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Senior Market Analyst, TradingEducation.com, LLC
Robert W. Colby is managing director of Colby Research in New York and the author of The Encyclopedia of Technical Market Indicators, Second Edition, which has become the standard reference work throughout the world for technical indicators and trading systems design. His firm develops research methods and custom investment decision-making systems for institutional and private clients. Colby also writes daily technical market analysis and strategy comments for an experimental educational service exploring investment strategy ideas for professional investors and traders. He previously was a proprietary trader at Schonfeld Securities and senior technical research analyst and vice president at Smith Barney in New York in the 1980s. A Chartered Market Technician (CMT), Colby also has been a part-time professor at New York University and New York Institute of Finance, developing several new courses.
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Robert's Secrets |
Secret 1 |
Study and learn. Study and learn. Study and learn. Make the time and effort to learn the market’s ways. Learn Technical Analysis and Money Management. Read the great books on trading. Make a commitment to learn as much as you can over a period of years. This will take dedication and hard work--but the alternative is failure. What you don’t know will hurt you, sooner or later. Nothing is worse for a trader than thinking he knows more than he actually knows. Lack of knowledge coupled with over confidence is the recipe for disaster. |
Secret 2 |
First, respect the big trend. It surprises me how many traders try to make decisions strictly form the short term chart or even intraday price action, which in to good old days was called “tape reading”. These traders are limiting themselves. They don’t seem to realize that the short term action is much more noisy, much less predictable, and is subordinate to the larger and longer term trends. W. D. Gann (1878-1955) taught us that the monthly chart is more important than the weekly, the weekly is more important than the daily, and the daily is more important than the intraday chart. He was right. |
Secret 3 |
Learn to analyze the market in multiple time frames. Enter a trade when they all line up. As a discipline, always trade in the direction of the larger trends, with the most emphasis on the Primary Tide that lasts many months or years. In a Bull Market, look only for opportunities to enter long and close long. In a Bear Market, look only for opportunities to enter short and close short. Trade around and with the main trend--never against it. Don’t even try to pick the top or bottom of a major trend, since such trends usually carry further than anyone thinks possible. In contrast, it is fine to fade the minor trend, since these change frequently. |
Secret 4 |
Leave leverage to the seasoned professionals. Sure, they use leverage to boost the rewards--and risks--of trading. By consistently applying a good trading system and using leverage, they take on greater risk in order to gain disproportionate rewards. But then, they have to set limits to their use of leverage, and they have to know when to expand and when to cut back their use of leverage, and that call is not so easy. Even great traders have gone broke when they took on too much leverage, since only a small, temporary move against them wipes them out. Don’t even think about using leverage until you prove that you can trade consistently with small drawdowns. |
Secret 5 |
You must control risk through use of actual stops, moderate bet size relative to capital, and diversification. You can also use time to control risk. If a position is not working out after n time periods, it is best to just close it out. (The value of n depends on your trading objective.) Always remember that the market always knows more than you could possibly know. And, the market is completely indifferent to your opinion. Even the greatest traders are frequently wrong, but the market is always right. Being wrong often and taking small losses is a good thing. Be humble enough to admit you are wrong on a trade and free yourself to move on to the next trade. Carrying losing positions seriously eats away at a trader’s power. |
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Free Research
Darrell Jobman: Euro/US
Friday, May 16 200810:29:00 EST - The dollar weakened in early Europe on Thursday following the firmer than expected Euro-zone growth data.
The US currency was also unsettled by a renewed increase in oil and commodity prices. The US growth- ... more>
Jim Wyckoff: Energies
Friday, May 16 200810:29:00 EST - June crude oil closed down $0.10 at $124.12 a barrel yesterday.
Prices closed near mid-range in volatile trading. The bulls still have the strong overall near-term ... more>
Robert W. Colby: Growth Stocks and Utilities
Friday, May 16 200810:29:00 EST - Energy and Materials Stock Sectors both rose to a new all-time price highs, driving some, but not all, of the major stock price indexes to new 4-month highs.
Relatively low volume fails to confirm a new Bull Market. The weight of the evidence appears mixed. ... more>
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