The Traders Journal

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A Tool to Uncover Your Personal Risk / Reward Profile

Far too many investors get it wrong, and perhaps no other group more so than the Millennials.  In a recent cover page article on the investing habits of the Millennial generation, IBD reported that Index ETFs are the investment vehicles of choice for these 19 -35 year olds.  I maintain that this is foolish and simply the result of the young investors not being aware of the powerful decision tools that are available to them.

I have personally discovered that the sweet spot with investing is to have a truly accurate understanding of your own tolerance for the markets’ inevitable pullbacks and drawdowns.  Most fundamentalists approach this problem with a static model that considers standard deviations, beta,percentage drawdowns or some numerical gauge.  The reality of investing, however, is that we each have completely unique tolerances for risk and reward.  This is precisely how it should be.

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Charts I'm Stalking: Action Practice #7

I’ve analyzed over one million charts.  That’s not  bravado, just math.  A hundred to two hundred charts a day (most days) for over 25 years, and that’s the number you reach.  I share this because chart reading practice has indeed allowed me to train my eye in such a away that it allows me to wring an astonishing amount of information from a one-page chart.  Cultivating these skills is what this bi-weekly “Action Practice” blog is all about.

For those of you who might have stumbled upon this as your first exposure to these “action practice” blogs, think of this as paper trading, visual investing or virtual trading exercises.  Might I suggest you revisit the September 2, 2016 blog where I explain my objectives in more detail.

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Investors: Look Here for the Attributes and Skills You Must Have

As an individual investor, what you bring to the table in the way of intellectual, emotional and behavioral skills will determine whether you succeed or fail.  This is hardly a breakthrough revelation, but it needs to be said nonetheless.  It’s been my experience that great investors are not born.  For the most part, they are average people who simply make a personal commitment to teach themselves the most appropriate skill set.  

Investors Business Daily (IBD) acknowledges this by its regular features about individuals who have excelled in one sphere or another.  For it is role models who can indeed jump start the acquisition of these essential faculties.  IBD features a large number of entrepreneurs in these bio picks.  This is clearly from experience and by design.  This is a reasonable alternative in lieu of face-to-face mentoring.

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Charts I'm Stalking: Action Practice #6

Yes, I’ve profited handsomely for years by trading on the coattails of top  mutual funds when they report their new holdings each quarter.  Yes, this is precisely why so many of you download the Tensile Trading ChartPack each quarter because we make it super easy for you to coattail along as well.

https://store.stockcharts.com/collections/stockcharts-com-chartpacks/products/tensile-trading-chartpack-by-gatis-roze

No, you don’t make these profits without some independent thinking, research and comparisons on your part.  

Okay, so we know that due to legislative changes as explained in the Action Practice #5 blog, Fidelity is selling their positions in certain financial equities and replacing them with different financial equities, such as ICE, CME, SPGI and STT.

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How I Maintain Emotional Consistency and Behavioral Intelligence Trading the Markets

I heard an insightful interview with a judge talking about the transformation she goes through in her chambers as she puts on her black judicial robes and enters the courtroom.
It reminded me of my own physician who I know socially and who I’ve seen experience a similar conversion when he dons his white doctor’s coat before we discuss my medical well-being.  Stay with me; there is a powerful and profitable lesson here for us investors.

Think back to your academic graduations and how you wore robes to prove that you had absorbed the wisdom imparted by your teachers.  Books have been written about the dual personalities of our sport heroes when they don their shoulder pads, helmets and uniforms.  Even our superheroes are empowered when they step out of the phone booth transformed by tights and a big “S” on their chest.  

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Charts I'm Stalking Action Practice #5

This is the fifth biweekly Action Practice blog we’ve done together, so I’ll assume most readers are up to speed by now and I don’t need to repeat specifics about “Permission To Buy”.  Here is the link to the Action Practice #4 blog which we will address below.

http://stockcharts.com/articles/journal/2016/10/charts-im-stalking-action-practice-4.html

1.  Per our methodology, our foremost concern is to answer this question: Is the market trending up, sideways or down?  The specific charts we deploy are all laid out in the Tensile Trading Chartpack within the three Permission to Buy ChartLists (10.1, 10.2 and 10.3).

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ChartPack Quarterly Update: Over 150 Improvements (v 8.5)

This ChartPack update is chock full of enhancements as a direct result of spending a week in Napa Valley with all the sensational commentators and luminaries at ChartCon 2016.  We confess that we have unabashedly incorporated a lot of their wisdom into improving our ChartPack.  We are sure you’ll notice and approve.

Before we go there, a few general thoughts on the ChartPack.  Even I myself am astonished to realize that I’ve been personally investing using the first version of this ChartPack now for over 15 years.  In 2010, I began distributing versions to my seminar students.  Since 2013, we have made it available to all StockCharts.com subscribers.  The markets are messy by nature.  Some investors never manage to organize the mess.  ChartPack users have a tool to make it un-messy.  My point is that with a user community numbering in the thousands, we investors have all benefited and profited immensely.

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Charts I'm Stalking: Action Practice #4

I’ve annotated the six charts I presented to you in my September 20, 2016 blog which was an exercise in Selling.  If you missed that blog, I suggest you review the un-annotated charts first, and then mark them up yourself before you peek at my annotations.  Here’s the link to the September 30th blog.

http://stockcharts.com/articles/journal/2016/09/charts-im-stalking-action-practice-3.html

Prior to my presenting my annotations, I want to remind you that this “3-Peaks Selling” methodology which we described in our book, TENSILE TRADING, is offered to investors who have no specific selling methodology.  Its attraction is based on its simplicity.  Most investors can visually grasp the pattern of a price peak followed by two lower price peaks.

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The Magic and Power of a "Four Leaf Clover" Investor

In my commentary to the 1,400 investors participating in ChartCon 2016, I reinforced an essential investing insight that I had many years ago which has served me well for over two decades. 

If I focused on the execution of my methodology instead of meditating on profits, the bottom line just materialized.  It’s a mystery, but after 25 years of trading the markets, I can assure you that this is indeed the case.  It may be counterintuitive to most investors, but a market-centric focus will beat a profit-centric approach day in and day out.  Nowhere is this more apropos that in the crucial four stages of stalking, buying, monitoring and selling, as we detailed in our book, Tensile Trading (Wiley & Sons, 2016).  

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