Finclub

Jack Schwager - author of the well-known in the west best-seller «Market Wizards» and «New Market Wizards», in which he summarized the experience of the best traders and most successful investors.

Schwager first book, published in Russian, became a 800-page tome titled "Technical Analysis. Full Course ", released last year in Alpina Publisher. In his book, Schwager included and the quintessence of the wisdom of the market - advice to traders. Courtesy Alpina Publisher "We are publishing tips in a few abbreviated version of the magazine

Start trading

1. Make a distinction between transactions in line with the important long-term positions and short-term transactions. Average risk for short-term transactions (assuming the number of contracts in the position and the exit point) should be considerably smaller. In addition, speculators should focus on long-term trading positions because they are usually much more important to the success of trade. Mistakes made by many traders, is that they are so immersed in trying to catch short-term fluctuations in the market (creating a lot of commission payments and slippage), which overlook the major price movements.

2. If you believe that there is a long-term trading opportunity, do not fall into greed in trying to achieve slightly better than the opening price of the position. The loss likely came from one missed the price movement may block the benefit from 50 bit the best price performance.

3. The opening of any long-term positions should be planned and carefully considered - it should never be instantaneous pulse.

4. Find the graph model, which says that now is the time to open a position. Not initiate a transaction without such supporting figures. (Sometimes you can consider the deal without such figures, if there is a convergence of many of the measured movements and support / resistance levels in this price area, and there is a well-defined stopping point, not implying a high risk.)

5. Place orders by determining their levels through daily analysis. If the market comes close to the desired level of open transactions, record trading ideas and revise it every day until then, until the position is opened or trading will cease to seem an attractive idea. Failure to follow this rule may lead to missing good deals.

One common case is that of trade idea recall, when the market has already gone from the beginning of the implied price of the transaction, and then it is difficult to make the same deal for the worse price.

6. When looking for large-scale reversals of trends we should expect the appearance of any topping formations, rather than opening position against the trend to target levels, or on the lines of resistance / support. This rule is particularly important in the case of the market, which had been achieved long-term highs / lows (eg, high / low outside the price range of the preceding one hundred days). Remember that in most cases, long the market trend will not generate turns of V-type. Instead, the prices will come back many times to re-test the highs and lows. Thus, the expectation of formation of topping formations can prevent the exchange on small things during the process of formation tops or depression, not to mention the loss that might arise if the trend resumes. Even if the market really forms an important V-top or V-trough, the subsequent consolidation (eg, flags) may give a favorable attitude profit / risk to the opening position.

7. If you do, when you look at the chart (especially if you do not think, to any market it is), once there is an instinctive impression, follow that feeling.

8. The fact that you have missed a significant part of a new trend, should not keep you from trading in line with this trend (up until you can determine a reasonable stopping point loss).

9. Do not play against the bull or bear traps (last nesrabotavshih price formations), even if other factors encourage you to do this.

10. Never play against the first break in the movement of prices! For example, if you want to open a position in the direction of correction, and correction of the forms on the price gap does not enter the market.

11. In most cases, instead of limit orders (executed at a specified price), use market orders (executed at the current market price). This is especially important in the elimination of loss-making position, or when opening a position associated with the opportunities for long-term transactions, in situations where it is important not to lose current prices. Although limit orders will give slightly better price performance in the vast majority of transactions, this advantage will usually be more than overlap considerably inferior prices or missed opportunities for profit in those cases where the initial limit order is not executed.

12. Never increase your position near the initial point of entry into trades after the market was already on a favorable position for your area and returned to their original prices. Often the fact that the market has made a full refund, a negative sign for the trade. Even if the position is still well founded, it increased in a similar situation can lead to premature fixation losses due to increased risk of an adverse price movement.

Exit trade

13. Decide on the level of protective stops in the opening position.

14. Out of any transaction, if the newly formed pricing models or market behavior is opposite to the direction of your position, even if the stopping point has not yet been achieved. Ask yourself: "If I need to have a position in this market, as it must be sent?". If the answer does not correspond to the position you hold, close it. In fact, if the opposing figures are strong enough, expand the position.

15. In any case, immediately close the deal as soon as its initial conditions are violated.

16. If the first day of your trade appears that you are essentially wrong, immediately get out of the deal, especially if the market is experiencing a gap, directed against you.

17. In the case of large-scale breakdown against the position you hold, or immediately liquidate the position, or use a very close stop. In case of breakdown with a break liquidate the position immediately.

18. If trading in this market begins to significantly exceed the previous volatility in a direction opposite to the position you hold, immediately liquidate their position. For example, if the market trading which took place in the daily range is about 50 points, opens at 100-150 points higher, immediately cover their short positions.

19. If you have sold (bought) at the level of resistance (support) and market consolidation, rather than turn around - get out of the deal.

