How to build consistent Trading Success

EWI’s senior analyst Jeffrey Kennedy shares with you practical advice on what it takes to improve the quality of your trades.

By Elliott Wave International

You’ve heard it all before:

  • If you want to trade using Elliott wave analysis, to succeed you first need to understand its rules and guidelines.
  • You need a clearly defined trading strategy (what? when? how? etc.) and the discipline to follow it.
  • Additionally, your long-term success depends on adequate capitalization, money management skills and emotional self-control.

Do you meet these qualifications, yet still struggle in the markets? If so, you may find some helpful advice in this quick trading lesson from Trader’s Classroom editor, Jeffrey Kennedy:

We all know that the Elliott Wave Principle categorizes 3-wave moves as corrections and, as such, countertrend moves. We also know that corrective moves demonstrate a stronger tendency to stay within parallel lines, and that within A-B-C corrections the most common relationship between waves C and A is equality. Furthermore, we know that the .618 retracement of wave 1 is the most common retracement for 2nd waves, and that the .382 retracement of wave 3 is the most common retracement for 4th waves.

Knowing that all of these are traits of countertrend moves, why do traders take positions when a pattern demonstrates only one or two of these traits? We do it because we lack patience. We lack the patience to wait for opportunities that meet all of our criteria, be it from an Elliott wave or another technical perspective.

What is the source of this impatience? It could be from not having a clearly defined trading methodology, or not being able to control emotions. However, I think impatience stems more from a sense of not wanting to miss anything. And because we’re afraid of missing the next big move, or perhaps because we want to pick up some lost ground, we act on less-than-ideal trade setups.

Another reason traders lack patience is boredom. That’s because — and this may sound odd at first — “textbook” Elliott wave patterns and ideal, high-confidence trade setups don’t occur all that often. In fact, I have always gone by the rule of thumb that for any given market there are only 2-3 tradable moves in your chosen time frame. For example, during a normal trading day, there are typically only two or three trades that warrant attention from day traders. In a given week, short-term traders will usually find only two or three good opportunities worth participating in, while long-term traders will most likely find only two or three viable trade setups in a given month, or even a year.

So as traders wait for these “textbook” Elliott wave patterns and ideal, high-confidence trade setups to occur, boredom sets in. Too often, we get itchy fingers and want to trade any chart pattern that comes along that looks even remotely like a high-confidence trade setup.

The big question then is, “How do you overcome the tendency to be impatient?” Understand the triggers that cause it: fear of missing out, and boredom.

The first step in overcoming impatience is to consciously define the minimum requirements of an acceptable trade setup and vow to accept nothing less. Next, feel comfortable in knowing that the markets will be around tomorrow, next week, next year and beyond, so there is plenty of time to wait for the ideal opportunity. Remember, trading is not a race, and over-trading does little to improve your bottom line.

If there is one piece of advice I can offer that will improve your trading skills, it is simply to be patient. Be patient and wait for only those textbook wave patterns and ideal, high-confidence trade setups to act. Because when it comes to being a consistently successful trader, it’s all about the quality of your trades, not the quantity.

Developing patience isn’t easy — yet, if you are serious about improving the quality of your trades, it is vital.

How much more successful would you be if you could develop the patience to act only on high-confidence trade setups?


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This article was syndicated by Elliott Wave International and was originally published under the headline How to Build Consistent Trading Success. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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CrashAs already stated in earlier posts, I am a believer in austrian economics. If you are familiar with this theory, the actual turbulences at the stock markets are no surprise. I can only heavily recommend to learn about this aproach to economics! One first step may be to listen to this audio interview with Dr. Mark Thornton, a senior fellow at the Mises Institute, which covers the topic of booms and busts. Mark and Jeff talk about how and why central bankers don’t understand deflation, whether they are really Keynesians or some variant thereof, what a “crack-up boom” might look like, and what the Skyscraper Index and other symptoms of irrational spending might tell us about the future of the global economy.

Listen to this 15 minutes long interview here.

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Can stock values simply disappear? YES!!

And it’s happened before, too — just think back to the 2007-2009 financial crisis

By Elliott Wave International

On Wednesday (Jan. 13) CNBC reported that,

“Almost $3.2 trillion has been wiped off the value of stocks around the world since the start of 2016, according to calculations by a top market analyst. U.S. stocks are now off $1.77 trillion, while overseas stocks are down $1.4 trillion.”

Stocks rallied on Thursday — but then tanked even harder on Friday, which probably made that $3.2 trillion figure even bigger.

But how can that be? Doesn’t money simply move from one asset class to another?

Our readers have asked us this question before — especially during the 2007-2009 financial crisis, when 54% of the Dow’s value got erased in just 18 months.

You may be wondering this, too. Well, here’s an answer — from Ch. 9 of Bob Prechter’s New York Times Business bestseller, Conquer the Crash:

Financial Values Can Disappear
(Excerpt, Conquer the Crash, ch. 9)

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. “The money has to go somewhere … It just moves from stocks to bonds to money funds … It never goes away … For every buyer, there is a seller, so the money just changes hands.”

