Trading Places The Real Story :April 29, 2006

Can the skills of a successful trader be learned? Or are they innate, some sort of sixth sense a lucky few are born with?

Have you seen the comedy movie "Trading Places" [1983] ?
If not, you must get a video and watch it.

Here is the story :

Mortimer and Randolph Duke are commodity brokers who enjoy a little wager now and then.

For the latest bet, Randolph believes they can take a common criminal and make him a successful commodity trader in the company.

The criminal, Billy Ray [ Eddie Murphy], is to be given the job and home of Louis [Dan Aykroyd], who in turn is set up for crimes he didn't commit, to see if he resorts to crime once he's lost his rich environment and friends.

The resulting movie is hilarious and fun to watch.

`Trading Places' is one of the best movies and one of the best comedies that I have had the privilege of viewing and almost every aspect of this movie is done to the highest excellence and the highest quality.

I have always considered that some of the most entertaining and enjoyable movies came out during the 1980s and `Trading Places' definitely falls within this category.



Actually, I will tell you a REAL LIFE story which is similar to this movie and took place around the same time.



In 1984, Richard Dennis taught a Trend Following trading methodology to a group of students (neophyte non-traders) in a two-week seminar.

Dennis' motivation for conducting the sessions was to settle a dispute with his friend and business partner William Eckhardt over whether trading skills could be taught.

Dennis strongly believed that trading abilities could be broken down into a set of rules that could be passed on to others.

Eckhardt believed trading abilities had more to do with innate instincts.

Eckhardt lost the bet with Dennis.



The group of 14 traders he taught earned an average annual compound rate of return of 80%.
In contrast, about 70% of all non-professional traders lose money on a yearly basis


Dennis nicknamed his proteges Turtles after visiting turtle farms in Singapore and deciding to develop traders like farm-grown turtles. Today, the original system has enabled Trend Followers to achieve outstanding returns with annual returns from 25% to over 100%. Using Trend Following, some traders have seen returns exceed 100% in a single month.



The main emphasis of the Training course was to concentrate on TRENDING STOCKS and have STRICT RISK CONTROL and MONEY MANAGEMENT.



Read about it at the following link :

http://www.turtletrader.com/turtle-trading.html

Does fundamental analysis work ? : April 29, 2006

If, by Fundamental Analysis, you mean listening to Analysts recommendations on the TV, then NO, it does not work that way!!.
As Gordon Gekko famously said [Movie: WallStreet] " Them analysts don't know stock from livestock."

But some people have become rich by Fundamental Analysis.
People like Warren Buffet and Carl Ican became billionaires buying undervalued companies.

But, one thing...they brought shares worth millions, gained management control of the board of directors and forced the current management to restructure the company.


See the latest Bloomberg magazine to read the article about Carl Ican, the takeover artist of the 1980s.

His strategy is as follows:

1. Identify a potential target for takeover and buy stocks to gain control of the board.

2. If he can not gain control of the company, he buys a stake and lobbies for management to make changes that will boost the firm's share price. These are investments such as Time Warner he makes through his hedge fund.

3. If Ican takes over a company, he installs new management and works to make the company more profitable.


This simple strategy has made him millions.


Ican bought American RailRoad Car Industries in 1994,, investing $ 42.8 millions.
As of Feb 2006, the investment has returned $ 332 million or 880 percent return

In 1998, he invested $ 28 million in New Seabury, a golf and condo development. it is now worth $ 178 million.( 525 percent return )

And $ 157 million investment in 1998 in Philip Services Corp has generated $ 347 million in profit.


The reason I am mentioning Ican is so that you can see how he manages risk

Here are some of his portfolio picks and the profits they generated. (Jan 1996 to May 2004)
1. RJR Nabisco Profit=893 millions
2. Imclone Profit=$ 418 Million
3. Revlon Profit = $ 281 million
4 Beazer Homes Loss= $38 million
5 Marvel Loss= $ 38 million
6 Reliance : loss= $ 33 million.



Here you can see that he let his Profits run but his controlled his losses.
His losses are less than $ 40 million but his profits are in three digits.

The lesson we can learn is :

Just let your profits run and cut back on your losses.
Exercise proper risk control in your investments.

