tradersams blog

PNA: closed my long PNA position today for a 1% gain.  I entered this position nicely on 28/4/09 bouncing from a support line.  I then pyramided in at a high price, only to see the position deteriorate.  My exit was triggered last friday on a close below a support line, however my exit position was not filled – my fault really as I tried to be clever and tune the exit, when I was not in a position to actually do that – leaving me to sit through the weekend with a half open position.

When a stop is hit – EXIT!

As I look at the US market starting today, the S&P500 is down more than 2% and can’t help but be reminded of the recent losses – and yet I know from my records there’s been some good gains over the last couple of months.  This article is a reminder – Its ok to lose money! I know I lost money when I started when around me others were making it.  Over the last year I’ve lost money – but not as much as some others have.  Come July I review the annual stats – then I’ll have to go read that article again!

Following is the next installment in my reviews of trading books from my library.

“Getting Started in Chart Patterns“ by Thomas Bulkowski.

The title suggests ‘Getting started’… this book can be picked up by a beginner who has an interest in the art of reading charts.  Don’t confuse this comment as one that suggests the book is for a beginner – many beginner books talk about how to place trades, differences between types of instruments and so on – this book assumes you know that.

The book specifically talks about chart trading of equities, however the concepts are obviously portable to other markets – with some care, due to his use of probabilities as they relate to his research against equity charts.  Thomas’ books are valuable to me because he has done A LOT of work analysing charts and quantifying what he sees.  When he talks about (for example) a Head and Shoulders pattern, he talks about the expected profit, as well as the percentage chance of getting that profit in bull and bear markets – great information!  Further to that, he gives a point form list of ‘requirements’ that a chart pattern must exhibit to be classifed correctly in a particular manner.

The author remains focused throughout the text on his trading via the use of charts.  A couple of times he may mention an MACD divergence or other indicator related metric – but then suggest the reader refer to other books to follow that idea through – the book remains firmly focussed on charts.

The book is written a bit conversationally in places, as the author uses simulated discussions between two traders as a tool to convey points regarding trades.  Looking at the price, I must say its one of the less expensive books of its type.  Whilst not to the detail of his other texts (which I’ll review at some later date) this is an excellent beginner to intermediate text.

The best thing I learnt from this text?  I’ve got to say looking at ‘busted patterns’.  Whilst I have been aware of them for some time, looks at the statistics – I’ll be looking for ‘busted head and shoulders’ more often!