time to blog

For 20 years on the day after Thanksgiving, Denis Gartman has been publishing his “Rules of Trading”. This year was no exception. Reading his rules reminds me of a quote from a man called Donal Deeney from Monaghan, Ireland, who has now passed away; he sums it up nicely, “It takes a wise man to learn from his own mistakes, but a smarter man to learn from the mistakes of others”.

There are lessons to be learnt here:

1. Never, Ever, Ever, Under Any Circumstance, Add To A Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; It is trading’s driving-while intoxicated. It will lead to ruin. Count on it.
2. Trade Like A Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.
3. Mental Capital Trumps Real Capital: Capital comes in two types: mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.
4. This Is Not A Business of Buying Low and Selling High: It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.
5. In Bull Markets One Can Only Be Long or Neutral, and in a bear markets, once can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.
6. “Markets Can Remain Illogical Far Longer Than You Or I Can Remain Solvent.” These are Keynes’ words and illogic does often reign, despite what the academics would have us believe.
7. Buy Markets That Show The Greatest Strength; Sell Markets That Show The Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to said the strongest winds, for they carry the farthest.
8. Think Like A Fundamentalist; Trade Like A Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technical and fundamentals, as you understand, them run in tandem.
9. Trading Runs in Cycles; Some Good; Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well research trade will go awry. This is the mature of trading; accept it and move on.
10. Keep your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve know have the simplest methods of trading. There is a correlation here!
11. In Trading/Investing, An Understanding of Mass Psychology is Often More Important Than An Understanding of Economics: Simply put, “When they are cryin’ you should be buyin’! and when they are yellin’, you should be sellin’!
12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and move on.
13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions
14. Be Patient With Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year… and our profits grow accordingly
15. Do More Of That Which Is Working and Less Of That Which Is Not: The works in life as well as trading. Do the things that have been proven of merit. Add to winning traders; Cut back, or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.
16. All Rules Are Meant To Be Broken… but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

The following article was published in the December 2006 edition of Bloomberg Money. Another big thank you to Sarah Godfrey, the Editor of Bloomberg Money, for taking the time out of her very busy schedule to meet with Vicky and me. We particularly like the quote about ‘exploding heads’ - excellent!

A new service for fans of technical analysis is promising to liberate investors from the need to spend their time watching computer screens to work out when to make a trade.

TimeToTrade (www.timetotrade.co.uk) is a web-based tool, unlike many technical analysis packages that need to be installed on a computer. Users can set up alerts for individual stocks based on technical analysis indicators such as moving averages, MACD, crossing moving averages and relative strength indicators (RSI). The system covers the UK and US stock exchanges and users can choose to receive alerts by email, instant messaging or mobile phone text message.

“Using a web-based system means you don’t have to download programs and aren’t tied to single computer,” said TimeToTrade’s founder Dary McGovern.

“The main innovative feature is the simplistic approach enabling rule-based alerts on a technical analysis basis.”

As well as being able to set alerts for when multiple conditions are met - such as an RSI below 30, moving averages crossing and the share price chart forming a V-shape - users can add their own notes to track developments and remind them why they took a particular view.

“People are starting to get their heads around technical analysis and realise you have to combine with fundamental analysis”, said McGovern.

“The objective of TimeToTrade is to make charts non-scary. Everything that exists in the technical analysis space is designed for the industry by the industry. If you show the average punter 20 charts to watch on one screen, their head will explode and they will run away.”

As well as shares, TimeToTrade can be used for options trading, and access to US brokers means options can be bought under either the UK or US rules.

As part of a special launch offer, investors can access a 30-day free trial, and a special promotion until April 2007 will allow access to the site for £9.99 a month including 40 text alerts. The usual price is £19.99.

The following article on timetotrade was published in the November 2006 edition of the What Investment magazine. A big thank you to thank Keiron Root, the Editor-in-Chief of What Investment, for taking the time to meet with Vicky and me:

Private investors can now benefit from tools similar to those used by professional investors, thanks to a new web-based service called Time to Trade.

The alerting service from Sensatus, a financial software firm, allows investors to use professional analysis tools without having to install software or watch their computer all day for updates. Alerts about trading opportunities can be sent to users’ mobiles, e-mail addresses or instant messenger accounts, and the service can be accessed through any web browser.

Once investors develop their strategy, they can set up rule based alerts for price, volume and technical analysis indicators. Dary Mc Govern, managing director and founder of Sensatus, said: ‘Our rule-based alerting service, Time to Trade, is the first in a series of financial tools designed to improve the lives of non-professional traders.’