That is true of the money, just as it was all the way up, but it’s not true of the values, which changed all the way up.

Asset prices rise not because of “buying” per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else — including those who own some of that asset and those who do not — need do is nothing.

Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer’s, then the value of the asset falls, and it falls for everyone who owns it. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market “gaps” up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone’s action to make it happen, just most people’s inaction on the other side.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy — both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else.

In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The “million dollars” that a wealthy investor might have thought he had in his bond portfolio or at a stock’s peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears.

You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons.

So, the answer comes down to “money” vs. “value.” Financial values don’t move from one asset to another. They can just disappear.


There is no time to waste
Global stocks lost $3.17 trillion in the first 2 weeks of 2016

Were you ready? Are you ready for what’s next?

You can be.

[Urgent New Report] How to Survive and Prosper in this Global Financial Crisis. With global stocks losing $3.17 trillion dollars in the first 8 trading days of 2016 (CNBC), NOW is the time to download this free report from Robert Prechter. This report was adapted from Prechter’s New York Times bestseller, Conquer the Crash. You’ll get a list of “Imperative Do’s and Crucial Don’ts” for surviving and prospering in today’s volatile markets. There’s no time to waste. It’s time you prepare for what’s next, NOW. Read the Complete Report.

This article was syndicated by Elliott Wave International and was originally published under the headline Can Stock Values Simply “Disappear”? Yes.. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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Expert’s advice: “sell everything”!

CrashThis is just a short update on my bearish market opinion. I want to point to two online articles describing horror scenarios as far as the stock markets are concerned. Please read here why experts think the S&P 500 could drop by 75% and here why one should “sell everything”!

Don’t tell me I hadn’t warned you! 😉

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  • FX Stealth FX Stealth is a Forex robot that uses a new stealth trading technology to automatically trade currency for you.
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gaslFirst of all: a happy new year to you, all the best for you personally and your trading, of course!
The beginning of a new year usually is tied with setting goals. As far as I am concerned, one – if not the – most important trading (or rather: investing) goals is it to take a broader look and invest longer term. Not only because this means less trades (and less commissions as one consequence), it also reduces stress and enhances the probability of winning trades.

Especially today, after some markets have been beaten massively – take the commodities sector as an example! Oil prices have collapsed, and most commodity indexes have lost 50 or even more per cent within the last 12 months or so. A perfect precondition for a high probability winning trade! We want to buy cheap and sell expensive, don’t we? 😉
So I did some research on leveraged commodity ETFs and found some of them quite interesting. Most promising to me seems the GASL ETF – which stands for The Direxion Daily Natural Gas Related Bull and Bear 3x Shares (see chart). It has been hammered down from it’s high in April, 2011 (4.163 USD!) to only 6,42 USD today!! In other words: it has lost 99,85% of it’s value!! It is ridicolous cheap today, and that’s what I was looking for. The downside is limited to 6,42 $/share, the upside is the sky (4.000 $!). This provides us with a reward to risk ratio of 648:1!! Where else do you find such setups?

Even if gas prices decline even more, I will sit on my hands patiently and wait….some day they will definitively go up again! (I also bought the UWTI, the velocity shares 3x long crude oil, which also has now a big upside potential).

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  • Forex Renko Charts FX Trading System a VISUAL forex trading system designed by a commodity trading advisor in chicago.
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Get a real vision of the financial markets!

realtvToday I want to recommend to you something very special: an online TV channel which gives you insights from and of the financial markets you won’t find elsewhere! It’s called “RealvisionTV” and started one year ago. It’s a channel where the smartest guys from around the world share their ideas and views. People whom you will most probably never see on channels like CNBC or CNN and the like!

I started my subsription from the very beginning and can really say that I don’t want to miss this kind of insights. especially when you are a “normal” trader/investor without a career in the financial industry, these interviews and comments (ususally between 10 and 60 minutes long) will improve your knowledge of the financial markets and industry a lot! Often you even get straight investment tipps which are much more valuable than those of the self-claimed “gurus” on public channels.

The content is 100% exclusive. The library comprises about 250 videos already, and 150 more are added each year. You can watch them on all devices (PC, laptop, smartphone) in HD quality. Totally commercial and ad free!

All for less than 1$ a day! Try it out – for free!

Besides that I wish you a very happy christmas and a good start into the new year!
Thomas

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    JVZoo Product Feed

  • Forex Renko Charts FX Trading System a VISUAL forex trading system designed by a commodity trading advisor in chicago.
  • Renko Charting Package The Renko Charting Package is a unique way for Forex traders to see price action on their charts. It completely removes all the noise and clutter associated with standard candlestick and bar charts, and leaves behind a clear and obvious trend direction f
  • FX Stealth FX Stealth is a Forex robot that uses a new stealth trading technology to automatically trade currency for you.
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