Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 01-24-08 (Thursday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): Market tuns up with +300 point day.

Volatility continues to rear its nasty head in the stock indices.  Wednesday’s action saw the DJIA up +298.98…trading in a wildly volatile atomosphere.   The large move to the upside has already used up the momentum to the upside, but don’t count out further action to higher levels.  We are pleased that the market is making a strong comeback and are waiting for an opportunity to short this market once again.

The StoRSI, our momentum oscillator, has  snapped back and has traversed halfway back to its upper trigger level.  It only took one day for the StoRSI to travel more than halfway back to its upper trigger level.  Another strong day could see the StoRSI at overbought level (making all short positions tempting propositions).

The T8, our exponential moving average, should provide terrific opportunities to sell. Although price came up toward the downtrending T8 on Wednesday, we are still only  halfway to T8. What seemed like a tall order for this market (the ability to rally back to the downtrending T8) early this week, is now easily within reach. The T8 indicator dictates our thoughts on the direction of the trend. As the T8 begins to decline at a steeper angle, the T8 is even a more powerful resistance.

Wednesday’s candle was a big white candle, the opposite of last week’s black bodies which dominated last week’s trading. The futures’ market stock indices continued to  post great looking hammers. The hammers are exactly the type of candle you want to see at the bottom of a move. The “dead cat bounce” that we suggested early this week is now a reality.

Please keep and mind and read the following thoughts on volatility. We have been preaching about volatility since August and we don’t believe that things will calm down for many, many months.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. The current volatility cycle has just started its volatile period. We feel this is the early stages of volatility and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 

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The Blame Game–

“I have an friend. He’s an investor. He manages not only his own rather, but also those of some of his family, a responsibility which he takes very seriously. We share investment ideas, and some of the ideas he uses come from my recommendations, in The Morning Call and the Mechanical Monkey, among other sources. All in the family, right? Sometimes, one of those investment ideas goes south, and I feel compelled to send off an apology to my friend. Invariably, he responds in this manner – ‘Hey, don’t worry! I went into that one with my head up, did my own research and made my own choice. That makes it my responsibility, not yours…

‘ In this ‘victim society’ of ours, blaming someone else for our own mistakes teaches us! absolutely nothing. It’s a matter of personal choice and individual responsibility. Your recommendations offer value to me for one simple reason. They narrow the fields of my own research. I am not a professional, and I do not have enough time in a day to start from scratch. Your recommendations point me down roads which otherwise might not have been taken, and for that you have my gratitude. For what happens thereafter, or does not, I will take personal responsibility.”
Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

The ideal trading system would be one that trades without emotions.  This means that you have to develop a systems that gives you the odds, in the long run, to have a profitable trading system.  Online trading systems that take the emotion out are called mechanical trading systems.  I think that you still need some emotion in trading but  the great traders channel this emotion into competitiveness.  Most are very competitive in nature and these traders work on their systems, their risk management and work their online trading plan.  They keep their emotions out of the plan they have developed and follow the plan.  Teach Talk Trade has mechanical plans that help take the emotion out but many still try to second guess the plan.  These traders try to justify their reasoning once in the trade to take a smaller loss or lesser of a profit.  You can not and will not influence the market.  The market will do what it is going to do, you need to continually assess the markets and put the probabilities in you favor with your online trading plan.  You will have losing trades as part of you online trading plan, and if you don’t then  I will tell you that your online trading plan is pie in the sky.  Accept losses as part of the business, this is difficult to do, and learn from them.  You will not eliminate losses, so embrace them, learn from them, and know that the profitable trades are around the corner.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Commodity Futures 12-18-07 (Tuesday): Occasional thoughts on various futures’ contracts.

CCH (March Cocoa): “Price touches T8 and is supported again.”

The T8 is the moving average that we use to define trend. If the T8 is pointing up, we consider the trend to be positive. The opposite holds true for T8’s that are in a downtrends. With a positive trending T8, our preferred moving average, we are constantly monitoring for only long positions. The rules are simple: a. take trades (buys) in the direction of the trend (the T8, which is pointing up) b. buy openings below the T8. c. buy retracements to the T8 intraday.

