camron.systems.australia section 18 of 26

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revolving door

Trading is like a revolving door. You see the direction and speed. The trick is to judge the speed, enter at the right time, move in sync with it, and exit at the right time. Get it wrong and you're stuck inside, come out facing the wrong way, or get trapped when the power goes off.

vacuum effect = zig-zag effect

when the selling stops

Assume a down move. Reverse for an up move.

An implicit (charting) assumption is each price point has a uniform (constant) value. ie the force of a 5 point rise is equal to the force of a 5 point fall. That's wrong. It's a natural visual illusion. The majors know it and take advantage of it.

Price can change for a number of reasons. A large price fall is often the result of an aggressive sell action by one or two brokers. It's never continuous. They stop and start. When the program is complete, the pressure ceases. Leaving a vacuum in its wake. And price immediately rises back into the vacuum. The magnitude of the retreat is usually, 1 unit of the root of the controlzone. If the move was swift and unexpectedly large, the magnitude of the retreat will be, two units of the root of the controlzone. A retreat into the vacuum is identified by an absolute lack of commercial participation in the rise. If they are participating, the fall is over.

The fall is due to selling pressure exceeding buying pressure. Once the sellers have completed their program, they are (obviously) not selling any more. The selling pressure stops cold. The buyers who took the other side were sitters. They're not chasing. Thus they are not the cause of any subsequent price rise. They're buyers at lower levels (below the cessation point), not higher levels. It is the jobbers who now step in and play in the vacuum.

reversal versus pullback

Understand the section above and identify the difference between a reversal and a pullback.

markets fall for 3 reasons

economic recession
profits recession
an economic event

trading rules

Basic themes extracted from the site in the form of a set of rules in order of priority
with a comparative list of the common rules found elsewhere (on the net).

camron rules	standard rules
learn the rules of the game know how the game is played know who the opposition are learn to read the market, in order to .. know when conditions are favourable know when conditions are unfavourable recognise changing conditions, mid-game • understand repetition practice, practice, practice • money management • et cetera •	develop a trading plan money management cut losses, ride profits follow the trend et cetera • • examples common rules 1 at tradingpicks.com/basic_rules.htm common rules 2 at refcoexpress.ca/50rulesoftrading.refco •

trading plans

The fallacy of having "a" trading plan is having just one.
It is more realistic to have 365 trading plans. One for each day.
The challenge is - which one do you use.
Same as the challenge of selecting the right tool for the day.

hardware v software v wetware

source - Greg Iles - Dark Matter - 2003
"The human brain is slow in terms of computing speed. But it is massively parallel. For processing, it is capable of making 100 trillion calculations simultaneously. Together with the equivalent of twelve hundred terrabytes of memory".

the surfing plan

The best explanation of a plan is "the surfer" who goes surfing. Goes down to the sea. Checks the weather conditions. Is the surf up?. Is the breeze on-shore or off-shore?. If the conditions are right, jumps on the board and paddles out 300 meters. And waits. Waits for the right wave. There are many waves. The key is to pick the right wave. Don't want to pick one too soon or too late. The choice of wave comes from seasoned experience. Not a surfing plan. A surfer does not go out surfing with a surfing plan in mind. The conditions of the moment on the day will dictate the play. Depending on the conditions, what was a good wave yesterday might well be a poor wave today.

What plan do you think this guy had in mind when setting out ?

last updated June 2005