Is Stock Market Trading knowledge now required to make money or can one still just rely on buying stocks in a trend trading investing environment over the long term?

A quick comment before we get to today’s topic about Stock Market Trading vs. Investing and whether one can simply succeed by buying stocks and rely on the upward trend trading bias of the stock market …

I want to thank everyone who voted for Top Dog Trading in the TASC Readers Choice Awards. This is an annual awards poll conducted by “Technical Analysis of Stocks and Commodities Magazine” (great magazine I personally subscribe to and recommend). Awards are chosen by the readers themselves – meaning the users of the products and services.

Generally it’s huge stock market trading companies and corporations with mega- marketing budgets that win these awards. But I’m honored and humbled to say that I was graced with awards in both categories for which I qualified:

• First runner up in the “Technical Analysis Websites” category.
• Finalist in the “Trading Centers, Schools, Training” category.

To be given such high positions along with, and even above, massive stock market trading companies is quite an honor and I thank all of you who voted for me.

NOW LET’S MOVE ON TO TODAY’S VIDEO:

It used to be presented as common wisdom that most people should not try to time buying stocks, but rather depend on the overall upward bias of stock market trading over the years, rely on the upward trend trading historical pattern, and perhaps even dollar cost average into the market over the long term.

In recent years many people are now questioning that “common wisdom.”

We’ll examine some of those concerns in this brief video. While it certainly won’t answer all questions about stock market trading or when one should be buying stocks, it will demonstrate why the old principles of investing are being called into question by many stock traders, both amateurs and professionals, today.

Thanks for participating in this discussion and please leave your comments below.

Stock market trading can be challenging. So people are always looking for a short-cut, an easy strategy to invest and trade stocks.

One of the most well-know of these “easy” strategies is the Halloween Cycle.

Because this stock market trading strategy is so well-known, it is worth our investigation. After all, sometimes stock market techniques work for no other reason than a lot of people are trading them. They become self-fulfilling prophecies.

This strategy for trading stocks is about as easy as they come:

Buy the stock market around Halloween (late October, early November) … and then in May, go away.

That’s all there is to it (though surely others have added their own additional rules as people always will).

If you look back enough years, there has been some historic evidence that this may not be a bad strategy. However we must keep in mind several factors:

1. Past performance does not guarantee future results (how many times have
   you heard that?!).
2. Market dynamics change from time to time.

So the question stands:

Is this a good, simple, easy stock market trading strategy you can use without knowing anything else about trading or investing?

Here’s a video where we investigate that question with a few examples from recent history.

Thanks for participating in this discussion and please leave your comments below.

Thank you all for taking the poll in the my last blog post (see the post immediately before this one). At this time over 2,000 people answered each question! That’s amazing and thank you for participating.

The results are clear – about 2/3 of the voters think humans are better traders than computers, and about 2/3 of the voters believe that the wide spread use of automated computer trading is a bad thing.

These results actually surprised me. With the rising popularity of trading “robots” that are marketed so heavily, and purchased so readily, I thought that most people would favor automated, computer trading.

But the response seems to indicate that the majority of us humanoids have a distrust of giving too much power to computers. Perhaps this is part of what made movies such as “2001 Space Odyssey” and “The Matrix” so compelling.

The debate is far from over and will continue to rage on since computerized trading is already firmly entrenched in the trading world.

As I read through the over 30 comments posted by you, I was very impressed with your insights. In fact, they were so good that you didn’t leave me much more to say! But since I’m expected to add to the conversation, here are a few thoughts:

As with many things in life, both sides have some strong points and some weak points. Here are a few of the most significant to me:

Robots (Computers):

• Positive:
• No emotion.
• Trade the rules consistently.
• They don’t get tired of watching the markets.
• Can process a massive amount of information fast, with precision and accuracy.
• Major companies use them successfully.
• Negative:
• Amateurs use them mostly unsuccessfully.
• Technology is not perfect and no program is without errors (“bugs”).
• People still monitor their computerized trading systems and often override them when the draw downs reach their personal emotional pain threshold. Thus they do not completely eliminate the interference of human emotion.
• The history of automated trading is far from perfect.
• They still require human oversight since they can encounter technical problems (loss of power, internet connection, etc.)

