The Ramoutar Report


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Hello All,

I have been day/swing trading US Naz equities for several years now. Along my 10 year daytrading journey, like many of you I have been: beaten, chewed up, spit out, anhilated, crushed and hurt by the market. Fortunately, I was able to surround myself around some successful traders, read some good books and more importantly...have the market educate me.

This thread was designed to provide an additional perspective to my success and failure in trading. I took the posts I have written on another board, and made them available here. Some of the posts contain dated information, links and images relative to the market. If you need them, please PM or email me.

I find that writing about them not only helps reinforce the qualities that every trader needs, but also helps my fellow traders who fight the same battles I do...

the market and ourselves.

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Fear And The Market: Ramoutar Report Vol.1

There are many emotions that we as traders and market participants, must wrestle with in order to reach success in what we do. Now, I do not possess a license, certification or degree of any kind in psychology. However, I have personally managed to overcome many of the emotional obstacles, which erode and strip away our chances of becoming successful traders in each passing day, and helped many traders do the same. By far, the most damaging emotion is fear. Once a trader is overtaken by fear, their trading is now being led by that emotion, and those results can drive a trader’s self-esteem into the ground. If we don’t recognize it, we start second guessing and looking in all the wrong places: commissions, strategy, scanning, basket, astrology, etc. Our fear can affect just about everything we do in trading: opening a position, managing a position, closing a position, etc, etc. It’s almost as if “ether” is being released from the trading screen and we become stupefied, euphoric and somewhat paralyzed. There are many more ways fear affects us. However, fear cost us the most amount of capital. What is fear? Why is it so powerful? Fear like any other “trading demon” must be acknowledged, looked right in the eye, fought and then ultimately conquered.

Ok, fear means that we’re afraid of something. Let’s take a look at some of the things we fear or have feared. The boogieman, we believed that the boogieman was real, what’s really interesting, is that we were never introduced to the boogieman and don’t know what he looks like. Watching a scary movie, and feeling your heart pump faster as the squirming of the person next to you made you even more afraid, afraid of going to the dentist, buying the first piece of real estate, asking for a raise, telling someone how you really feel, telling someone you supervised that they were laid off, making your first trade, taking your first loss, taking your first profit, deep down inside being afraid to be successful, and so on and so on.

Do you see what’s going on here? What did we fear? We feared the unknown:

- Boogieman: never saw him, but the name scared us
- Scary movie: the music, the darkness, the director did a great job
- Buying 1st piece of real estate: what’s going to happen (what does happen) at the closing table
- Asking for a raise: Never having asked before
- Telling someone how you really feel: What will they think?
- Telling a subordinate that they’re laid off: Afraid of what they’ll say. Giving them terrible news
- Making your first trade: “Should I be entering here?”
- Taking your first loss: “Should I take this loss, or wait for it to come back?”
- Taking your first profit: “Maybe I should hold on to it, it’s going become more profitable.”
- Afraid of being successful: rising out of your mediocrity, leaving your comfort zone.

What do all of these things have in common? The unknown. Once we have been through one of the events (except the boogieman), we realize that our perception alone created the fear. After we have experienced the reality, we rise to a higher level of understanding. If we have to return to any one of these events, we have fear, but now the fear is controlled and regulated by our new approach, then the fear becomes caution. Right? I’ve been through several real estate closings; at the end of each closing I am wiser, and better prepared for the next. At the end of each trade, I am wiser, more empowered and better prepared for the next trade. Since I am very honest with myself, I can take an objective eye and analyze exactly what I did wrong. If you followed and adhered to your entry and exits, and the trade didn’t work, you did nothing wrong. There was one of two other factors that created the loss: first the trade was stopped out, and or two you didn’t set the right entry and exit points. That’s easy: you need to go back to your determination of entry and exit points. To correct that you need to get the right education. The right education is the one that works best for your approach, strategy and timeframe. What is the other factor? The market. You can’t control that and you never will. Losses are a part of trading and investing, and you must take the risk with the reward. Risk has a direct percentage relationship with reward. If you want low risk open a savings account with no more than $100,000 at an FDIC insured bank. What’s the reward there? Success is a journey, not a destination, as one of those motivational posters say. We will never be perfect, but if help the process, we will evolve. To achieve greatness, we must evolve. Again, I’m not a psychologist; I’m a trader and an educator. What I did learn is, there are some things we have complete control over, and many other things we can’t control.

The only way to increase control over a situation is to have control over each of its components. When I trade, I try to have control over as many components as possible:

- Technology: I learned about networking, firewalls, viruses, install memory, change hard drives, etc. Get comfortable with it, your livelihood, retirement money, and children’s education is hinged up on it. You may not be able to fix every problem, but you’ll be calmer. When something goes wrong, and you can’t fix it, learn as much as you can from the person that’s fixing it. If you don’t have an interest in learning it, make sure that you have someone who will get the job done…. the right way.

- Quote and Execution Platform: I must know my platform inside and out. I’ve been using the same platform for years, and I have taught so many people how to use it. Yet, I learn something new about it everyday. It’s a great feeling when you can identify a problem, and communicate it to the customer support rep (if you can’t fix it yourself). Soon enough, you may know more about the system than the rep does. One day you’ll ask the rep, “You’re new there aren’t you?”

- Money & Risk Management Skills and The Respect For Them: I can’t believe that there are still so many people out there, that hold positions and they have no predetermined entries, stops and targets, and reentries. That means that they have submitted to the market and they’re letting it control them. If you don’t manage your money and risk, it’s no different than sitting on a sailboat in the middle of the ocean, and letting the wind carry you.

- A Plan: This is one of the most important parts of becoming a successful trader or investor. This document is very much like a faith. The “Personal Trading Plan” takes all of the components and puts them into perspective. You need to establish, document, respect, follow and review every component of the plan to be successful. Its like the Code of Hammurabi.

- A List Of Trading Vehicles: Some people refer to this as basket, portfolio, universe, hit list, etc. I refer to it as the “Trading Stable”. I find it much easier to draw my candidates from a list of stocks that meet very specific criteria. The criterion is calibrated with my “Personal Trading Plan”. I do not envy other traders that invest time and money in scanning programs looking for the movers and shakers. I have nothing against it; I just find it easier to trade stocks that I know. I have said this for years, “The Trading Stable is very much like the people in my life. Once I feel pretty comfortable with them, trust them, and can predict how they will react in any given situation.” Now I’m not saying that you’ll predict what a stock, ETF or future will do, but you’ll feel much more comfortable with it, than trading or investing in something you have no “relationship” with. I know each stock in my “Trading Stable” intimately. I can’t remember anniversaries, birthdays or doctor appointments, but I know support, resistance, MA s, etc of those stocks.

When I was a teen, I remember my friend complaining about mathematics. He asked his father, “Dad why do I need math, I’m not going to need this in life.” The father said, “When you take over my company, you need to know math and watch the numbers.” My friend said, “Dad, we have a manager who does the inventory, he knows math, we have an accountant and he knows math. I still don’t understand why do I need math?” The father said, “How will you know if they’re robbing the company?” Now I’m not saying that the customer service rep or tech person is going to rob you, but you’ll be more at ease knowing what’s going on around you. Once you get your arms around as many components as you can, you’ll be on the road to improving your results. Look at this as a business. If you were a publicly traded company where would your stock price be? Would you go long or short yourself? What would the board of directors do, how would they vote? Now, what about trading?

