Book Review - Stock Market Wizards (revised ver)

One of the most striking ideas you get from the book are the different kinds of traders that are successful in their own methods namely, quant, arbitrager, high probabilities trader, information traders minus the fundamentalists.

Ideas:

High probabilities trade - if a trade work 85% of the time, and risk/reward 1vs1, u still win

Arbitrager - if different countries different treatment to dividend tax, arbitrage

Team - psychiatrist, analyst, trader (very interesting setup)

Lessons:

The importance of catalysts for movements in stocks

Setting goals even in amounts made

Trade Setup

Consolidating some of the trade setup here.

bull flags,

You want to find a confluence of support at a key moving average (usually the 20 period EMA) and also a Fibonacci retracement, usually the 50% retracement. This will increase your odds of a successful trade, and also allow you to take a potentially larger position as a result of a tighter stop.

RSI system - Bill Cara (mostly for extreme case)
FAs most of you know, my simple RSI system shows Accumulation and Distribution Zones when the RSI-7 is below the 30 line for the Monthly, Weekly and Daily data series and above 70 for the same. But a Buy Alert for a short-term oriented trader is when the Daily RSI-7 pops back up over 30, if confirmed by similar RSI turnabouts in similar stocks. For an intermediate-term oriented trader, there should be a crossing of the 30 line in both Daily and Weekly RSI-7 data, and for a long-term oriented trader, the crossing of the 30 line should happen in the Daily, Weekly and Monthly.

Exuberance trade ( shall name it this way)

1. For counters going panic buy or sell with a set of criteria belows:

- traded out of bollingerband 20 to increase the odds of exuberance

- chart show breakout/down without consolidation especially if early morning trade

- traded above a round figure resistance (for e.g. 2.60) or depth showing mini sellers/buyers for breakout/down respectively.

2. Short/Buy on countertrend with a stop only 2 bids

3. Buyback at depth showing nobody buying or selling

This is a high probabilities trade, risk to reward is thin, 1 to 1. If i have time, i attached a chart to show how it works

Market Review

Just back from break, seem like a good one, or else will be whipped more by the mkt.

I am not entirely bullish but the sideways consolidation can be a likely scenario for the next thrust. Market can consolidate through correction or time and it is doing the latter in many sectors.

In the events we are going to break, here are a few for breakout play. But as always watch your risk, especiallly a failed breakout, :)

Straitsasia
Goldenagri
Pac Andes
Olam
Wilmar
Ho Bee
Wingtai
Allgreen
UIC

I am thoroughly disappointed during these few months, although i am still up 77% average for the year on all my accounts. And to continue research in a systematic way, i should put up what I am going to do in scrutiny of my very few readers..

1. To read 1 book a month if i can get my hands on
Frost, A.J. and Prechter, Robert R., Elliott Wave Principle, Tenth Edition
Edwards, Robert D. and Magee, John, Technical Analysis of Stock Trends, 9th Edition
Kaufman, Perry J., New Trading Systems and Methods, 4th Edition
Kirkpatrick, Charles D. and Dahlquist, Julie R.: Technical Analysis The Complete Resource for Financial Market Technicians, Pearson Education
Nison, Steve, Japanese Candlestick Charting Techniques, 2nd Edition
Pring, Martin J., Investment Psychology Explained
Pring, Martin J.: Technical Analysis Explained, 4th Edition
Aronson, David R.: Evidence-Based Technical Analysis

2. For those aspired TAs who want to win buy and hold, win this game first http://www.chartgame.com/ Don't say not enough indicators or can only buy/sell on closing/opening. Beat it.

3. To do quant testing on market
- I am not that keen on above as there are numerous resources out there that can do a better job than me, the only disadvantage is that lack of such data in sg.