For Boyd Stone, our charting expert

Hello Boyd, I got this alert a couple days ago from a net friend who buys options"

"Alert - Nortel NYSE has broken out of it's channel !!!!!!!!!!
Ahhhhhhhhhh !!!!!!!!
I bought more today at 43."

I bought some at a lot more some months ago!!

From your charting experience, what do you think? Just curious to know if you'd jump in now or wait.

Thanks.

Eliz.

Hi,

I'm in disappearing mode, as I told the group at FIB in message http://friendsinbusiness.com/board1/index.cgi?read=7105 but because I'm highly flattered that you asked my opinion, and because you are one of about 20 people on the internet that I respect (what I just wrote is the total truth, and in fact the number could be lower than 20), let me give whatever input I can.

Since I trade by looking for orderly price movement and trying to "go with the flow" as early as possible, the latest signal I see from the Nortel Systems is a ledge breakout Sell.

From 9/27/2000 to 10/17/2000 the Nortel barchart formed what Joe Ross called a "ledge," a tight sideways trading range.

The best way to trade a ledge is as follows: If the price pops out of the ledge on the downside, and then retreats back into the ledge and pops out on the upside, it's a buy signal. If, as is the case with Nortel, the price pops out of the ledge on the upside (October 20), then retreats back into the ledge and pops out on the downside (October 24), it's a sell signal.

If Nortel was a commodity item, in other words, the latest thing I would have been trying to do would have been to try to sell at a couple of ticks below the ledge, if I'd been trading that particular commodity item.

For me to be interested in buying Nortel, I'd have to see an orderly rise in prices, and then I'd try to get on board as early as possible, put in a stoploss, and try to ride a trend for as long as I could, moving up my stoploss as new support areas were put in.

As I've mentioned a zillion times, I've only successfully lost money as a trader (about $20,000) whereas you and your husband make money as traders, so take what I've written here with at least a grain of salt.

Anyway, that's how I look at charts: I try to buy into upward price action and sell into downward price action.

Hope this was somehow useful!

best,

-Boyd

> Hello Boyd, I got this alert a couple days
> ago from a net friend who buys options"

> "Alert - Nortel NYSE has broken out of
> it's channel !!!!!!!!!!
> Ahhhhhhhhhh !!!!!!!!
> I bought more today at 43."

> I bought some at a lot more some months
> ago!!

> From your charting experience, what do you
> think? Just curious to know if you'd jump in
> now or wait.

> Thanks.

> Eliz.

Boyd, I'm going to take a look at NT's chart and try to map all the comments that you make against it. Or better still, I could try to memorize all the comments you've made, and impress the heck out of the husband!!

In any event, he wasn't interested in buying Nortel. But I wanted to add some new positions to my portfolio to average down. But I think I'll just stay put.

Take care and good luck in your new ventures.

Best regards,

Eliz.

P.S. Thanks for all the nice things you said about me earlier on. Don't want it to sound like a mutual admiration society, but I too think you're a fine person, with lots of integrity and honesty. The kind I would want to do business with any day.

Hi,

First, thanks for your comments. I mean, if I was Boyd I'd thank you for your comments. But I'm not Boyd, I'm Mr. Anonymous.

Onward LOL.

The ledge signal works in this way. After a ledge forms, buy stops tend to appear above it and sell stops tend to appear below it.

(Leastways, that's what happens with commodity futures.)

The floor is well aware of the positions and numbers of these stops because they have the home traders' tickets in their hot little hands LOL. To execute your trades "efficiently" they have to know where you want to buy or sell. Does this give them a way to make money?

The way I interpret the Nortel chart is that before the move to the downside, the floor traders first cleaned out all the buy stops above the ledge. See what I'm saying? The floor was happy to sell high to all the private traders who wanted to buy above the ledge.

Then the real move to the downside happened, with the floor in the nice position of having sold at the best possible point. Some of the private traders who bought high now realize what's happening, and they panic and try to exit their losing positions. Everyone's selling, which is why you got that long down bar.

What will happen next is a period of consolidation of sufficient duration for the losing floor traders or market makers to make back the money they lost. Then, another "real" move might happen.

Or it might not LOL. To make money as a trader you have to either make allowances for how the floor brokers make money, or you have to only trade when the floor brokers are out of control of the price movement. The latter way is best.

Yours,

-Mr. Anonymous

Hi,

You wrote:
> To make money as a
> trader you have to either make allowances
> for how the floor brokers make money, or you
> have to only trade when the floor brokers
> are out of control of the price movement.
> The latter way is best.

I tend to agree. That's one drawback inherent in daytrading: when you're daytrading, you're fighting on the pit brokers' turf, and you're playing with certain disadvantages (like the time lag in seeing new prices, the time needed to get filled, and not being really aware of 'market sentiment' with all that implies).

Let me add one thing about my much heralded losses as a trader. I did over 1500 real-money S&P futures trades, and ended up losing about $20,000. That's an average loss per trade of $13.33 including commissions, which were $20 per round turn. See what I'm saying? I actually make money, excluding commissions.

For someone daytrading the S&P futures for so many trades, that isn't really that bad, considering that in that market it's possible to lose at least everything you've got.

Best,

-Boyd

I actually went into my 'fancy' Big Easy Charting Software and followed the trades from 9/27/2000 to 10/17/2000 as you suggested. So, now I understand this 'ledge' that you are referring to that

>Joe Ross called a "ledge," a tight sideways >trading range.

