Sunday, June 27, 2010

Channel Breakout II

In my last post, we talked about channel breakouts, using the 20 day high/low. With this method, you will always be in the market, because once you hit your stop loss, it would automatically means you had a breakout/breakdown on the other side.

In a improved method, we use the 55 day high/low as entry points when it breaks, but keeping the 20 day low/high as our stop loss. This method reduces noise in the market. When using this method, there will also be periods when we are in no trade, when the market is flat. This is because you do not go in the trade till you break the next 55 day high/low, after you are stopped out by the 20 day low/high.

Techniques and methods are constantly being tried and test, put on the battle field and new improvments always being made to make the system more efficient and/or reduce risk while increasing profitablity.

P.S: Courtney Smith is indeed a great teacher.

Channel Breakout

This is a technical analysis that is around for well over half a century, and it had been profitable year in and year out ever since. This techniques keeps you in the market at all times, either in the short position or the long position. You do not flat the market with this.

Basically the channel breakout analysis is able to capture all the big moves in the market, so you might lose a little on some trades, but once the market conditions is right, you will capture the big moves and make alot from the rally.

For channel breakout, you can use it for any market, such as futures, stocks, forex etc. The basic priciple it follows is the 4 week rule. In simple words, first plot 2 lines, the 20 day high and the 20 day low on the chart; and if the market moves above the last 20 day high, take a long position and if the market moves below the 20 day low, take the short position. The stop loses are at either the 20 day high or 20 day low, for short position and long position respectively. So at all times, you are in the market in either a long or short position.

After some improvements and tweaks to the technique, the channel breakout now uses the 55 day high/low as one of the indicators. More on that in the next post.

Tuesday, June 22, 2010


Discipline cannot be taught, you have to do it yourself. However, there are steps and ways that can help you along the way to master discipline.

In trading, always have a trading plan. A trading plan is writing down your analysis, both technical and fundamental, and then your action to take. Next step is to execute your trading plan once it is done without making any unnessesary changes to it. Having a trading plan first also helps to reduce the emotions and psychological effects on your trading.

Other than having a trading plan, always do post mortem of your trades when you close them. Find out if you could have done better or anything wrong with your analysis, or if you did not have discipline in following your trading plan. When doing your post mortem, this is where your written trading plan comes in handy as you always have a record of your thought process and action.

P.S: All information in this post and some that follows are taken from Courtney Smith's teaching. I hope to blog it down to reinforce my learning and for sharing.

Monday, June 21, 2010

Psychology of Investing

Today is the first day of starting my course in maxfuturesprofits. Just want to share some things which I learnt.

The most important factor in investing is (to have) correct psychology, which can be affected by:

-Adequate Capital
-Adequate Time

We want to achieve stress free investing and we can achieve that by:

- Using scientifically proven and battle tested strategies

- Becoming the casino

- Having proper Risk Management (the 2nd most important factor for trading)

P.S: Making a start is the first step. Taking Courtney Smith's maxfuturesprofit course is one of my best action step.

Invest and Cheer

At the World Cup, when a soccer player scores a goal, his team mates cheer, his country cheers.

When something happy happens to you, you cheer out in joy.

When you make lots of money, you cheer.

Everyone loves cheer.

Who wants to know how to make investments that allow them to cheer, investments that makes them money? I do.

I am not able to teach you how to, yet. But in the course of my pursuit for it, I will be sharing some things I learnt and some of my thoughts here.

P.S: All things have a higher purpose, this is my higher purpose.