When we trade we’re afraid of losing money, and that fear becomes stronger anytime we lose money. Losses are a part of trading they will always exist. We must assume a degree of risk in the pursuit of reward. So, in most cases it’s the risk that we FEAR. You know there is a risk, so why do you fear it? What most people FEAR, is the unknown. One way we can reduce or eliminate our fear is to know the unknown.

Now, we can perform some sort of analysis to arrive at some entry and exit points. If you do not perform any analysis of any kind, what are you using? Are you trading or investing by the seat of your pants, listening to and following someone else’s advice? In that case, you have everything to be afraid of, because you are in the abyss. One of the first ways to take control of your trades, is to have predetermined entry and exit points:

- Entry: Where will I enter, at what price will I open the position?
- Stop: At what price will I close the position for a loss?
- Target: At what price will I take a profit?
- Risk Reward Ratio: Is the presumed gain, better than the expected loss

The difference between the entry and the stop is the loss. The difference between the entry and the target is the reward. From there you can determine whether or not the trade or investment is worth taking by looking at and weighing the risk reward. It seems pretty simple right? Well it’s a lot easier than staying up at all hours of the night, trying to come up with formulas and test models. So many people belabor themselves to arrive at their win and loss percentage. The result of which will either be a negative reinforcement or a short-lived positive reinforcement. I’ve seen thousands of trading screens that had “spaghetti” all over the charts, and the traders still couldn’t answer those four questions….Entry? Stop? Target? Risk Reward Ratio? All technical studies point back to two things… price and volume. If you’re having a tough time, go back to the basics. Give it a sot. Now I don’t want to crush the grapes of anyone who has been working hard on scanning and test models, but I need to ask you this. Do you think Tiger Woods, Mark McGuire, Anna Kournikova, Patrick Ewing, Warren Buffet, and Bill Gates looked at their winning and losing percentages? I think they focused on becoming better at what they did. When they focused on that, the results improved. If they focused on the winning and losing percentages, they would ultimately stay locked in to those percentages, because their human instinct incarcerates them in the comfort zone or the status quo, and never become better at what they did. I knew I turned the corner as a trader when I stopped focusing on becoming a successful trader, and focused on making successful trades. I also reached the point many years ago when I set goals fro myself, “If I could make $500 day trading I’ll be happy.” Not to long after I said that, I made $500 in the first ½ hour. Then I was fearful to keep going. “Was I going back to the well one too many times?” What do I mean? What is the result of 72 successful golf strokes? What is the result of focusing on building an software operating system and having it on every PC? Do you get the idea? What would have happened if these people focused on something else, like their winning and losing percentage? Start focusing on making successful trades, and less on becoming a successful trader. Focus on predetermining your entry, stop and target. Think EST (Entry, Stop, Target). If you focus on predetermining EST, risk reward, sticking to EST, taking action, open the position, manage the position and closing the position (either at a stop or target) the net result will be successful trading. Focus more on the cause and not the effect.

Now let’s get back to risk and reward. When someone refers to this they always put the words in that order…risk…reward. Maybe you can explain what this is…3to1, 2:1? Why do they put the words in one order, and the actual ratio in the reverse order? Are they talking odds? I don’t think so. They speak one way, and think another. They think of the reward first. I think of the risk first, and then reward. I say it and think of it the same way…risk…reward…1:3. For every dollar I am risking, my reward is three dollars. My stop (risk) will cost me $1,000 and my target (reward) will yield me $3,000.

Now back to the FEAR, what an ugly word. Are you still afraid of it? Don’t be. Here’s how you can start minimizing it.

First and foremost, you must identify the risk, stare it right in the eye, and accept it. Once you have accepted your risk, you have absolutely nothing to fear. Now you might say that’s easier than done, but you know it will be much easier to become a successful trader or investor if you take as much emotion out of positions as possible. There is a little person in each of us, which does not want to succeed. The fear of success can sometimes be just as powerful as the fear of failure. We are afraid to come out of our comfort zone, afraid to become consistently profitable and successful. Part of that fear is becoming better and then continuing to raise the bar. We’ll always have to make the next trade or investment better than the one before it. To achieve success in anything we must overcome the fear of failure, success and becoming more successful.

The best methods, strategies, and systems are useless until you start tackling your fear. As I stated earlier, if you focus on the actions you take rather than the results you will ultimately improve the results. Sticking to your plan, adhering to your entry and exits, and proper education will minimize your fear, increase you confidence and make you a better trader.

I believe that once you have come to terms with this “king of the trading demons” the rest of the demons will fall like a house of cards…over time of course!


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Switching Timeframes: RAMOUTAR REPORT VOL.2

Switching Timeframes:

When I leave the ophthalmologist, it’s almost always a rude awakening and a sign that I’m getting older. The doctor has asked “better or worst” after several clicks of the lenses, and I finally say “better”. I am now faced with the fear that I will walk out looking like “Froggy” from the Little Rascals with my new glasses.

Deep inside, in a place where we holds secrets that we share with no one, we would have been much happier or felt much younger with our older and yet outdated prescription. We know that in order to see, we must go with the truth and get the lenses changed. The truth hurts, but we must move on.

Shortly after I made a 180-degree turn in my trading in ’95, I had a relapse. My next demon was changing timeframes. Plotting EST from a 5-min, and just as I was going to get stopped out, I took a look at the 15-min, the 30-min, back ten-days, and maybe even the daily. I would stop when the picture looked better. Many traders do that when they are in a trade that’s gone bad, and they don’t want to take the loss. You know you’ve taken the daytrade too far when you get the annual report in the mail.

Conversely, there are many traders that have tried to move up to the larger timeframes, in search of less stress and to stop the account from bleeding with losses spent on commissions. Instead of watching a 1-min, they move to 5 or 15 min timeframe. What happens more often than not is, they get very fidgety and trigger-happy, like a 5-year old boy who can’t sit still for 5 mins. They have been conditioned on the 1-min charts for so long, that they lose their patience and if they could, they’d drop some “speed” in Father Time’s coffee. That’s impossible, so they start dropping down timeframes.

If you are in either situation, you are on a path to stress, anxiety and or self-financial destruction. No different than putting on a pair of reading glasses if you don’t need them or not wearing your glasses for nearsightedness and then driving cross country at night.

Here’s how you can begin fighting this demon. First, ask yourself…”What is my primary timeframe?”

- Investing with weekly charts?
- Swinging with dailys and or 60’s?
- Daytrading with 15-min, 5-min?
- Or drinking Red Bull and or Dunkin Donuts coffee and then trading the 1-min?

Whatever the answer is, make sure you’re honest and give it a REAL try. Let’s take daytrading with 15-min charts as an example.