Humans:

• Positive:
• Someone who has mastered trading develops a feel and intuition for trading that is beyond even their own conscious mind.
• The human brain is still more powerful and complex than a computer. We still haven’t explored the full depths of the brain and it’s capabilities.
• Negative:
• We get emotionally involved which may lead to breaking the rules.

A few other observations I’d like to add:

• Major companies that trade massive amounts of money do use trading programs, and often use them to a great extent. With the tremendous resources they have at hand, both in the area of talent and capital invested in creating such trading programs, it must be acknowledged that alg0rithmic trading has a tremendous amount of validity.
• On the other hand, most amateur traders who buy trading robots are not successful with them. Such robots are not to be compared to the programs that professionals use. Therefore to say that you should use a robot because the professionals do, is not a completely valid point.
• Computerized trading is not THE final answer to trading success. If the markets were traded completely by computers, without any human traders, there would still be winning computers and losing computers since that is the nature of the market buy/sell dynamic.
• Trading programs definitely have a clear advantage over human traders with regard to trading the rules strictly, without emotion, and also with regard to their ability to access tremendous amounts of data to calculate probability scenarios (thus the reason that computers have been able to out-perform chess masters).
• Experienced traders, who have reached the level of mastery, trade based on factors that they are not even conscious of any more. They have internalized their knowledge of the market to the extent that much of their expertise lies in their unconscious. Thus, unlike the amateur, their intuition is to be trusted. This knowledge, developed through massive experience and putting in their “10,000 hours” is so internalized that they cannot even express it consciously to teach others or program into an algorithmic formula to be replicated through a trading computer.

So there you have it – the final definitive answer!

Has algorithmic trading changed the markets? Yes, absolutely.

Is it good or bad? I don’t think there’s a clear answer to that.

Is it better than human trading? It depends on the computer program and the human trader you’re comparing.

Does my Top Dog Trading method still work in this era where over 1/2 of trading activity in the stock market is made by computers? Yes, because my method simply measures the “Energy” in the market regardless of who makes the trade.

A trend (direction)  is a trend whether it’s created by computer trades or human trades … in a similar way whether a turtle is going East or an cheetah is going East … looking at a compass tell you they are both going East, because East is East regardless of what animal or object is going in that direction.

Thanks for participating in this discussion and please leave your comments below.

Stock market trading, emini trading and Forex day trading, have been taken over by robots!

It’s estimated that more than half of stock market trading is performed by automated computer programs – algorithmic trading that executes orders automatically without human intervention.

The most infamous type of automated trading to come under recent scrutiny is “high frequency trading” in which computers calculate small inefficiencies in the stock market and attempt to take advantage of them quickly before they disappear – often for only a few seconds.

Are the robots taking over the world? After all, money makes the world go ’round, right? … oh, wait, no, that’s supposed to be love!

But I digress.

Hedge funds, pension plans, mutual funds, and large financial institutions are using computer programs to make decisions about when to enter and exit the stock, Forex and futures markets, and also to execute those trades automatically.

The fact that so many of the “big money” players are using automated trading indicates that there may be some validity to it for successful Forex, emini and stock market trading.

On the other hand, there are myriads of trading “robots” offered to retail traders, and most of them see to only disappoint.

• Are computers better traders than humans?
• Can the market really be reduced to a mathematical formula?
• Will a highly skilled professional trader always be able to out-perform a robot in the markets?
• Is the dominance of computer trading a good thing for the world financial markets?

Let’s see what you think!

PLEASE COMPLETE THE POLL BELOW. Simply indicate your opinion on the 2 questions. Also be sure to bookmark this page and come back in a few days after others have voted to see the results of the poll.