And I also understand:

>The best way to trade a ledge is as follows: If >the price pops out of the ledge on the downside, >and then retreats back into the ledge and pops >out on the upside, it's a buy signal. If, as is >the case with Nortel, the price pops out of the >ledge on the upside (October 20),then retreats >back into the ledge and pops out on the downside >(October 24), it's a sell signal.

So, I now know a little bit more about how to read charts, but it's all based on historical data!! I know, I know, if we could forecast a stock's future movement, even a week in advance, we'd all be rich.:-)

In any event, I'll use the info. to help me better understand charts but keep on using my old fashioned methods (instinct and knowledge of the stock's trading patterns) to determine when to buy and sell.

Thanks again.

Eliz.

Hi,

You wrote:
> I know, I know, if we
> could forecast a stock's future movement,
> even a week in advance, we'd all be rich.:-)

If you can devise a way to see 1 (one) minute into the future, I'll make you richer than Bill Myers.

Seriously, just be able to see one minute into the future, and with what I know about daytrading the intraday S&P 500 or E-Mini contracts I will make you $10,000 a day if you want. Easily.

I'll make it easier in fact. All I need to be able to see is 1 (one) minute into the future of the changing prices provided by a trading data-feed.

Any prognosticators who can do this are urged to email me. Don't pass Go, don't collect $200, just email me, OK?

Best,

-Boyd

> Let me add one thing about my much heralded
> losses as a trader. I did over 1500
> real-money S&P futures trades, and ended up
> losing about $20,000. That's an average loss
> per trade of $13.33 including commissions,
> which were $20 per round turn. See what I'm
> saying? I actually make money, excluding
> commissions.

Boyd, that's quite interesting! So you *were* actually making money -- until you paid the commission!

May I ask, how often were you trading? Was it something like a trade every few minutes, or every few hours?

I have a friend who I consider a "day trader" (I've mentioned him before). But in reality, he probably buys and sells every few days at most, so he doesn't trade so often.... (However, he also works a job, which is a factor in that....)

Is there some way you could make your system work with fewer trades? Then you'd be paying fewer commissions, and it might work out better....

(If this sounds ignorant, remember this is a long-term investor talking.... :)

Dien Rice

Hi,

> May I ask, how often were you trading? Was
> it something like a trade every few minutes,
> or every few hours?

Some days I had so much fear about entering trades that I couldn't make myself pick up the phone and call in the orders. On these days I usually started out an emotional wreck and became more of one as the day progressed because I could see, in many cases, that I would have won bigtime if I'd just phoned in the order.

The most daytrades I did in one day was around ten. That is hard work, let me tell you.

Need and Greed are the trader's enemies. I wasn't greedy, but I needed to win since I had a small account. $200,000 is a good account size for an S&P daytrader who trades 1-3 contracts, believe it or not. I say this based on the account sizes of winning S&P daytraders that I talked to or knew about.

Generally I did three to five trades a day, on the days when I could force myself to pick up the phone. I did this, off and on, from 1993 through mid-1995, with a 6-month break in 1994 during which I worked in Joe Ross's Bahamas office; if you called Joe's office anytime in 1994 the chances are 1 in 3 that you talked to me. I worked with another trader from November 1994 through mid-1995.

I created an Access database into which I entered over 800 real-money trades (I filled out about 25 fields of data per trade, most of which were the readings of various technical indicators--I used Omega TradeStation, and I displayed a 2-minute, a 5-minute and a 10-minute intraday barchart, onto each was plotted a 15-bar SMAC, a 40-bar SMAC, and some special Bollinger Bands that I created). Many of my Access trade entries had screen captures attached showing what the chart looked like after I exited.

I created my database so I could analyze the workability of my trading signals.

One finding that you may find useful, that my database clearly pointed out, is that intraday stock index futures traders can do well by trading the first hour-and-a-half of the day, and the last hour-and-a-half of the day (after the Bonds close), and goofing off the rest of the time. Three hours a day of real-time tick-by-tick chart reading is enough work, anyway.

With my typical luck, I was trading during a time of low market volatility and I stopped trading right before it "got good." [Expletive deleted]!!

Best,

-Boyd

Boyd, I was very impressed by your experience....

I also looked up Joe Ross on the 'net. He sounds like quite an interesting guy....

I thought this was intesting too....

> One finding that you may find useful, that
> my database clearly pointed out, is that
> intraday stock index futures traders can do
> well by trading the first hour-and-a-half of
> the day, and the last hour-and-a-half of the
> day (after the Bonds close), and goofing off
> the rest of the time. Three hours a day of
> real-time tick-by-tick chart reading is
> enough work, anyway.

I'm pretty interested in patterns in the stock market. For example, apparently it is usual for a stock to make it's biggest gains for the year in January. And October seems to have a tendency to be a bad month!

This is an interestic topic to explore more....

I know I've read more about this, but sometimes it slips the mind.... However, I know where I can look some stuff up.... Let me do some reading, and maybe I'll write a post about more of this kind of thing.... :)

There is a luck factor too, to a degree.... I guess it's in my nature that I like to minimize the risk (I guess that's why I'm a long term investor). I tend to calculate risks carefully, and make sure the chances of success are in my favor.... If they are, and if I don't have too much to lose and much to gain, then I go for it! But everyone is different, and everyone has different strategies, and certainly more than one approach works!

(For example, my carefully weighted approach to things seems to usually be disapproved in various "leadership" books, which generally seem to say that leaders should make quick decisions....)

Dien Rice