- Start with the daily and know the significant pattern, trend, prices, MA(s), support, resistance, etc.
- Drop down to the 60-min and repeat
- Drop down to the 15-min and repeat
- Predetermine, EST, RR, open it, manage, and close it
- Done

Last week I put up a swing play on QCOM. Yes, folks I called this play as it was in progress. It was a “Scaling Swing” as I call it. When I scanned QCOM, the very first thing I did was look at the daily, because the smaller timeframe showed a more bullish tone. Going back to daily, I saw a completely different picture. I set my EST and had the discipline to stick it on this swing. After I was out, I proceeded to day trade the stock for the crumbs (very nice profits) after putting the bread on my kitchen table, very much like a cat bouncing a mouse around after he’s killed it, as if it will wake up so he can kill it again. I was criticized by a couple of folks on how I handled this trade; some felt I was “leaving too much money on the table and throwing up my own roadblocks”. This is not a jab at those premature and uninformed comments, and nice ET’rs but rather an example of a “lesson” I learned long ago: “Be conservative and selective in your risk, and if you are stopped you’ve only exhausted a small portion of your strength and resources and you can trade another day”. A friend of mine turned me on to the movie “Rounders”. Here’s that movie’s defining movie moment for me: Matt Damon is playing cards with “The Russian” (John Malcovich) and he wins (the last game). Go rent the movie and you’ll see exactly what I mean, besides, I don’t remember the character’s names.

I see trading in a couple of ways, “Poker playing (like the movie Rounders), and WAR!!! I scan and then predetermine my timeframe, entry, stop, target, and risk: reward ratio, and I deploy with conviction and discipline. They’re not taking these stocks private anytime soon, and if they do you’ll have plenty of notice. You CAN ALWAYS TRADE THEM AGAIN!!!


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Elements For Successful Trading: RAMOUTAR REPORT VOL.3

To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.


Elements For Successful Trading:

We as traders put our primary focus on the profit, which is the result we seek. Isn’t that why we’re trading? The $64,000 question is how do we make profits consistently? They say repetition is the mother of success, what many fail to realize, is that it’s also the “mother of failure”. Doing the same thing over and over again, the same exact way will almost always produce the same results. A recipe is a combination of components that when followed, produce a result. We all know that when we change any of the ingredients the result will change. Eight years ago, during my transition from a clueless trader, to a consistently profitable trader, I focused on the ingredients and stopped focusing on the end result. A few years back, I had the rare opportunity to see Phil Mickelson warming up for a charity outing, and the press was there. A reporter asked him, “Phil, if there is one word that you could use to attribute to your success as a golfer, what would it be?” Phil replied, “repetition”. That answer further confirmed for me, what is required for trading success. Let’s take Phil’s answer a few steps further with the recipe approach.

Here’s what I attribute to my trading success:

1)A “realistic” Personal Trading Plan that I know intimately, respect and follow: When I evaluate traders and review their plans, I find that not only are plans unrealistic, but the trader will fail an oral exam of their own plan. You must know your plan inside and out. When someone asks you a question, your answer must be “reflexive”, no umms and uhhs. Ask someone to test you on your plan. If you can’t answer the questions immediately, you are doomed to fail.

2) A Daily Trading Plan, which is hinged upon the Personal Trading Plan: the predeterminations of entry, stop, and target and risk reward are derived from a specific method of scanning. The scans and predeterminations are always done the same way. Repetition! After you have reassessed all other components and still feel you’re missing something, you’re method or interpretation of your method may be faulty. At that point, you need to get the right education.

3)A “Trading Stable”: I know every single stock in my “stable” inside and out. This is the group of stocks I scan. I don’t have an interest in any stock outside of my “stable”.

4)Right before I enter the trade (like the pro-golfer addressing the ball), I repeat my mantra: “ I know the entry, I know the stop, I know the target, I accept the risk, and the risk outweighs the reward by “X”. I have nothing to fear. I will act.”

5)"I have acted", I enter my stop (AN AUTOMATED STOP), “load up” or prepare the target, and manage the trade. I neither have fear nor greed. I know that the stock will either be stopped out, or reach my target. Everything in between is noise.

6)Like a horse with blinders, I ignore everything else that does not fit in points 1 through 5.

What is the pro-golfer thinking when they address the ball with the club? “Wow! I’m being watched by millions of people, so I can’t screw this shot up”, or “I hope I make a great shot.” No, most of them are reevaluating their grip, making sure their foot is properly aligned with the ball, etc, etc. What is the result of their swing? When I enter a trade, I am reviewing everything that has brought me to that point. If you don’t know what your stop, target and risk reward is before you open the position…”you’re finished”. That repetition will continue to take money out of your pocket, and give it to those who have a plan.

Reevaluate your recipe, finalize your recipe, respect and follow your recipe, and repeat it over and over again. If you’re willing to give this a try, it may be tough in the beginning, because you will find yourself in a lot less trades, but I can assure you that you that most of your trades will be higher quality.


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What Are You Looking At? RAMOUTAR REPORT VOL.4

What ARE YOU Looking At?


You can show the same chart to several people and get different answers. “At the high, it’s going to come back in it’s getting ready to break out, it’s at the top and it can’t go any higher, or we’re headed into Liberia and the volume will dry up here which will bring in more selling pressure. Moving average “X” crossed over moving average “Y”. There’s so many more way people read charts.

The question I have is, “What ARE YOU looking at?” What do you see when you look at the charts? Do you see the truth, or are you painting the picture you want to see and then planning your EST around it? As I’ve said before, there are a lot of people who may have a chart filled with “spaghetti”. They have 10 different moving averages, stochastics, RSI, ADX, and Bollingers, etc, etc. Now there’s nothing wrong with these tools, many of them are great. These are the people who are so deep in the forest that they can’t see it for the tops of the trees anymore. These folks can’t even identify where the major support and resistance levels are, but they know everything about %K an %D. They’ve lost touch with the basics, they will continue to become the feeders in the market’s “eco-system”.

How in the world did people make money from 1792 until the 1920’s when charts were rarely used or available? The only remnant of the tool that people used back then is used to shower some great people in the “Valley of Heroes” otherwise known as lower Broadway in Manhattan, during the “Ticker Tape Parade”. What were THOSE PEOPLE looking at from 1792 to 1920? What did Jesse Livermore do? Was he watching CNBC, back testing his strategies, and figuring out his stochastics. They read the emotions and when the ticker came out they read the tape. I’m not bashing TA tools, I use many of them, but I stay in touch with the basics. Every single successful trader I have met has never lost touch of the basics. One weekend, take a real hard look at the tolls you use during the day. Scrutinize every window, program and screen that sucks the ram from your pc and attention from your mind. My screen looks like a Cessna cockpit, plain and simple with all of the information I need. Remember, the more your looking at the less you see.

When I see candlesticks, I see fear, greed, pain, ecstasy, crying, laughter, inspiration and desperation in every single formation and candle, just to name a few. A chart is very much like the ink blotches a psychiatrist shows a patient, and then asks, “What do you see here?” I would drive the psychiatrist to a psychiatrist, because very one of my answers would be “ink blotch”. This may sound a little crazy but, I completely submitted to the market years ago, and I now see it as a “Supreme Being”. I do exactly what the market tells me. I trade people and emotions, not stocks. Heck, for all I care, Congress can rename them “widgets”. And as long as the NWSE and the NAWDAQ have historical data on widgets, I’ll trade them.