Trending Stocks for Friday, April 28, 2006

Disclaimer: For education/entertainment purpose only. Invest at your own Risk

Trending Stocks for Thursday , April 27, 2006

Disclaimer: For education/entertainment purpose only. Invest at your own Risk

Trending Stocks for Wednesday , April 26, 2006

Disclaimer: For education/entertainment purpose only. Invest at your own Risk

Trending Stocks for Tuesday , April 25, 2006

Disclaimer: For education/entertainment purpose only. Invest at your own Risk

Trending Stocks for Monday April 24,2006

Have a look at the following trending stocks :

Trending Stocks for Friday April 21,2006

Have a look at the following trending stock :

Trending Stocks for Thursday April 20,2006

Have a look at the following 4 trending stocks :

Trending Stocks : Tuesday April 18,2006

Have a look at the following two trending stocks :

The SOVIET Defector : April 16, 2006

He grew up in the Soviet Union when it was an "evil empire".
He hated the Soviet system and wanted to get out, but emigration was forbidden. He was brave and bright and was willing to take the greatest risk of his life.
He had entered college at sixteen, graduated from the medical school at 22 and took a job as a ship's doctor.

When the Soviet ship landed at Abidjan, Ivory Coast, he jumped the ship.

He ran to go to the US Embassy through the clogged dusty streets, hotly chased by his ex-crew mates and guards armed with machine guns.
He managed to get inside the safe havens of the US Embassy gates.
The CIA whisked him away, put him in a "safe house" and then on a plane to New York.

He landed at Kennedy Airport in February 1974, arriving from Africa with just the clothes on his back and $25 in hs pocket.
He spoke some English but did not know a soul in the USA.
He later got a position as a psychiatrist in St Luke's hospital and then established his own practice.
He also started trading in Stocks and options.

Psychiatry gave him insight into trading.

He learned by trial and error and became very very successful as a trader, trainer and a speaker at international trading conferences.


==============================================

No, I am not writing a James Bond type spy novel ( though it would make a great novel and movie) This is the real life story of Dr. Alexander Elder.

I was lucky to meet the good doctor a few years ago at New York Trading Expo, where he is a regular speaker.
He is a very nice person to meet, simple, down to earth.


I have an old dog - eared much used copy of his famous book "Trading for a Living"

He explains trading in a very simple manner without confusing people with arcane terms. He tells of his own story of how he failed so many times at trading and how again and again he picked himself up, learned what was wrong with his trading and improved himself.


This book explains about technical indicators and the trading systems he had developed. But the most important thing I learnt from this book is about risk control, money management and trading psychology.


Do read this book by getting it from your library or browsing from Barnes and Noble when you get a chance. You will LOVE it !!

It is a TRADING CLASSIC.

If you like to vist his site, it is located at http://www.elder.com









Note:
I and DreamTai.com inc. are not affliated nor have any finacial arrangement with Dr. Elder or his company.
Dr. Elder is a person I am inspired by and for whom I have great respect.

The Gentleman from Ireland : Saturday, April 15, 2006

A Gentleman from Ireland asked me the following question :

Can your software be used for trading the Dow30, FTSE100 indices ? I like the built in risk control features in your software.
I think a good strategy when swing trading would be to hedge any shortterm retracement of the futures market by countertrading the same indice with a slightly larger stake as a day trade, resulting, hopefully in a win/win situation. How would that strategy appeal to you Sanjoy ? All the best,


Dear Sir,

Attached are the two charts of Dow Jones Index and FTSE index showing buying and shorting signals using DreamTai.

The charts are daily charts.

However, for daytrading, they can be used to know when it is safe to be long . You can be more confident when the price bar is green, that the trend is up.

The rule for going long are that the price bar should be green and should be ABOVE the blue dotted line.

The rule for going short is that the price bar should be red and should be below the blue dotted line.

So, if the price has turned green and gone above the moving average, you can day trade with a positive bias.


About the strategy of trading counter trend when the market retraces, it depends on your experience and expertise trading the futures market.

If you are new to trading and have just begun, I would not recommend it.
In US, we call it "Catching the falling Knives"

The reason we have rule in DreamTai that the price must be above the moving average and must be green is that we are trading in the direction of the natural market flow or momentum. so, there is very little resistance.

When you trade counter trend, there is chance that the prices may suddenly move against you in direction of the trend.