ALSO – PLEASE EXPAND ON YOUR THOUGHTS BY LEAVING YOUR SPECIFIC COMMENTS BELOW.

Below is my newest podcast video!

If you have an iTunes account, log in to iTunes, do a search for “Top Dog Trading” and then click the “SUBCRIBE” button so you get all future podcasts for me … they’re FREE!

Daytrading Forex, stocks and eminis is tough. When you consider that daytrading professionals sometimes intentionally try to take money from amateurs, well that can be infuriating.

Welcome to the topic of “Stop Running” or “Gunning Stops.”

While the topic makes most amateurs mad, it needn’t. All you have to do is calm down and ask a good question (most of life comes down to asking the right questions):

“How can I turn this to my advantage?”

The answer is that while you can’t always avoid having your stops taken out (they’re there to protect you after all), there is a way to turn these lemons into lemonade.

YOU can join the pros in running stops … if you know what to look for (I’m going to show you that in just a moment).

This lesson applies to futures and stock daytrading, Forex day trading, emini trading, stock market trading and emini trading alike.

You can watch for these stop runs and follow the pros as they do it. The video podcast below shows you how:

Please leave your comments below.

Good news! My Podcasts are back up in iTunes and the first one is about trend trading.

If you have an iTunes account, log in to iTunes, do a search for “Top Dog Trading” and then click the “SUBCRIBE” button so you get all future podcasts for me … they’re FREE!

Here’s the first one we uploaded. It’s on Trend Trading.

This podcast on trend trading is appropriate for daytrading but also for swing trading and investing. The trend is always relative to the time interval of the chart. There is no objective “The Trend” independent of a time interval.

The classic definition of an up trend is when the market makes a higher high and a higher low. My daytrading and trend trading experience has taught me that is bunk (as my grandfather used to say).

Some people determine market direction by using fundamental analysis. In this podcast I’ll show you why I don’t find that helpful either.

Listen (this podcast is an audio with no video) by clicking on the arrow below.

Please leave your comments below.

Hard to believe, but today is my birthday!

I decided to begin this new year of my life by giving a gift to you.

No payment or even opt-in required. This is not even a promotion for anything I’m selling about daytrading.

It is a brief 10 page PDF report entitled “3 Steps to Becoming a Cool Trader.”

This free Special Report shares 3 lessons I’ve learned over the years about life and trading (daytrading, swing trading and investing).

Please note that this Report isn’t a 3 step method for making money. It’s about big picture principles that will help you deal with the emotions and pressure of trading so you can keep your cool and trade more effectively, and therefore, profitably.

So enjoy this gift and feel free to send others to this page to also download this Special Report.

You can download it or open it by clicking on the title of the report below:

“3 STEPS TO BECOMING A COOL TRADER.”

WHAT DO YOU THINK OF THIS FREE REPORT?
PLEASE LEAVE YOUR COMMENTS AND RESPONSES BELOW

IF YOU HAVE A YAHOO ACCOUNT, please also click the “BUZZ UP” button on the top left of the Yahoo Buzz page which can be found at this link: YAHOO “BUZZ UP”

Day Trading Tips

The single most common of the day trading tips requested of me is this:

“What is the most reliable time interval I should be using on my trading charts?”

This question comes from people trading the stock market, futures, Forex and eminis alike.

The assumption is that there must be an optimal chart interval (the length of the bar on a chart) in which trades are more likely to be profitable.

There is a very small amount of truth to that assumption, but not as much as one might think.

Most things in trading are relative, and this is another one of those things (actually there’s a day trading tip within a day trading tip!).

Having said that, however, the time interval you choose for trading is indeed VERY important … but for reasons that do not occur to most who are day trading or swing trading.

There are indeed a couple issues that do make certain time frames objectively slightly more reliable than others. In theory these reasons make a lot of sense. However in the actual practice of swing trading and day trading, I haven’t found them to be as significant as one would expect.

More importantly, there are personal reasons that some time intervals are better than others for individual traders. These are the critical, yet less examined issues.

