Reblog: Trading Rules From Amos Hostetter


Amos Hostetter cofounded Commodities Corporation (otherwise known as CC) along with Helmut Weymar back in 1969. CC is the trading shop that produced more legendary trading talent than the Yankees have All-Stars. Alumni include Bruce Kovner, Michael Marcus, Paul Tudor Jones, Ed Seykota and more…

Hostetter was considered the wise sage and mentor of the group. He’s credited with imbuing many of these trading greats with the wisdom and knowledge they used to achieve their grand heights.

Upon his untimely death in a car accident in 1977, the directors of CC commissioned one of their traders, Morris Markovitz, to gather and record Hostetter’s timeless philosophy on markets and trading. The goal was to ensure future CC traders could benefit from his invaluable teachings. The resulting work was an internal booklet titled Amos Hostetter; A Successful Speculator’s Approach to Commodities Trading.

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Reblog: Richard Rhodes 18 Trading Rules


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I must admit, I am not smart enough to have devised these ridiculously simple trading rules. A great trader gave them to me some 15 years ago. However, I will tell you, they work. If you follow these rules, breaking them as infrequently as possible, you will make money year in and year out, some years better than others, some years worse – but you will make money. The rules are simple. Adherence to the rules is difficult.

“Old Rules…but Very Good Rules”

If I’ve learned anything in my decades of trading, I’ve learned that the simple methods work best. Those who need to rely upon complex stochastics, linear weighted moving averages, smoothing techniques, Fibonacci numbers etc., usually find that they have so many things rolling around in their heads that they cannot make a rational decision. One technique says buy; another says sell. Another says sit tight while another says add to the trade. It sounds like a cliche, but simple methods work best.

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Reblog: Profitable Trading Explained


If you have a winning system with the right risk management you can still fail to be profitable if you do not have the right trading psychology to trade it with discipline.

If you have a winning system with the right trading psychology you can still fail to be profitable by blowing up during a losing streak without the right position sizing and risk management.

If you have the right risk management and trading psychology you can still fail to be profitable because you are trading with no edge because you don’t have a winning trading system.

Profitable trading requires three dynamics: a winning price action trading system with an edge, proper position sizing with risk management, along with the right trading psychology to allow you to trade your process with discipline.

The original post is authored by Steve Burns of newtraderu.com and is available here.


Reblog: Why the Cup & Handle Chart Pattern Works


While my trading is more following capital flows based on trends that I measure with key moving averages there is one chart pattern that I find very useful and that has high probabilities of success.

The cup and handle pattern is a bullish continuation formation, it is one of the newer chart formations and can be easily identified on a price chart. This chart pattern was first popularized by William J. O’Neil in the first edition of his 1988 book, How to Make Money in Stocks. In order for the cup and handle setup to have the highest odds of succeeding, it should come after a clear uptrend is in place. The chart pattern consists of two key components: (1) cup and (2) handle.

The cup part of the formation is created when profit taking sets in or the market itself is in a correction and the stock sells off and forms the left side of the cup. The cup bottom is formed when the stock finally runs out of sellers at new low prices and buyers start moving in and bidding the stock back up again as sellers demand higher prices to turn the stock over. Most of the time as the stock emerges out of the right side of the cup in an uptrend it fails and meets resistance the first time it tries to break out to new high prices and the pattern forms a handle. The second run at new highs usually works as the sellers have been worked through and the stock breaks out to new highs.

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Reblog: 20 Reasons Why 90% of New Traders Don’t Make It


  1. They risk too much to try to make so little.
  2. They trade with the probabilities against them.
  3. They think trading is easy money.
  4. Instead of focusing on learning how to trade they focus on getting rich.
  5. They blow up due to improper position sizing.
  6. With no understanding of the mathematical risk of ruin they are doomed after the first long string of losing trades.
  7. Blindly following a guru that leads them down the road of destruction.
  8. They don’t do their homework.
  9. They trade opinions not robust systems.
  10. They go looking for ‘trades’ instead of a methodology.
  11. They have no trading plan.
  12. They attempt to piggy back on the trades another trader but don’t understand the risks.
  13. Most new traders quit when they realized how much work is involved in trading successfully.
  14. Most traders quit when they learn how many losing trades they will have to have to get to the winners.
  15. New traders quit if they do not have a passion for trading itself.
  16. Many new traders will give up the moment they realize that trading does not have guaranteed income, you are an entrepreneur.
  17. They are not willing to pay the tuition to learn to trade in time, study, and losing trades.
  18. They are crushed by the learning curve that they do not work hard enough to get through.
  19. We lose a lot of new traders when they realize that trading is actually harder than their job.
  20. The traders that don’t make it quit when they were tired, frustrated, and stressed out, the winning traders quit after they had figured trading out.

The original article appears on newtraderu.com and is penned by Steve Burns. It can be accessed here.


Reblog: How To Be A Grown Up Trader


I do not think traders start making money until they mature and understand the big picture. I have been on this journey myself and went through the wild excitement of the internet bubble, day trading and the experience of making a few hundred dollars in a few minutes the first time and the delusion of the get rich quit trading scheme and the expectations of doubling or tripling an account within a year. The game of trading has large amounts of money flowing through the markets that we want to capture for our accounts and can give rise to emotions that make us act immature through the delusion of ignorance, ego, and greed. We can easily become unrealistic and go down the wrong road, it is crucial for success that we stay on the right road.

1. Quit believing all the riches of people promising that you will be rich if you just sign up for their newsletter, seminar, or join their premium service. Look for realistic resources to learn from. The more hype the more the probability of a service being a scam.

2. Quit thinking you are going to double or triple your account in less than a year, even if you do that just means in almost all situations you are taking on too much risk. If you can achieve a 20%-25% annual return then you are among the best traders in the world, these are close to the annual returns of legends like George Soros, Warren Buffet, and Paul Tudor Jones.

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Reblog: 10 Things a Trader has to Beat


To be a profitable trader you must overcome these ten things:

  1. You must beat the market benchmark you are competing against or you might was well just buy and hold that index.
  2. You must beat your emotions by following a trading plan.
  3. You must beat your ego by taking losses early when you are proven wrong.
  4. You must beat your greed by managing your position sizing to limit your risk exposure.
  5. You must beat your fears by letting a winning trade run when there is no reason to exit.
  6. You must beat your desire to predict the future by reacting to what price action is actually happening.
  7. You must beat the trader on the other side of your trade.
  8. You have to make enough money to beat your commission costs.
  9. You must not let the market beat you up with too many losses and make you quit.
  10. You must beat the naysayers who think active profitable trading is impossible.

The original post is authored by Steve at newtraderu.com and is available here.

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Reblog: 2 Moving Averages that Beat Buy and Hold


2 Moving Averages that Beat Buy and Hold

Most the investing establishment considers buy and hold investing the Holy Grail that always works out in the long term. For long term buy and hold investing your entry time frame matters, whether you got in at good prices and if you have time after bear markets to get back to even. NASDAQ buy and holders waited a long time from March of 2000 and buy and holders from 2007 also had to wait many years to get back to where they were. The most simple long term moving average systems can beat buy and hold by getting and keeping you in during bull markets and getting you out before big drawdowns. You are capping your downside risk and keeping your upside potential profits open by simply having an entry and exit strategy based on price action not opinions or predictions.

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