The Ten Most Foolish Things a Trader Can Do

The Ten Most Foolish Things a Trader Can Do

 

In the spirit of April Fools Day here are the ‘Ten Most Foolish Things a Trader Can Do’. In no particular order of foolishness.

1. Try to predict the future movement of a stock, and stay in it no matter what.
2. Risk your entire account on one trade with no stop loss plan.
3. Have a winning trade but no exit strategy to get out, no trailing stop or exhaustion top signal.
4. Ask for and follow the advice of others instead of trading with your own trading plan, method, rules, and system.
5. Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.
6. Trade your opinions, not a quantified method.
7. Do not bother to do your homework on trading, just jump in and trade, you are smart, you will figure it out.
8. Short the best and most expensive stocks in the stock market and buy the cheapest junk stocks.
9. Put on trades you are 100% sure are winners so you do not even need a stop loss or risk management.
10. Buy more of a trade that you are losing money in and sell your winners quickly to lock in small profits.

Do not trade foolishly my friend.

1930-The Gartley Pattern -For Traders

A leading technical analyst of the 1930s created a method for trading that is still applicable today. Learn how to trade market turning points based on Fibonacci retracements and market psychology with the Gartley Pattern.

Many traders ask how a trading method that is 77 years old is applicable today. When you combine timeless tools like Fibonacci Retracements with great risk: reward ratios, it’s easy to see why this method is so popular. If those aspects of a trading method appeal to you, it’s my pleasure to introduce you to the Gartley chart pattern.

What is the Gartley Pattern?

The Gartley pattern is a powerful and multi-rule based trade set-up that takes advantage of exhaustion in the market and provides great risk: reward ratios. The pattern is also known as the “Gartley 222” because the pattern originated from page 222 of H.M. Gartley’s book, Profits in the Stock Market that was published in 1935 and reportedly sold for $1,500 at the time.

The Gartley pattern is based on major turning points or fractals in the market. This pattern plays on trend reversal exhaustion and can be applied to the time frame of your choosing. The other key that makes this pattern unique are the crucial Fibonacci retracements that come together to fulfill the plan.

There is a bullish / long / buying pattern and an equally powerful bearish / short / selling pattern. Much like you would find with a head and shoulders pattern you buy or sell based on the fulfillment of the set up.

Buy & Sell Gartley Chart Pattern

Here is a stripped down version of patterns so you can see what the look like without price and time on the chart.

The buy pattern will always look like an “M” with an elongated front let. The sell pattern will always look like a “W” with an elongated front leg.

Gartley Strategy Tools

The three important tools to use on your chart when finding a Gartley are:

Fractals – The important part about trading the Gartley pattern is that you will trace the pattern from turning points or swings in the market. One of the better indicators to trace swings is Fractals. Fractals show up as arrow above swings in price.

Fibonacci Retracements – The Fibonacci retracements will make or break the patterns validity. Below are the specific retracements that make up the pattern. Fibonacci retracement lines are horizontal lines that display support or resistance in a move.

Add Line Tool (Optional) – This tool will allow you to clearly draw connecting points like X to A, A to B, B to C, and C to D for easy measuring.

Gartley Strategy Rules

• Point B should retrace 0.618 from the XA move.
• Point D should retrace 0.786 from the XA move and create the entry zone.
• Point D should be a 1.27 or 1.618 extension of the BC move
• Point C should retrace anywhere from 0.382 – 03886
• Buy or Sell at point D depending on whether the pattern is bullish or bearish
• Place stop either below the entry for the tightest or Risk: reward ratio or below Point X.
• If the market trades through Point X, the Gartley pattern is invalid and you should exit or not take the trade.

When these rules are met, you can find yourself on the cusp of a trade at the Entry Zone. Recognizing these points in the market is truly like riding a bike. Once you get the hang of it, the levels will pop out on the chart to you.

Closing Tips on Using This Pattern

When trading the Gartley pattern, the pattern is meant to be traded at D only. If you believe a pattern is unfolding but we’re only at point B, be patient and hold off until we get to D. The power of the pattern comes from converging Fibonacci levels of all points from X to D and using the completed pattern for well-defined risk.

Lastly, this can be traded on any time frame you prefer. The reason this method has a stable track record is that it is based on unusual market positions where most traders are afraid to enter. Take advantage of the risk: reward set up available and trade with proper trade size.

This pattern occurs rather frequently. When you get comfortable with using Fibonacci retracements for support and resistance you’ll find yourself looking for the points to complete a Gartley pattern. It is very important to watch for the D point to be at 78.6% of the XA leg and to keep your stops rather tight in case the pattern is invalidated.

27 Motivational Quotes for Traders

1. IF A TRADER DOES NOT UNDERSTAND WHAT HAPPENS TO HIM PSYCHOLOGICALLY WHILE IN A TRADE, HE IS DOOMED TO LOSE UNTIL HE DOES OR HE RUNS OUT OF MONEY.
2. THE MARKET PAYS YOU TO BE DISCIPLINED.
3. BE DISCIPLINED EVERY DAY, EVERY TRADE AND THE MARKET WILL REWARD YOU.
4. ALWAYS LOWER YOUR TRADE SIZE WHEN YOURE TRADING POORLY.
5. NEVER TURN A WINNER INTO A LOSER.
6. YOU’RE BIGGEST LOSER CANNOT EXCEED YOUR BIGGEST WINNER.
7. DEVELOP A METHODOLOGY AND STICK WITH IT.
8. BE YOURSELF. DON’T TRY TO BE SOMEONE ELSE.
9. YOU ALWAYS WANT TO BE ABLE TO COME BACK AND PLAY THE NEXT DAY.
10. EARN THE RIGHT TO TRADE BIGGER.
11. GET OUT OF YOUR LOSERS.
12. THE FIRST LOSS IS THE BEST LOSS.
13. DON’T HOPE AND PRAY.
14. DON’T SPECULATE.
15. NEVER TAKE A BIG LOSS.
16. HIT SINGLES NOT HOME RUNS.
17. CONSISTENCY BUILDS CONFIDENCE.
18. LEARN TO SWEAT OUT YOUR WINNERS.
19. MAKE THE SAME TYPES OF TRADES OVER AND OVER AGAIN.
20. BE A BRICKLAYER.
21. DON’T OVER ANALYZE.
22. ALL TRADERS ARE EQUAL IN THE EYES OF THE MARKET.
23. IT’S THE MARKET ITSELF.
24. ITS BORING. ITS A JOB. PATIENCE.
25. 70% OF THE MONEY FLOWING COMES FROM INSTITUTIONAL INVESTORS.
26. STRONG VOLUME IS 150% OF NORMAL VOLUME.
27. TRADE WHAT YOU SEE, NOT WHAT YOU THINK.