Now I’ve attached two charts of stocks that have been mentioned here on ET. I’m not going to say who mentioned them, or what stocks they are. The gent who pointed these out called for a long on one and a short on the other. Is he right? Maybe. However, looking back in time you need to imagine yourself as one of the people caught up in one these positions from a couple of years ago. What would you do, if you sat with a loss for two years, and it came back to “BREAKEVEN”? We as traders may know better, but the average investor, and mutual manager who was told to hold is now looking to get out. That’s what I see when I look at charts. I say, “Ok, who’s going to give me trouble on this move?” I see angry, crying, and desperate, traders and investors who are in PAIN. They have been in pain since Q2 2001, and they’re going to slam me. That’s what I’m looking at. It doesn’t matter what timeframe you’re in, go up in timeframe and see who’s waiting to ambush you. I set my targets for areas where I’m out of their reach. When I avoid the war, I reserve my strength, which allows me to come back again and trade unscathed. Give it a try.


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Building Your Trading Stable...:The RAMOUTAR REPOR

Building Your Trading Stable, and Cutting Down Your Scanning Time. The RAMOUTAR REPORT VOL. 5

To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

This report was inspired by a reply to a member’s question…
“Hi Jai,

As I understand you don't use scanning s/w like TC2000, Metastock, Advanced Get etc.
What is your criteria for scanning stocks?
And i am talking only about swing trading.


…and I have been asked several times discuss how I select and scan stocks. I have put it into this format since I believe it can benefit many of you. This report while not addressing strategy gives a very clear explanation of how I build and run the stable.
For those of you that have PM’d me, I apologize for not getting back to you right away. There have been many, and I’m catching up. Feel free to send a PM, I answer everyone.

I have attached a spreadsheet, which contains the NDX 100 components. The fields I will reference in the spreadsheet are:

Last, % Weighting, Days Range, Net, Volume, Avg Volume and 52 week range. While this information is readily available throughout the day when trading, having it in a simple hardcopy spreadsheet allows me to be focused on the information I’m interested in, and nothing else. That little exercise really helps the discipline too. Working in an xls also allows you to manipulate and prioritize the information in any way you wish. I’m not a MSFT wiz, but much can be done with this format. For example, I had one of my nephews setup an Access DB using this info. Periodically throughout the day and week, I enter my scan results to the DB, and during the day I type in a symbol and all of the information is right there. This information is very helpful and perhaps because it’s in a raw form, it helps me focus. I have cut down my scanning time from 3 hours to 45 mins doing it this way. Everyone is different, I’m just answering your question, “how I do it”.

Last – just a reference

% Weighting:

the higher the percentage the more likely it is the stock leads the index and does not follow it. I use the NDX as one of my primary internals, I don’t need a stock that leads it, I need one that follows it, that’s the idea of using a leading indicator, right? When using this filter you’ll see that you limited avg volume along with the trading range. That’s just fine, the whole exercise is getting a list of stocks narrowed down to your “stable”.

Day’ Range:

Is like a micro-beta indicator. Long ago when I just daytraded, I excluded stocks that had narrow ranges, and found myself excluding swing trading opportunities as well. AMTD a stock I trade has a narrow DR, but it’s a great swing stock. If volume tells me nothing about the stock’s temp, the DR will. For example, if a stock normally has a 3 point DR, and its narrowed that can be a technical or momentum tell-tale sign.

Net- just a reference

Volume and Avg Volume:

The first piece of information I look for is volume. I run down the list and take the pulse and temp of every stock. A blind doctor can tell when someone is excited just by feeling their pulse, and check the temperature to see if their sick. I print this sheet out every night (on the back of junk mail that’s blank on one side) and over a glass of wine, go down the list with a highlighter and mark the ones that have an extremely high or low pulse (volume). This is much easier than sitting at the pc initially. Haven't we looked at that all day? I highlight the excited and sick stocks. Stocks are excited / exciting when they stimulate or are stimulated by greed and fear, and more than likely its between those emotions when its sick. The volume differences must punch me right between the eyes. Volume is part of momentum, momentum is a fuel in trading. You can have the best chart in the world, but if the volume is not there the stock is going to take MUCH longer to arrive at its destination, if at all. Volume is KEY!

52 Week Range

You can look at the last and compare it to the 52 week high and low to see if its trading near potential LT support or resistance. If I see something of interest here, I give it a once over in the chart.

That’s the spreadsheet I run all current and potential “stable” stocks through. It’s a pointed, clear and simple, and yet vast snapshot. You know how I am with analogies…an eagle has very powerful eyesight, right? Is that eyesight more effective from the sky or the ground? I say the sky. I look at the big picture, and then soar in. These pieces of information are rudimentary and we see them all of the time, what may not be so rudimentary, is the way they are combined and used to build a stable. All of these components are like pieces to a jigsaw puzzle, together they form an image.

My swing scans all come from my “stable”, my stable comes from my filtering, I filter the NDX and the S&P 100. From there I highlight the most compelling stocks, I then scan the weekly, daily, 20 day y intraday, and then 3 day intraday. The analysis I perform is all based on strategies that I use, a discussion and topic that I may discuss at some point in the future. With technical and momentum analysis, I have the swing and day “hit list” for the next day.

I am not averse to the software you have mentioned, they’re some of the industry’s best. However, they just serve no purpose to me in this area. As far as back testing goes, it’s my opinion, the market has is too dynamic and has experienced too many structural changes for the back testing results to be 100% valid. We all struggle as traders, it doesn’t matter whether or not your neophyte, learning curve survivor a $400MM hedge fund manager. From time to time you need to sit back with the pc off, and look at what you really need to look at. “The more you look at the less you see.” Again everyone is different, I choose to focus on a targeted group of stocks, trading the “stock ‘du jour” or a “Haley’s Comet” doesn’t work for me. If you need more information, feel free to ask or PM.
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To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

"Trading is WAR!"

“Those who are first on the field of battle will be rested and those who follow will be exhausted. “ Sun-Tzu, Art of War.

That was the beginning of scaling for me. Everyday, I look at the market as a battlefield , I see myself as a general, and my trading dollars as an army. I see each support and resistance zone as an inevitable “hot zone”, a cluster of soldiers ready to attack. When comparing the strategy of war to trading, you’ll see many correlations.

Before any major battle, generals drop in a small, but highly specialized and effective group of soldiers into the area that perform reconnaissance and preparation for the inevitable landing of the army. They are the ones who provide the entries and exits for the general so a battle plan can be developed. Once the information is gathered and a plan has been developed, the army is moved in. We too, seek “intelligence” through our analysis and scanning of the markets. Our analysis is secondary to how we interpret it and execute our actions.