But, if you have traded counter trend before and have experience, there is no problem.You can go ahead with the same as long as you maintain proper risk control.


By the way, we also have a blog at http://dreamtai.blogspot.com
Please feel free to ask any questions.

Sincerely,
Sanjoy
Dreamtai. com Inc.

Lost in Translation : Saturday, April 15, 2006

Would you like a translation of the products you have listed in italian? I am sure that the italian citizen do not understand what you're selling!


Dear Sir/Madam,
Ebay automatically translates Dreamtai listing when it lists it in ebay Italy.

It will be difficult for me to handle different languages individually because Dreamtai is being used by people living in many different countries.

Here is a list of countries and exchanges supported by DreamTai

http://finance.yahoo.com/exchanges

Trying to translate web pages and keep them updated in so many languages will be difficult.

Besides, we have a blog also at http://dreamtai.blogspot.com

If you have any questions about Dreamtai, please feel free to contact me.( in English..please:-)))

sanjoy

Options Stops: Friday, April 14, 2006

Dear Sanjoy
I have been using DreamTai for a couple months with good success. You have developed a powerful and predictive program. Thank you for an excellent product!

I am primarily a trader of options (calls and puts) on high-volume Nasdaq stocks. I read on the Blog your answer to another option trader, and think your recommendation of 3-month-out options is correct. Regarding stops, do you think option traders should tighten stops on the underlying stock? As you know, the typical at-the-money option will become worthless by the time the DreamTai stop level is hit.
Thank you for DreamTai and for your answers to my questions.



Dear Sir/Madam,
Thank you for your kind words !!
DreamTai is just a tool to help you. I should congratulate you on your investment success, because you had the discipline and determination to manage your risks., which is the most important part of any investment strategy.


The stops in DreamTai are based on the volatility of the stock. We can not tighten the stops because we have to let the stock some room to move around.

What we can do to reduce risk is to buy fewer options.

The total amount to risk in any trade is two percent of the capital.

If you have $100,000 then you risk only $2000 on a single trade.

Assume the worst case senario that the options expire worthless. You should not lose more than 2 percent on this trade.So, if you buy options, buy options worth $2000 ONLY for $100,000 capital.

Keep track of the stop loss price suggested on the day of the trade. If the stock moves below the stop loss price or if the trend changes, sell the options.

We buy at least three months period far away options, because we want to give the stocks some time to move around before the options expire.

Please remember that options are a double edged sword. on one hand, they give you leverage to magnify your profits. On the other had, they decay with time.

Sanjoy

Buying and Selling through Dreamtai: Friday April 14, 2006

In the New Sell box ( New Buy/Sell Tab ) should I sell every time my stock shows there or sell some stock for a profit?
Under Analyse Stocks tab, does sell mean to "sell short". What is the
purpose of the high limit stop when you sell a stock.

Please advise


Here is my answer.
Dear Sir/madam,

The New Buy and New Sell Section is there for your convenience. it just tells you AT AGLANCE which stocks have turned from Red to Green in the most current bar or from Green to Red in the most current bar.

It is there so that if you do not have time to look at all the charts, you can see at a glance which positions have turned bullish and which positions have turned bearish.


Just because a stock is there in the New Buy or New Sell does not mean that you have to make a trade.


Here are the steps for making a trade


CHECK THE STOCK TREND

First, for those stocks, you have to see if it is in a strong upwards trend.
If the dotted moving average is slanting upwards (30 to 45 degrees ) or downwards, then the stock is in a strong trend.


NEXT CHECK THE STOCK SIGNAL

This requires that you note the latest stock price bar's color and whether it is above or below the dotted line.

You can go long only if the green bar is above the dotted moving average.

You go short only if the Red bar is below the dotted average.
This helps you to place order in the direction of the trend.



If the price bar is GREEN and it is above the dotted moving average, it is bullish trend and you should buy the stock.

After you buy the stock, you hold it till the charts turn red.



If the price bar is RED and it is below the dotted average line, the trend is bearish and you should short sell the stock
After you short the stock, you hold the position till the charts turn green.