This simple set of rules has triggered three trades during the past three trading sessions.  On each occasion, the price has opened lower than the positive postured T8 or has retraced to the T8.   This is an excellent approach to many types of trading. Simply stated: buy touches of a positive T8. The first retracement is always the most important and offers the largest potential return.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Every trader wants to make money, that is why were are in the game. Even the very best traders realize they will have losing trades. Losing trades is part of the business and you need to get your head around this. If you are playing baseball, would you expect to get a hit everytime at bat, of course not. Very good hitters have a batting average in the 300’s. Just think what is considered very good in baseball, getting a hit 3 out of 10 at bats, 30% of the time, would be considered terrible in trading. But wait, could a 30% wining record be good in trading?

Well lets see, if you had a system that had a probability of 30% wins and 70% losers could it be a great system. This would be a hard sell to most people. But if you think in probabilities and odds it just might be a good system. Lets say your wins produced an average of $3000 for each win and a loss of $1,100 on each losing trade. Well this system over the long run would produce a gain of $130.00 for each trade, not bad. You see though, you would need the fortitude to emotionally lose most of the time and have losses of $1,100 each time. This would be difficult for the amateur trader. A trader with a $5,000 starting account could not even think of using this system since it may wipe the trader out before a profit. Even a $10,000 account would be too small in my opinion, the capital at risk would be too large.

This trader could experience 11 losses before a win also. Losing trades are part of the business. Teach Talk Trade can help you develop a system that fits your
style. Teach Talk Trade can show you the tools you need to be successful. TTT educates you, we teach you how to develop and test for yourself. There is no Holy Grail, no system that is 100% successful. After a long testing period, every trader should evaluate their statistics to find their edge. What percentage of trades are profitable? What is the average winning trade? What is the average losing trade?

What is the average profit per day? What is the equity curve? What are the potential drawdowns. Testing a trading system is a gradual and painstaking process. By paper trading, the trader can develop his/her skills and evaluate a trading system. The next step is trading minimum size positions and testing system results. You need to keep well within your risk tolerances at this stage so that you can learn the system, and control your emotions. Keeping a trading diary and tracking performance as the system develops can establish the system’s edge and odds of success. Keeping a journal is a MUST on Teach Talk

Trades list of successful things to do. By keeping a trading journal, the online trader can assess the trades and performance which will help you become a professional trader.Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Using and Understanding Trailing Stops

Once you get in a trade you hope the price immediately starts moving in your favor.  If so, you need to execute your plan, and if this includes trailing stops, then put your plan into action.  there are a couple of ways to do this.  With online trading it is easy to use a trailing stop that is continually modified according to the price action.  Lets say your trading plan calls for a $.50 trailing stop.  When you enter the order you will initiate the trailing stop which will be $0.50 below the entry price, As the price moves up your trailing stop will also move up.  In the purest sense, you would just leave this stop in until you get stopped out.

If your trading plan includes moving a stop up to a breakeven level after a certain profit level, then you would put in an initial stop and move it up manually following the price action.  You will never be hurt taking a profit or breaking even.  You have to be careful since taking small profits will not make up for the losing trades with larger stop losses.  If you place your stops too tight then you will be stopped out will very little profit.  The overall  game plan is to cut your losses and let your profits run.

If I am day trading in my online account, one of my plans is to lock in a breakeven level as quick as possible and then watch and trade off the candle formations in different short time frames like the five, ten, 30 and 69  minute time frames.  If I see that the trend is breaking down I will lock in a profit or smaller loss.
There are many ways to use trailing stops and there are ways to reduce risk with multiple contracts and using trailing stops.  Teach Talk Trade will educate you in these type of trading methods and philosophies.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call (we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues with analysis)  &  The Mechanical Monkey  where we discuss our mechanical trades & give you entries and exits.

Energy Stock Directions 12-05-07 (Wednesday): A Technical Analytical View of Solar and Alternative Energy Stocks.

STP (Suntech Power Holding Company Ltd.):  T8 supports market all the way up!

In a report that we published in April, STP was one of the tweny solar and alternative energy stocks that we recommending trading.    At the time, STP was trading in the thirties.  Many times when a stock more than doubles, there is a tendency to shy away from participating in the move.  Many traders feel that the potential has been reached when a stock doubles or triples its price.  Don’t allow these thoughts to curtail buying in some of the strongest stocks trading.  Many of the stocks that fall under this sector have put up spectacular numbers this year.  Take the ride, enjoy the view.

The Chande Momentum Oscillator, our preferred momentum oscillator for STP , has turned up before hitting its lower trigger level, and that’s a very positive sign.    