No general, except for Custer perhaps, has exposed an entire army to massive or unknown risk. Every challenging battle ended in success for the general that “scaled” his army into battle. When victory is imminent there are less groups and larger masses concentrated to a smaller number of areas, since the likelihood of defeat and or casualties have been minimized. As price action heads into support or resistance (the primary areas of battle), I establish a “smaller” position (on the battle field early), and then I watch the battle as the casualties of other armies are expended. Once I’m pretty certain of the battle’s outcome (trend), I advance my armies (increase my position). By sacrificing a smaller number of troops, I not only minimize my exposure, but I’m able to collect intelligence from the battlefield.

After entry, stop and target are predetermined, the next question is how much exposure will be used in the battle. A simple assessment of the risk reward ratio (after I have scanned) tells me what the likelihood of casualties (losses) will be, and whether or not victory in that battle, and the ability to fight another day can be achieved, while preserving the majority of the army. In essence the question, is the risk of loss outweighed by the potential of profit?

When I scan I always find marginal setups, and many times the reward potential is too great for me to pass up, in spite of the fact that the risk reward ratio may not fit my plan. To compensate for this, I added another component to my trading plan, the “exposure table”. Here’s an “example”:

Again this is just an example. The amount and scalability of the shares depends on the trading plan and position concentration. By using a table, I establish a position in these questionable setups with a smaller position size. If the trade goes against me, I have fewer casualties. If the trade begins to bear fruit I add to that position accordingly, not exceeding my maximum exposure for that trade. Averaging up on a long, and averaging down on a short allows me to continue adding to a position that maintains its trend. I must admit that in the beginning, I had a very tough time doing this since it was counter intuitive to buy more where I thought I should exit. After a while, I found that not only did this further refine the money, risk and trade management portion of my trading plan, but it really did wonders for my greed and fear. I satisfied the fear element by using a small position, and the greed was addressed because I had a position early on, and I have the option to add to it. For example, if the position went against me, I would lose $100 instead of $1,000. My trading became much more relaxed. If it began trending the way I wanted, I would add to the position and my average price was always better than the price I would get by closing the position out at the market price.

You may want to consider adding this to your plan, or revising it. The table will allow you to position yourself in the “marginal” plays, having them prove themselves, while limiting your risk exposure. The biggest challenge of course will be having the discipline to follow it.


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What Really Drives Prices? RAMOUTAR REPORT VOL. 7

What Really Drives Prices? RAMOUTAR REPORT VOL. 7
To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

What Really Drives Prices?

Demand, Supply, Greed, Fear, Support and Resistance

These six words dictate price and make the market move. Too often many of us get caught up in over analysis and the dynamics of the market, and we lose sight of what’s really driving the prices. All of the analyses we perform are based on these six components; regardless of what studies you’re using you must not lose touch with the fact that all of these studies are lagging indicators, I’m going to break down each component, and then show you how they relate to one another.

Demand – the need or desire for something

Supply – the availability of something that is needed or desired

Greed – an aggressive pursuit of something

Fear – insecurity and heightened uncertainty

Support – an area marking the transition from supply to increased demand. The majority who believe the price cannot go any lower form this area.

Resistance- and area marking the transition from demand to increased supply. The majority who believe the price cannot go any higher form this area.

The relationship between supply and demand is clear, however, the ratio between the two is really formed by perception. Most traders neither know nor care about how many shares are outstanding on a particular stock or how many are actually available. We as traders, trade without regard for that information. That often times can becomes a very expensive mistake, because these two are the alpha of all prices. In everyday life we see the perception of these two change prices all the time. Where I live, snow is common in the winter months, but when a “storm” is expected, the supermarket parking lots are jam-packed. People are rushing out to buy milk, bread and ice melt or salt. Why? The perception is that the supply of these items will drop as the event draws closer. In a macro sense we know that the supply of any stock we want to buy is very robust. We have learned that the demand is not always as robust, that is one of the primary reasons why shorting is so much more lucrative than being on the long side of the market. Using the snowstorm example, we know that the distance we are willing to travel for them only limits the supply of milk, bread and salt. With stocks, the supply is limited by the amount of capital one wish to use in acquiring them. Our demand in both situations is regulated by our perception of supply.

The emotions of greed and fear are the by-products of one’s perception. Again, the popular subscription to these emotions forms support and resistance. Only after seasoning in the market does one really start to embrace and respect these emotions. The biggest key and challenge is letting greed and fear run their course, as they always do, and then following them until they transition into the next phase without letting your own greed and fear interrupt the internal process. Support and resistance are temporary floors and ceilings for demand, supply, greed and fear. The area between these two zones is where we find the most opportunity. The longer the price action in these areas the more potent the breakdowns and breakouts are. My understanding and respect for these areas reached new heights after I read, “Secrets of Profiting in Bull and Bear Markets”. The author, Stan Weinstein, wrote this book in 1988. He did such a wonderful job in explaining support and resistance, referring to these areas as a “war between the buyers and the sellers”. That one line summed it all up for me, I looked at charts with a brand new perspective, and then I discovered that the price action was secondary to the emotions, the emotions actually begin this chain reaction.

This may certainly seem basic to many; however, from time to time I revisit this eternal process. Go back and revisit this chain of events, and then look at the charts. You’ll see a lot more than support and resistance when you scan. I hope this helps you!


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To Adapt and Evolve Is To Succeed-RAMOUTAR REPORT VOL.8

To Adapt and Evolve Is To Succeed-RAMOUTAR REPORT VOL.8
Ramoutar Report Volume 8

To Adapt and Evolve is To Succeed.

To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

This post is a bit verbose. It contains many examples relative to the subject matter. Enjoy!

As each year passes there is always some new mechanism, trading vehicle, margin or order handling rule that’s introduced and it throws traders off of their equilibrium. Along with that, there often comes a “new” fad, or a “popular delusion” that seduces and ultimately destroys them. When I entered the securities industry, I caught the ending of one fad and the beginning of a new one, limited partnerships and biotechs. Nothing compared to the events of late.

Within your circle of friends, colleagues and fellow traders, how many do you know of that survived that fateful day of March 31, 2000? I’m proud to say that I know of many who survived, and know many more who didn’t. I always had a deep respect for individuals that allowed themselves to evolve and adapt, as the markets’ changed. These are the folks that will always be far ahead of the pack, not hunting the next quick hit or boom.

During the Internet boom, I did not trade “ONE” Internet stock. Why? They neither fit in my personal trading stable or my personal trading plan. The fundamentals, technicals, and overall behavior were abnormal. Is that wrong? Back then it sure seemed that way, people were amazed and angry that I didn’t trade them. I felt like “Serpico”, a man who wasn’t on the take. I don’t see it as missed opportunity in the boom, and I certainly don’t see it as luck after the bust, I made a conscious decision to not trade the dot coms. Was I regretful that I didn’t trade them? Absolutely. But I was ecstatic that I stuck to my plan, and maybe that’s why I’m still around. I gave up huge profits, and later larger losses in exchange for longevity.

Here’s a look at some of the popular phrases I have heard from traders over the years, as new changes came and fads went in and out, and many of them went out with them…

1990 – “I can’t believe how much money I lost in that limited partnership. I sure hope I win some money in that settlement.”

