software Platform I purchased and the 5 reasons why I chose the platform.
Reason 1) Real Time Data: When I first looked into the different options for software, I knew that I needed a robust platform that would supply me with real time data. This limited my choices down because a lot of the free web based programs have a data delay. Since I day trade and swing trade, I could not afford to have a data delay (which is OK if you are trading long term).
Reason 2) Wide Variety of Market Data: I needed market data for the CME and NYMEX
Reason 3) Wide Variety of Indicators and Charting Methods: I wanted a platform that would do Point and Figure Charting as well as Japanese Candlesticks. I also needed the MACD, RSI, and Moving Averages.
Reason 4) Competitive Rates: I needed a provider that had rates I could afford for the data that I needed.
Reason 5) Easy Custom Programming: I required a platform that I could program with out having to be a Computer Engineer. I wanted to be able to back test strategies, program custom indicators and trading systems somewhat easily.
Reason 6) Reputable Company: I wanted to stay with a reputable company that had an established presence with its platform and data feed.
[Side Note: Another reason I did not want to write this article is because it looks like a promotion for TradeStation. This article is not making me any money from TradeStation. I am not affiliated with TradeStation in anyway other then using their platform, datafeed, and having a brokerage account with them.]
After looking at several options following my 6 reasons above, I decided to purchase a subscription to TradeStation.
I opened up an account with them because they offered a discount if I was a brokerage client (Reason number 4 above).
TradeStation uses a programming language called EasyLanguage that is user friendly (after all, it’s called EasyLanguage) once you get the hang of it. They even offer classes that you can take if you are confused or want to get really good with it.
It allows me to back test, program custom indicators, modify indicators (Reason number 5 above).
It also has just about every kind of market data that you could ask form including CME and NYMEX (Reason number 2 above).
On top of everything else, it had won numerous awards from industry publications (Barron’s and Technical Analysis of Stocks and Commodities). (Reason number 6 above).
When you first start with TradeStation it is a little overwhelming. However, it is like anything else in life, the more you use it, the easier it becomes.
I am sure that I will be getting a lot of questions on TradeStation now, which was not my intention of the article. They also have an extensive help section and BLOG if you run into any problems.
I hope this helps you see the methodology you need to use in order to select your Online Trading Software successfully.
If you need any help setting up the platform for trading, please let me know.
Sincerely,
Michael MeAngelo
3 Kinds of Online Trading Fraud
Thursday, January 10th, 2008Time: 10:35
From: Way West of Wall Street
Dear Friend & Subscriber,
There are 3 Kinds of Online Trading Fraud to Watch Out For
The CFTC provides information for you about other specific kinds of fraud.
Foreign Currency Trading (Forex)
Foreign currency trading scams often attract customers through advertisements in local newspapers, radio promotions, or on attractive Internet sites. These advertisements may peddle high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. Precious metals scams often work the same way.
The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly.
Commodity Pool Operators
Commodity pool operators often solicit investments from friends, neighbors, co-workers, and fellow religious or social group members by using their reputations in the community or their personal relationships. In many cases, however, these investment schemes turn out to be fraudulent, and you can lose your entire investment, in many cases as a result of outright theft.
Individuals and firms that fraudulently solicit funds from investors for commodity futures and options trading are usually not registered with the CFTC. They may operate “Ponzi” schemes in which little or none of the money sent in by investors is ever invested as promised in the commodity markets. Instead, the operator of the scam steals the funds, and creates the illusion of a successful business by using some of the money put in by later investors to pay phony “profits” to earlier investors. This tactic makes it appear to investors that the investment is actually making money, which in turn attracts additional investors. Be wary of such payouts if you do not fully understand their source.
Introducing Brokers
Introducing brokers often use advertisements and infomercials on radio and television to promote commodity futures and options. These advertisements may claim that seasonal trends in the demand for certain commodities or well-known current events (such as a hurricane or a terror attack) create an opportunity to make big money by trading in commodity futures and options. They promise quick riches, like turning $5,000 into $20,000 in just a few months, with little risk.
Sincerely,
Michael MeAngelo