Old Belief vs New Thinking

Determining General Market Direction

Extracted from the book: Trend Trading for a Living, Thomas K. Carr

Five different types of market conditions

• Bullish strongly trending
• Bullish weakly trending
• Bearish strongly trending
• Bearish weakly trending
• Range-bound (or nontrending)

BULLISH: STRONGLY TRENDING

The Focus: It should be on long setups, particularly breakout plays.

Characteristics: Everything goes up, and up a lot, nearly every day. The bulls are completely in control and win every battle with the bears. Making money is easy in a bullish strongly trending market, as long as you have the right entry system. But the drawback is that when this kind of market reaches a top, the sell-off can be quick and harsh and can wipe out months of hard-won gains in a matter of days. So in a strong bull market you must always be careful to play defensively against a possible reversal of momentum.

How to Play It: Here we can say that a bullish strongly trending market is a great market to be in if you are already long. But if you are coming late to the party (and hopefully not too late), your best play is to look for stocks that are breaking out to new highs from periods of consolidation. You must make sure these breakout plays are confirmed by the various technical indicators we use. If price is making a new high but the indicators are not making new highs, then you have bearish divergence and you should move on to another chart.

BULLISH: WEAKLY TRENDING
The Focus: It should be on long setups, particularly pullback plays.

Characteristics: This is a tougher market to trade, since the pullbacks tend to be more frequent, steeper, and
longer-lived. In a weakly trending market, corrections can last a couple of weeks. This can be frustrating if you are sitting on open long positions. Ultimately, the bulls are in control, but it can seem for days on end that the bears have moved in and made themselves right at home. However, this is one of the best markets in which to find great risk/reward scenarios in our setups. Those lengthier pullbacks serve to take a lot of the risk out of a trade, so our stop-loss can be closer to entry, and our exit targets can be that much further away.

How to Play It: Here we can say that a bullish weakly trending market is an ideal market for trend trading. You should find stocks that are showing strong trending action (normally stronger than the general market itself ) but have pulled back to an area of support. This pullback should be confirmed by oversold indicators, and the current daily candlestick should put in a reversal bar of some kind before you consider an entry.

Common Types Of Order

There is a great range of orders that traders can give to precisely control the execution of their order. Not all brokers will accept the same range of order types, but I list below the most common types of orders that most brokers should accept.

Market Order

An order to buy or sell at the current market price.

Limit Order

An order to buy or sell at a specified price or better.

Stop-Loss Order

An order to close a position if the market price hits a certain level. Note however, that this type of order means that after the stop price is hit the order becomes a market order and you may suffer slippage.

Limit Entry Order

An order to buy below the market or sell above the market at a specified price. You use this type of entry order if you feel that the currency pair will reverse direction from that price.

Stop-Entry Order

An order to buy above the market or sell below the market at a specified price. You use this type of entry order if you feel that the currency pair will continue in the same direction. Just like with a stop order, you may suffer slippage when using this type of order.

Stop-Limit Order

An order to buy above the market or sell below the market at a specified price only. When your price is hit your order becomes a limit order which prevents slippage. However, there is a chance that in a fast-moving market your order won’t be filled at all.

One Triggers Other(OTO)/ Parent and Contingent

A set of orders whereby when the parent order is filled, the contingent order is placed. This is commonly used to make sure a stop and/or limit order is placed as soon as an entry order is filled.

One Cancels Other (OCO)

A set of orders whereby when one order is filled, the other order is cancelled. This is commonly used to set both a profit-taking limit order and a stop-loss order as soon as an entry order is filled.

The Success Principles

Success is a journey! If you want to be successful, you have to take 100% responsibility for everything you experience in your life. From the level of your achievements to the results you produce, to the quality of your relationships to the state of your health and physical fitness — even responsibility for your feelings, your income, your debts... Everything!

This is not easy.

In fact, most of us have been conditioned to blame something outside of ourselves for the parts of our life we don’t like. We blame our parents, our bosses, our teachers, our friends, our co-workers, our clients, our spouse, the weather, the economy, our astrological chart, our lack of good golf clubs—anyone or anything we can pin the blame on. We never want to look at where the real problem is — ourself.

How many times do you look for the answers to your problems outside yourself, when the answer lies within? It is you who creates the quality of the life you lead and the results you produce. No one else!

Choose Now to Make a Change

Our final admonition to you as you start down your path to future success, is that you have control over just three things in your life — the thoughts you think, the images you visualize and the actions you take. How you make the most of them determines the outcomes you experience in life.

If you don’t like what you are producing and experiencing, choose now to change your responses. Change your negative thoughts to positive ones. Change what you daydream about. If you don’t like the way people treat you, say something about it or spend your time with different people.

If you keep doing what you’ve always done, you’ll keep getting what you’ve always gotten. In fact, if what you are currently doing was capable of producing the “more” that you are seeking in life, the “more” would have already shown up. If you want something different, you’re going to have to do something different!

The Success Principles by Jack Canfield and Janet Switzer.
http://www.thelucrativeinvestor.com/downloads/13492246.pdf