1991 – “Oh sure, every one of these companies has the cure for cancer and aids. I like this new CANSLIM thing, and I’m going to stick with that”

1992 – “I can’t believe this stock went from $5 to $50, and it still doesn’t have the cure for cancer or aids”

1993- “Do you mean to tell me, that NAFTA passed and these stocks are higher because of it?”

1995 – “Now why the hell would I want to give up my $65 fixed commission and 15% investment returns to become a SOES trader?”

1996 – “Price fixing my butt, now we have to trade in teenies? What happened to stocks being quoted and trading in ¼’s? The SEC is going to do something about this, YOU WATCH!”

1997 –“What the hell is an ECN, and who in the world is ISLD? They are outbidding GSCO for 100 shares. They’ll be out of business in a few months. INCA will crush them. How can anybody make money trading for 100 shares?”

1997 – INCA chairman in an interview with Mark Haines from CNBC :”Would you ever consider acquiring Island?” INCA chairman: ”Not in a million years, they’re and island onto themselves. I don’t see how they can grow at $1 per order.”

1998 – “OK, let me get this straight. They have this website on this new thing called the Internet, and people use it to search. This company charges advertising fees, that are three times the amount of print ads, and they have no earnings? You said the symbol is YHOO, and its going where? I’m going to short the at $15, the hell with them?”

1999 – “I can’t trade anymore. You remember that stock you told me not to trade or “short”? I’m still short, and I’m finished.”

1999- “How in the world am I supposed to make money trading with decimals?”

2000 – “I’m back after that short, I found some money. All I need is $5,000, and I trade stocks for rebates. I’ll do this for a while and then I’ll get a job with a trading firm.”

3/31/2000 3:00pm-

“Hey Bob. Is it me, or does it look like something’s wrong with this market? DAMN!!! I should have held that short on YHOO.”

2001 – “This rebate trading thing is awesome. Even though I’m making money, I really don’t feel as if I’m trading.”

2001 – INCA buys ISLD. LOL!!!

2001 – “Blodgett has not returned any of my calls. He said EBAY was going $400 and PCLN was easily a $700 stock. *&^( IN CO%^ SUC!%$ !!!!

2002 – “Super Montage is really going to hurt the market.

2003 – “How high can the S&P go?”

Last week – “Where is the S&P going?”

I believe you get the idea. Every time there is a new change in the market, there is always a large group that doesn’t survive the change. Why? They are not willing to adapt. Instead of evolving and adapting to the new environment, they hold on to the market’s past and get very sour about the present, thus sabotaging their future. Not trading what they see, and changing how they think.

When I started SOES trading in 1995, I used Level II and nothing else. Every stock was quoted in ¼’s, moved in ¼’s and had and average spread of a ¼. I did very well trading for myself, and for one the firm I was with. I really didn’t make technicals my primary analysis until 1995, and that changed my trading forever. I made the realization that I was using price action all along; it was just in my head, now I had the visual.

After using TA for a couple of years, I saw a lot of the original SOES bandits from 1988 get washed out, many of them made fun of me for using charts. They couldn’t handle the teenies, and the ECNs. It didn’t make sense to them, and unfortunately they didn’t accept it. Why? The entire market changed. Most market makers showed a size of 100 shares for the first half of 1997, they too had to go through a learning curve of competing with anonymous orders on ECNs that could have been put there by a grocery store owner in the back of some building in the Bronx. They had no idea, so they reduced their exposure. Take a look at a Level II now. Before teenie quotes, when stocks moved through a price tier, they changed by .25; teenies equaled .0625 on the same move. The next washout was the decimals. Now stocks were quoted in pennies and moved in pennies.

The reward on a one-tier move in Level II on a 1,000 shares went from $250, $62.50 and then $10, in a span of 3 years. Whoever survived that jumped on the Internet roller coaster as it “clicked” up the track until that fateful day, March 31, 2000. If you were a trader throughout that whole period, take a moment…sigh with relief and pat yourself on the back. I personally have a very deep respect for any trader I meet who lived through that and survived. My respect is for the stamina and the discipline they had to adapt their plan and themselves to the changing market.

What do the traders that entered the market in 2000 and 2001 face? They have narrow ranges; new trading vehicles (ETFs, SSFs, etc) and they’re cursing the people who talked them into trading to begin with. I have spoken with several traders over the last few weeks; many who were rebate traders making the transition into P&L trading. The prop and LLC area of the market has undergone some radical changes, and it’s affecting the payouts and the cost of doing business for the trading individual. Some of the changes are good and some are bad, it depends which camp you’re in and which house your with.

When your trading plan isn’t working anymore, you need to look at what you’re doing before you start blaming your quote and execution platforms, costs, and the market. Take a real hard look at your trading plan, trading stable, analysis, scanning, methods and timeframes. This is also a good time to see if your current resources (quote & execution platform, costs, firm, environment, etc.) still meet your requirements.

After you have made any drastic changes to your trading plan, it is my advice that you scale back your size until you get used to it. The only way to expect nothing and be prepared for everything is to be ready to change in very short notice.

Pretend for a moment that equity pricing and order handling changes again. Let’s say that instead of quotes being 20.01 – 20.02, they become 20.0001 – 20.0002. Is it possible? It sure is. What’s the likelihood of it happening? Not too good. If that seems ridiculous to you, look back at the history of the markets’ changes. Start forgetting about how long you have been a trader, at the end of the day it means nothing. You’re not a government employee whose going to get a pay raise for your tenure, and a pension when you retire. You’re trading for a living. Everyday is a new day. What you made yesterday, last week, last month or last year is not the most important thing. What is most important is what you do now, and how you improve it for tomorrow. When I was broker, the most popular saying I heard from the manager was, “You’re only as good as a your last sale.” I as a trader live by the saying, “I’m only as good as my next trade.” Adaptability is one of the keys to longevity and success.


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Knowing When Enough is Enough, and When It's Not Enough RAMOUTAR REPORT Vol 9

Knowing When Enough is Enough, and When It's Not Enough RAMOUTAR REPORT Vol 9

To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

Knowing When Enough is Enough, and When It's Not Enough

I was inspired to write this report after helping three traders over the last several weeks. I helped one trader admit that it was time to end his career, and the other two get back on track.

There comes a time when each of us has reached the crossroad, and we must make a choice: to continue on trading in spite of not reaching our goals and objectives, or cut our losses and quit. When making that fateful decision, there are a few more items we need to consider and questions we need to ask ourselves:

Rule Number One:


Placing the blame on someone else other than you is a self-destructive path and obstacle to self-improvement. I know a trader who has arguments with his wife, and blames her when he has a losing trade. She wasn’t in the room and she didn’t click the button.

Question Number One: How Did I Get Here?

