Divine Warning ??

Posted September 3, 2015 By Phil Elrod

This past week-end I was playing around with my computer and loaded a different screen saver – Bubbles.

Usually when the screen saver comes on the previous display, in this case, my trading software screen, goes away and I see just the screen saver.

That did not happen this time. My trading screen stayed there and all of a sudden there were bubbles everywhere imposed over my markets.

Software glitch? – or maybe divine intervention – a warning. The markets are rumored to be getting into bubble territory and maybe, just maybe, this was s subtle warning.

I have no idea which, but I wanted to share it with the world just in case.

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#bubbles #trading #markets

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The Uncrowned King

Posted August 10, 2015 By Phil Elrod

The political season is already underway. For most of my life the democrats have supplied the color and the republicans have supplied the substance in our national politics at least that is my opinion.

So far this year, the Republicans have provided the most colorful start ever. It is going to be one hell of political season for the next fifteen months. OMG! Did I say fifteen months? When I was a young man there were the conventions in the summer and the campaign in the fall. The conventions are almost a year away. Why all the political activity so soon?

I have a possible answer to that question. But you have to bear with me for a moment or two as I tell you about one of the very first books I ever read. It was titled, The Uncrowned King. Relax I am not going to review the whole book – just tell you the names of its two principal characters,. They were both princes, and their names were, “Really-Is” and “Seems-To-Be.”

Now my audience is not a large group and you are all intelligent so I don’t think I need to go any further about what the book is all about.

But what has that got to do our politics today, here in the US?

I bet most of you know already. We desperately need new leadership in this country. If we do not select the correct captain pretty soon, our ship of state will surely be lost in the treacherous waters we are already entering.

And we will have to look at each candidates and decide who is the most capable leader for the job that must be done; Really-Is or Seems-To-Be.

As in my little book from long ago; making the correct choice can be difficult.

To help you I will provide a few of my political proverbs:

Politicians fear change like Yellowstone hikers fear Grizzly bears.

If you are doing something that is not working, doing more of it won’t help.

There is no such thing as a free lunch – somebody always has to pay for it.

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Known versus Unknown

Posted August 6, 2015 By Phil Elrod

Most of us are proud of what we know, Defensive about what we do not know; and generally confused about many things that we believe to be in one group or the other.

Security Traders, as I have stated so many times in the past, work in a world of probabilities. Do not deceive yourself; our only that is always true in our business is that nothing is always true. Exceptions are the bane of our chose profession.

Talking with a friend of mine the other day about our chosen profession, I casually mentioned that, “I believe that it is not what we do not know that hurts us the most, but what we think we know that is not actually true.”

He really took me to task on the subject and AI have spent a lot of time thinking about it since that conservation..

I am now convinced that I was spot on – and absolutely correct.

It is not what we do not know that hurts us the most; it is what we think we know that is not actually true.

So what is the lesson here?

Perhaps it is that we should spend more time re-examining what we think we know, and less time trying to learn new things.

Trouble is, that is not what we humans usually think is time well spent.

No wonder Socrates only asked questions.

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Assessing a Potential Trade

Posted July 27, 2015 By Phil Elrod

A friend of mine recently asked me if I could give him a few rules for assessing a good technical trade.

I told him that there are very few rules, as I understand the term, involved in trading.

To me a rule is something that is always true.

Trading is about probabilities. The only thing that I have ever found to be always true is that nothing is always true. We have to trade in a world of probabilities, not certainties.

However there are some guidelines that may help with the probabilities:

1. Observe the size of oscillations for the timeframe you are going to trade.

2. Expect to capture no more than 80% of the average oscillation value in a trade.

3. Look at the spread (difference between bid and ask). You must make the spread before you make any profit at all.

4. If 80% of the oscillation is not at least twice the spread, you are better off in Las Vegas. It should be 3 to 5 times the spread to give you a decent chance of profit. The higher the better. I personally consider four times a general minimum.

5. Set a stop loss price and a target price that make sense and stick to them. This is where so very many traders go wrong. Small losses are a part of trading. If you let a trade go past your target price, at least move you stop to that price. Profits are too precious to sacrifice in the name of greed.

A few comments about number 5:

A trader can, and must from time to time, accept small losses. That is what stop losses are for. Use them and use them diligently. A bad trade seldom gets better with time.

Then there is the old saying, let your profits run. True, but do not let then reverse and vanish. When you have hit your target price, set it as a stop, profits are too precious to let slip away.

If you make three to four times your loss on each profit, you can be profitable with an average of 50% good trades.

Use a good momentum indicator and if the market you are trading reverses its direction for your time frame it is a good idea to get out of any long trade quickly. The secret to successful trading is as much avoiding losses as it is making profitable trades.

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Great Ideas

Posted July 17, 2015 By Phil Elrod

I agree and concede that immigrants built this country; BUT that does not give them the right to destroy it!

America needs to wake up to the realities of the world!

Good ideas are composed of both content and timing.

What was a great idea a hundred years ago may not be so great today.

Something to think about.

In nature the rule is adapt or perish.

Adapting may be painful, but as opposed to perishing, it doesn’t seem so bad.

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