NEXT CHECK THE POWER RANKINGS TO SELECT THE BEST CANDIDATES

Out of all the stocks with a buy/sell signal, select stocks with higher power ranking


Have a look at the sample trade charts at

http://www.dreamtai.com/trial/ebayvdo.html



NEXT AS SOON AS A BUY OR SHORT SELL ORDER IS FILLED, SET THE STOP LOSS ORDER TO PROTECT YOUR POSITION


If you short sell a stock, you have to place a stop buy order ABOVE the stock price to cover your positions if the stock suddenly moves up.


If you buy a stock, you have to place a stop sell order BELOW the stock price to cover your positions if the stock suddenly moves down.


NEXT MONITOR YOUR POSITION EVERY DAY TO SEE THAT THE STOCK DOES NOT GO FROM BUY TO SELL OR VICE VERSA

If a stock in which you are long has turned Red, then sell the stock.

If a stock in which you are short has turned Green, then cover the short position by buying the stock.


Hope that you found these steps useful.
Please feel free to add your comments, feedbacks.

Confusion: Too Many Transactions: Friday April 14, 2006

Here is a letter from one of our members :

I am somewhat confused as to what sell really means - it seems that I am
making too many transactions which is expensive.


Here is my answer. Please feel free to add your own opinions, views, suggestions, feedback .


Dear Sir,

You said that you are making too many transactions. It appears that your stocks are being whipsawed around and so you have to buy them and then sell them again and then buy them again.

The whip saw happens when the stock is moving in a flat range and is not trending.


Dreamtai works best with strongly trending stocks.

You have to select strongly trending stocks, that is stocks which are in a strong uptrend or downtrend.

How do you detect a strongly trending stocks ?


Just because a stock is there in the New Buy or New Sell does not mean that you have to make a trade.


CHECK THE STOCK TREND

For those stocks, you have to see if it is in a strong upwards trend.

If the DOTTED MOVING AVERAGE LINE is slanting upwards (30 to 45 degrees ) or downwards, then the stock is in a strong trend.



See the sample stock picks here in this blog http://dreamtai.blogspot.com


Also, whipsaw also happens when the market is in a flat zone and is not going anywhere. You just have to wait them out.

It is just like fishing. Some days, you will not catch any fish and some days, you will have a huge catch.

The most important thing to do during this flat period is not to lose lots of money.

Being stopped out is not bad but losing a fortune on your stock positions is bad.


Let me give you a very interesting example:

Have a look at NAVI chart at the following web link

http://finance.yahoo.com/q/bc?s=NAVI&t=3m&l=on&z=l&q=b&c=


In the past 3 months the maximum it has gone is from $1.5 to $4.5


Then have a look at the two year chart

http://finance.yahoo.com/q/bc?s=NAVI&t=2y&l=on&z=l&q=b&c=

Here, the stock has been in the $ 1 to $ 5 range


Wait, now PREPARE YOURSELF for a SURPRISE !!!

OK, are you Ready ??


Now look at the 10 year chart.


http://finance.yahoo.com/q/bc?s=NAVI&t=my&l=on&z=l&q=b&c=

It is SHOCKING. I know you would not believe it if you look at the above chart.

Can you imagine the investor who had just held to this loser stock all these years hoping that one day it will go up again ?

I can assure you that it is much better suffering a tiny loss and getting rid of the stock than being sentimental, believing the analysts on TV and holding on to the stocks.

In th next question, I will address how to buy or sell stocks using Dreamtai.

Trending Stocks :Thursday April 13,2006

Have a look at the following trending stocks

They are volatile. Have suitable risk control in place.

1) CC
2) ROLL

Trending Stocks : Wednesday April 12,2006

Wednesday April 12,2006
Have a look at the following
trending stocks

1) AW

Keep an eye on BEAS

Trending stocks: Sunday April 9,2006

Sunday April 9,2006
Have a look at the following
trending stocks
1) ZEUS
2) CME
3) AOS
4) NEU
5) LFC
6) FUL
Keep an eye on NAVI

Thursday April 6,2006 : Some Stock Picks

Thursday April 6,2006

Have a look at the following
trending stocks
1) CHL
2) FSL
3) HC
4) ICON
5) PALM
6) PMCS
7) PWR

Uptrending Stocks ; April 5, 2006

Wednesday April 5, 2006
Have a look at the following
up trending stocks

1) AAUK $21.25

2) FIZ $14.24

3) HLT $ 27.16

4) KNOT $19.81