I often get lost while driving, and I don’t always stop and ask for directions. One of the first things I do I make a U-turn and drive back to the first familiar site. Whenever I have a map and a clear set of directions my chances of getting lost are minimal. What event or (more likely) chain of events brought me here? One of the key ingredients in trading, and life is…honesty. You must be completely honest with yourself if you expect to succeed or reach your goals. As painful as it may be, recall as many events as you can and document them. This task is much easier when it’s done on a regular basis, if you don’t already have one consider keeping a trading diary. If possible, document the attributes for the result of every trade. Start with the personal reasons first. Did you follow your plan? Did you get greedy or fearful? Why did you get greedy or fearful? Trading is as much about losses as it is about profits. That’s why you have stops; you assume that you will take a loss as much as you hope for a gain. Reading through your own entries can be very enlightening, and disappointing.

Rule Number Two:


Question Number Two: What is the cause of my chronic losses?

Am I following my Personal Trading Plan? Am I following my plan for every trade? Am I chasing? Do I have predetermined entry, stop, and target and risk reward ratio for every trade? Etc, etc, etc. The diary will help you pinpoint these reasons if you have the memory and patience to record them. When you have identified the most frequent reason, focus on eliminating it. How do you eliminate it? Ask yourself if you repeated it after you’re in the trade. Ask it aloud, there’s nothing wrong with talking to yourself

Rule Number Three:


Question Number Three: Should I decrease my exposure (share size) until I conquer the trading demon(s)?

Many of us do not possess the discipline to eliminate the weakness shortly after we discovered it. Reducing your exposure until you have conquered the trading demon(s) will put a tourniquet on your equity will and will help ease the pressure.

Rule Number Four:


Question Number Four: Are the requirements of your primary strategy and timeframe compatible with your resources?

I spoke with a trader who is battling a sickness that has decreased her daytrading P&L. However, her swing trading P&L is consistently profitable. When reviewing her trading diary, she found that many of her swing trades losses were caused by daytrading distractions. She stopped daytrading, and focused on swing trading. Her Sharpe Ratio on ROI increased dramatically. She later told me that she was afraid to stop daytrading in fear of what her trading buddies would think of her, and what the firm would do with her commission schedule. Even though she’s lonely at the water cooler, and her commissions went up slightly her P&L speaks for itself.

Rule Number Five:


Question Number Five: Does the environment I trade in and the company I keep help or hurt my trading?

If you are not comfortable in your environment, change it or adapt. In the long run, changing the environment is easier than adapting to it. The company you keep is not just the traders you mingle with, but web-based groups and forums as well. Negative people and surroundings will not help you. Positive reinforcement and sources of help and healthy discussion will help you achieve success.

Rule Number Six:


Question Number Six: Am I using the right tools?

I am often amazed and amused by traders who pinch pennies on their tools, but chase stocks for several hundred dollars. Until broadband was available in all areas, there were several traders that I knew who would not trade up to DSL or cable modem because the cost was too high. If you’re not maximizing what technology has to offer without breaking the bank, then you will continue to suffer the consequences. My results improved dramatically when I dropped a quote platform after using it for eight-years. Platforms and providers like eSignal are on the cutting edge of technology, and offer the reliability that is a necessity.

Rule Number Seven:


Question Number Seven: Am I committed to changing my future?

The only way you stand a chance of becoming successful is having the fortitude to execute the change. Our egos have a tendency of standing in the way of our success, and at the end of the day the ego is meaningless. Your evolution, and honesty with yourself will make you a superior trader. If you are not willing to be honest with yourself and execute the change, you should say, “enough is enough” and close your account immediately. If you don’t, it will be closed for you soon enough.

Rule Number Eight:


Question Number Eight: Do I have the resources to change and continue?

Do you have the time, capital, education, discipline and patience to continue trading? The only way to be certain about this is to create a Personal Trading Plan. If you do not have the required resources, you do not have enough and you may harm more than one person if you continue on. Admitting that it’s time to end it is a big step and very difficult to accept.

Sometimes enough was not enough, and you if you have the required resources, you should take some time off and reevaluate your plan before turning a new leaf and trading again. Rethink your strategy, and get some more education. The best education is given by the market, and for that reason you should re-enter with a substantially lower exposure until you find some positive consistency.

These are eight rules out of a possible one thousand. The most important lesson here is being honest with yourself.


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Repetition, The Mother of Success and Failure RAMOUTAR REPORT Vol. 10

Repetition, The Mother of Success and Failure RAMOUTAR REPORT Vol. 10

To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

Albert Einstein’s famous quote:” Insanity is doing the same over and over again and expecting a different result”, a trite statement with a profound aftertaste. think of your trades. Does this quote apply to your results? I know it applies to mine. My capital has succumbed to the virtue of Einstein’s quote many times, and thankfully with the fortune of hindsight and the humility I have been able to recoup the losses with the unstable resource of discipline.

Technology has advanced quite rapidly, and with superior technology we can achieve greater results. However, the availability of the technology is secondary to how we use it. I have met many traders over the years who place the blame on everything and everyone else but themselves. When I accepted the fact that loss is a component of the market, I stopped blaming the markets and began blaming myself. I improved my trading results drastically by “planning the trade, trading the plan and sticking to the plan.” Let’s break that statement down:

Planning The Trade:

We can never plan the outcome of the trade. However, through scanning and analysis we can plan our entry, stop and target.

- Entry – Stop = Risk
- Entry – Target= Reward

After evaluating the risk reward and its ratio, we decide if the trade is worth taking. At this time we have determined the risk and accepted it, this will help us control the internal fear factor. If you are not comfortable with the risk, don’t enter. Predetermining the reward is a concept neither understood nor accepted by many. The famous question is, “How can you predetermine the reward? How do you know where the stock will go, why don’t you just let it ride.” If you use technical analysis and understand the concept, theory and self-fulfilling prophecy of support and resistance, you will understand.

Trading The Plan:

This requires reliable and real-time quotes, a direct access trading platform, an education in the difference between passive and active trading and a great deal of focus. I have often missed my entry and reevaluated the setup. Sun-Tzu (Art of War) said, “Every battle is won before it is fought”. It really reduces the tension and stress that comes along with uncertainty.

Trading with a plan, when done properly is very boring. When I embraced this discipline several years ago, my ticket counts (commissions) and blood pressure dropped and my confidence and Sharpe ratio increased.

By trading the plan you’re not chasing the market, instead the market comes to you. We can’t predict the outcome of the trade, but we can predetermine and follow the plan we have set forth for handling the outcome of the trade.

If you don’t have predetermined entry and exit points you are gambling, it’s just that simple. Give this a chance. Planning the trade and trading the plan will not only improve your results, it will also help you develop and strengthen your “trader’s instinct”.

Sticking To The Plan:

Ah yes, discipline. That seems to be the toughest part. The definition of discipline is the fortitude to stay the course. It can be a challenge to maintain your fortitude if you do not know what the course is, that’s where the plan comes in. The plan is your course, it is a set of directions that we have predetermined before we began our journey. I know when I’m in a losing trade the instant I see “filled”, the hairs on the back of my neck stand up and I overtaken by fear and stupidity. If I’m careless enough to stay in the trade, the results almost always take money out of my account, and I have no one else to blame but myself.