The direction of the T8, our exponential moving average and trend definer, has been positive since the middle of October.  We would like to see the market to drift down to the T8, at that point, but first we expect the market to rally. Retracements to a positive T8 are almost always buying opportunities.  Please note that there has been nine retracements or openings below the T8.  All of these entry opportunities have turned out well.

Tuesday’s candle was a “bearish engulfing “. “Bearish Engulfing” candles are signs of market exhausting itself on the upside. Look for movement to  continue down to the T8.  We would like to buy the retracement of this bull flag that the market is painting.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. This volatility cycle is in its early stages and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Interest Rate Directions 12-05-07 (Wednesday): A Technical Analytical View of Futures, Eminis and Forex for online and day traders.

TYZ (December Ten Year Note): Stariway to Heaven?

Since 10/17/07, when the T8 turned positive, TYZ has trending up, yielding six points to long participants.  In commodity money, this equates to over six thousand dollars.

 We continue to preach the advantages of taking long positions on price retracements to the T8.  Going back to Halloween, there has been seven price retracements to the T8.  All of these opportunities would have been handsomely profitable through Tuesday’s close.

The CMO3, our momentum oscillator, has not smacked its upper trigger level.  Tuesday, the CMO closed at 84.31 and has plenty of room to move higher.  The CMO is such a swift judge of momentum, the indicator is deemed overbought, only at +100 (and then at times, it will stay overbought at that number).  

The direction of the T8, our exponential moving average and trend definer, continues to point up, and has been a strong trend indicator for the last 30-plus trading days. Any retracements to the T8 should be considered as buying opportunities.

Tuesday’s black candle, a spinning top,  is a sign of market indecision and not a reliable candle. Candles don’t give signals everyday and when they do, the signals don’t last forever. 

Stop Placements

Stop placements are imperative, all the time!  This is what separates amateurs from professional traders.

A stop placement must be part of your trading plan.  Believe me, developing a plan for placing stop placements is not easy.  It can be different for different markets or issued you trade.  You must decide where the stop is being placed BEFORE you place your online order.  you cannot pass.

It must become automatic for you to place these stops.  Many say they will use mental stops and I will tell you that if you are new to online trading DO NOT do this. You must place hard stops or the game will eat you alive.  I have seen many advanced traders use mental stops but in the heat of the game, their emotions get the best of them.  They let a $100 loss explode to a $500 loss and never exit in the hopes of getting it back. 
 

Here are several things to consider when developing your trading plan:

The size of your online trading account  along with your position sizing has be biggest effect on stop placement. Your trading plan will have determined where the stop must be placed.  You should determine the dollar or percentage amount of the stop.

Another aspect of developing your online trading plan is your comfort level with risk.. You may have a large account that can withstand an allocation of 5% of your capital on each trade with a 10% stop but if you are not comfortable with the amount of potential loss, then you must adjust it to YOUR comfort level.
Consider volatility in the particular issue and market. You must take into account market volatility when placing your protective stop. If the average true range of an issue is $.40 and then you notice it is at $.90 you must take that into consideration.  Your normal stop may be too tight and you could get chopped out of the market.  You may also realize that a stop above this volitility area makes sense for the trade but is out of your comfort level or risk tolerance for a loss.  If this is the case then do not trade this issue.
Experienced traders can use mental stops, BUT they must consider the will the market drop past your level when you are not paying attention.  You must be very disciplined to do this and I will tell you that most are not.  Again the emotions take over and without notice you are not trading your plan and reacting to the markets.

It is tough to use a mental stop in one issue, not think if you are trading multiple issues and multiple lots sizes and if you plan on scaling out of the trade.  With online trading accounts these days, it is very easy to place multiple hard stops and adjust them if need be.

 Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Ten Year Note TYZ07 12-04-07 (Tuesday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

On Friday there was a long entry trigger signal for the Ten Year Note at 10:20 at 113 26 which was a close below the lower SEB. The price of the Ten Year Note climbed higher for the rest of the day. The 34 ema is flattening and may turn negative if the price drifts lower.  The StoRSI was an oversold level at our trigger level.  On Monday, the price immediately went higher as the StoRSI breached the upper level of 80 and then closed above the inner SEB which is the exit signal.   I am hoping for a quick down trend in prices in order to get another long trigger since the FED will be possibly cutting interest rates on the 11th.  Watch for the next entry below the lower SEB band around 113 20.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.