In the video below, I clearly share all of the reasons I’m hinting at here.

So of all the day trading tips I could give you, here’s one of the popular: How to find the best time interval for your charts.

Enjoy!

WHAT DO YOU THINK OF THIS VIDEO?
PLEASE LEAVE YOUR COMMENTS AND RESPONSES BELOW!

a

Trading Volume Indicator

A trading volume indicator can dramatically improve your profitability, and the use of a volume indicator can make the analysis easier than reading the pure volume histogram at the bottom of the chart.

There are 3 things that are absolutes on a chart:

1. Price
2. Volume
3. Time

Most of the other elements traders put on charts are calculations based on one or more of these absolute values and we call them “indicators.”

Trading volume, like price and time, is not an indicator.

However using a volume indicator can be helpful in trading in that it can help us “see” the meaning behind price and/or volume more easily.

In the video below, I present a couple basic principles of how to read pure price and volume, and then go on to show how using a volume indicator can enhance your insight into what trading volume is telling you about potential future movements in the market.

Enjoy!

WHAT DO YOU THINK OF THIS VIDEO?
PLEASE LEAVE YOUR COMMENTS AND RESPONSES BELOW!

To learn more about the Top Dog Trading techniques, including my
Top 7 Volume Patterns, go to:

http://www.topdogtrading.com/Products_SwingTrading.html

When most people think of being financially independent, they imagine themselves never having to work again.

While that is one view of it – there is another.

The other way of thinking of it is to be free (independent) to make money however YOU want.

This is finding independence in the process of building your financial well being.

A JOB will not give you financial independence.
.

When you work for someone else you are dependent on your boss and your company for your financial well-being.

However most people willingly sacrifice that independence for the security of an hourly wage or biweekly salary, along with retirement and medical benefits.

But in today’s employment environment, working for someone else no longer provides the same type of security it did for the last generation when people often worked for the same company for 40 years and retired with great medical and pension plans.

A BUSINESS will not give you financial independence.
.

Though you may be the owner of your own company, you still have a boss – your customer. In my seminars I’ve found that most business owners spend more than 50% of their time on tasks that don’t directly result in making them more money.

I’ve owned several businesses and experienced the burdens of:

• Government paperwork
• Employee management
• Legal hassles
• Payroll
• Industry changes
• Brutal competition
• … and sleepless nights over the risks of owning my own business

Keep in mind that my use of the term “financial independence” in this article refers to being independent while doing your work. There are those (few) who work extremely hard day and night for many years, build a large company, and then sell it. In this way they are able to create financial independence after they exit the business.

Trading can give you true FINANCIAL INDEPENDENCE while working.
.

As a day trader or swing trader you are truly independent. That’s the good news and the bad news.

The GOOD NEWS is that you don’t have a boss to obey, you don’t have customers to please, and you don’t have to spend a lot of time on things that don’t directly make you money. In this way it is a relatively “pure” money-making endeavor.

Trading, when conducted properly, provides a huge earnings potential. While that reward is reserved for the few, it is an exciting possibility. So it can give you financial independence in the process of your work as well as potentially providing enough money to become financially independent in the traditional sense of the term.

When it comes to living the ideal LIFESTYLE, combined with HUGE EARNINGS POTENTIAL, nothing compares to daytrading for a living – whether you do stock market trading, forex day trading or emini trading.

The BAD NEWS is that you succeed or fail on your own merits, and the truth is that most fail.

Trading is inherently risky. Most traders do NOT ever become financially independent. Daytrading, emini trading and stock market trading are all deceivingly difficult.

Is daytrading for you?

Only you can answer that question by weighing the risks and rewards and talking with your family and trusted advisers.

If you’d like to get a free “taste” of trading, I invite you to enjoy my free 5-day correspondence daytrading, stock market trading, emini trading and forex training course videos by clicking here:

FREE VIDEO TRADING COURSE

Leave your comments below regarding this topic. Traders – feel free to share your trading experiences, both the benefits and challenges, for others to read.