Lack of discipline and a plan are usually the causes of a trader’s demise. Whether you’re a beginner or a veteran, stop and take a long and hard look at your trading. Do you have a plan? If you don’t or your not terribly excited about your plan, spend more time refining it, it will be well worth the time invested. May the trend be with you!


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To reiterate the disclaimer:

The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

Zen In the Markets, Confessions of a Samurai Trader…Edward Allen Toppel (I am not promoting or endorsing this book, and I have no agreement with the author, just using it as an example)

Until January 1996, I was a consistently profitable trader and a “so so” investor. One of All-Tech’s (a former employer) customer’s had asked me to trade with him in his account. The fear of trading with someone else’s capital was paralyzing. I could do nothing right for 3-months. Here were some of my emotional chants:

- “Maybe I should short when I want to buy.”
- “Maybe I should buy when I want to short”
- “It’s a conspiracy….the second I buy a stock its stops moving, then it moves against me, I get out, and the second I get out it rips higher. Everyone on Wall Street knows I’m in. they make phone calls to each other and shake me out.


The fellow I traded with gave the above-mentioned book to me. While my religion and principle are nowhere near “Zen” the book frightened me initially but made a lot of sense.

Part I “Seeing Through Zen Eyes” (What the hell are those?)

“It is too clear and is so hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate

After having my *ss whipped several times by the market from January 1996-March 1996, and coming home everyday listening to Frank Sinatra “That’s Life” while drinking a shot of Courvoisier and smoking a Cohiba both of which I could not afford for that three-month period, picked up the book and read it.

After taking off the trading cap and retreating to my lavish living room in my TWO-room apartment, that I shared with my ex-wife (whom I was miserable with) the light of demons shone upon me. I realized there was no conspiracy theory; I was my own conspiracy and enemy. The market just is…..whatever it is.

I took a stand and made the decision that the market was not going to beat me anymore…and I would not try and beat the market, just do what it told me. Several years ago a reporter from the Star Ledger, a NJ newspaper interviewed me. She asked me how I felt about the market. My response…”I see the market as a supreme being, it has lived long before my conception and will continue on long after my carcass becomes dust. I don’t question or curse it, I just do what it tells me.” She was baffled; she expected a high-ranking analyst view of the market. None here, I was and still am dead serious on my view.

As the book says: “you must lose yourself to find yourself” as I did. I recouped all of my losses within three months after reading the book. I recouped the losses by swinging for numerous base hits, not home runs. The book did not change my trading; it helped me change myself, which changed my trading. I have not had a losing week or month since March 1996.

Those of you have read my previous articles know my trading mantra:

“Predetermine entry, stop, target, risk reward ratio, rationalize and execute”

I began that method several years ago. It has kept me away from trading dot.coms from ’99-’00 and away from the (same) dot bombs from ’00-present. I left a lot of money on the table by not trading those stocks, but they did not meet my criteria.

You’ve seen in a previous article, “repetition…the mother of success and failure”. In many ways I am very stubborn. I don’t care to look at other software platforms…quote, execution, and scanning, etc. etc. Why? It diverts my attention; I lose focus on my plan. That is one of my trading demons. I identified the weakness and keep myself away from it so it won’t get me. As I sit and sip on a nice glass of 65-degree merlot, I use an example of a friend of mine who is a recovering alcoholic, he stays away from any environment that includes alcohol, and this helps him remain sober. I try to steer clear of situations that invite my trading demons to come out and get the best of me.

Now back to

“It is too clear and so is hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate

I am mentoring two of my friends, two cases.

Case One:

Traded for three plus years. Rebate trader first year turned size scalper on AMEX last year. While he did well in both areas, trading size (5-20K shares) of AMEX stocks killed him. His monthly P&L was in excess of $10K, and to his surprise his AMEX fees were in excess of $10K. He put out limit order that lasted more than 5 minutes and then went to the specialist book. These orders became “billable tickets”; our friends on the AMEX floor (specialists) were charging 4 tenths or $4.00 per thousand on top of his commissions. They smashed him.

He is my friend’s son, I devoted weeks to getting him to evolve. I have introduced him to another strategy, intra-day swing scaling. We’re in week four: 1st week- $300 losses per day, 2nd week- flat to minimal losses, 3rd and 4th weeks- net, net, net up $200 per day (avg) only one losing day ($600 on FAST 3/12, my bad), trading 400-600 share lots. It’s not luck and it’s not a coincidence. It’s sticking with a plan. The streak can only be broken if the streak of discipline and focus is broken.

His current weakness is being too conservative and trading with scared money. While those are two very valid and potentially good weaknesses, they cost money.

I had him following me on many trades. We predetermined EST and RRR and executed the trades. Did awesome on most of them, risk reward ratios were a 1:2 minimum with scale ins at more favorable ratios.

When I didn’t have contact with him (intermittently, several hours here and there), he fell off of the path. Why? His emotions got him. By no means is he a dunce (one of the brightest guys I have traded with), but he was searching for a fire with a lantern.

Case Two:

A friend. He has been paper trading for several weeks now, hoping to go live soon. Like case one, I am very proud of him. He is very disciplined and able to separate his emotions from his trading, to a strong degree. Within the same age as case one, we all have many things in common.

Several times it seemed like he was a contrarian on several of the trades that case one and I were in. I challenged him on many of the trades, and in a few cases his calls were correct. However, he didn’t have a substantial reason for entering some of them. I called him on a contrarian trade he made today, asking him why. Initially the response was, “I just want to see what happens.” I became very aggressive with him, and later the trade worked in his favor. I had case one go on the other side of the trade to take a 4-cent loss of 200 shares.

Case two became very angry at the end of the day, slamming the desk and walking off of the trading floor, a promising indication that he’s taking paper trading seriously. Based on his performance so far, I believe he wil be an outstanding trader.

At the end of everyday, I request both cases (individuals) to perform post-mortems on the best and worst stocks they traded. After we conclude our market wrap discussion, they perform the post-mortems and then scan for the next day’s stocks.

At some point next week I will release our trades along with the 1 & 5 min charts, I believe they will really help you.

What’s the conclusion?

- Predetermine entry, stop, and target, risk reward ratio. You can never predict the outcome of the trade; you can only minimize the outcome’s impact on you.
- Face and accept the fear (risk) face and accept the greed (reward)
- Execute the trade and manage it until stop or target is met.

We cannot control what the outcome of the trade is going to be, but we can control the impact of the trade’s outcome on us.

I know it’s very hard to separate your emotions from your trades, but it can be done. Start by using EST and RRR.

- Paper trading if done properly can produce losses
- Live trading if done properly can produce gains
- Focus on sticking to your plan, not making profits. Adhering to the plan will result in profitable trading.

I hope to have all of the trading blotters and charts available to you next week.


Junior member
21 0
Jai, I've only just discovered t2w myself.

There seems to be an excellent selection of material along these lines under the first steps and beginner guide sections.

Perhaps your posts would be more appropriately placed there where they will be of more immediate prominence and use?

What's your background? Are you a successful trader? Will you be offering a seminar/course/product? There's also a commercial systems forum for that as well.

Great site, isn't it!
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