20. For analysts and financial managers: if you feel that your previous recommendations, transactions or accounts are wrong, - change your opinion!

21. If you can not watch the markets for some period of time (say, travel) - either liquidate all positions, or make sure that all open positions posted operating stop orders. (Also, in such situations should use limit orders that guarantee access to the market with a planned purchase at low or no c planned sales at high prices.)

22. Do not relax, having an open position. Always know where you will exit the market, even if this point is far from the current price. In addition, the emergence of the figure, negative for your transaction, may suggest the desirability of an earlier than planned, out of the trade.

23. Resist the temptation to immediately return to the market after fixing damages in the performance of defensive stops. Such a return will usually lead to an increase in initial losses. The only reason to go back to the previously stopped the transaction may consist of a significant change in market conditions (occurrence of new models), ie if all of the conditions justifying any new deal.

Other rules

24. When the trade goes bad: (a) reduce the size of the position (remember that position in the strongly correlated markets is akin to one big item), (b) use a similar defensive stop, and (c) do not rush to start new transactions.

25. When the trade goes bad, reduces risk by eliminating unprofitable and not a winning position. This observation was also made by Edwin Lefevre in his "Reminiscences of a Stock players:" I did absolutely the wrong thing. I supported the trading position of the cotton and closing a winning position in wheat. There is nothing worse than trying to average a losing position. Always close the loss-making deals, keeping the position shows a profit. "

26. Please be careful not to change the methods of trading after profit: Yes. Do not start any transactions that would have seemed too risky in the beginning of the trading program. b. Do not increase suddenly the number of contracts in a typical transaction. (However, a gradual increase with the growth of assets is quite normal.)

27. Come to the small items with the same common sense that a large. Never say: "It's just one or two contracts».

28. Do not hold very large positions in the time of publication of important economic data and government statistics.

29. When trading spreads should apply the same principles of risk management, as in the case of unilateral positions. Very easy to relax at the thought that spreads are moving rather slowly, and because there is no need to worry about defensive stops.

30. Do not buy stock options without having to plan, at what price the underlying asset deal would be eliminated.

Retention of profitable positions in and out of them

31. Do not fix a small quick profits on transactions in the direction of the main trends. In particular, if you're absolutely confident the deal will never fix the profit in the first day.

32. Do not rush to close the position after a gap in your direction. Use the break-up as the initial stop, then enter the tracking stops.

33. Try using the tracking stops, placing them on the basis of the development of the market situation, instead of record profits on target levels. The use of goals is often hampered fully realize the opportunities provided by the main trends. Remember, from time to time you need big wins to cover failures.

34. Despite the previous rule, still useful to define the primary goal in the opening of the transaction, which will apply the following rule: if in a short period of time after opening the position reached most of the profit target (eg, 50-60% for one week or 75 - 80% for two or three weeks), it should be fixed income units, referring to the recovery of liquidated contracts at market correction. The idea is that it would be wise to take a quick tidy profit. Although this rule can often lead to the loss of the remaining portion of the profits from liquidated positions, holding positions in such a case can often lead to feverish elimination at the first sudden return of the price.

35. If the goal is reached, but the position you still like it, leave it, stop using tracking. This rule is important from the standpoint of trade in the direction of the main trend. Remember, patience is necessary not only in those moments when you are waiting for good deals, but in order not to close a position when it makes a profit. Inability to obtain adequate profit on the transaction in the correct direction of the trend - a key factor limiting the profitability of trade.

36. One partial exception to the previous rule is that if you have a very large position and the value of your assets is growing before our eyes, you should consider partial profit taking. When everything is too good to be true, beware! Perhaps it is time to start gradually record profits and place close tracking stops.

37. When the profit in a transaction which, in your opinion, still has a long-term potential (but possibly vulnerable to short-term correction), develop a plan to resume the position. If the market does not make a substantial return, which allows to resume the position, stay tuned for pricing models that can be used to select the date of the new entrance into the market. Do not be afraid to re-open position, even if the new entry point into the market is worse than an exit point if the idea of ​​long-term trends and assessing the current time of the alleged resumption of the position. Failure to return to the market at a worse price can often lead to loss of the main part of larger trends.

38. When trading multiple contracts, and avoid the emotional trap, which consists in the desire to be right 100%. In other words, fix income units. Always try to keep at least a partial position in the direction of the trend - as long as the market will not form a convincing reversal shape, or it reaches an important defensive stops.

Other principles and rules

39. Always pay more attention to the behavior of the market and the formation of pricing models than the target levels and areas of support / resistance. The latter often can be the reason that your correct opinion on the market will change abruptly.

40. When you feel that you need to act - or open position, or leave it, - act without delay.

41. Do not act against his own views on the long-term trend of the market. In other words, do not try to sit on two chairs.

42. Winning positions, tend to have a positive reassessment of the beginning.

43. The right timing for opening the position and exit (for example, the timing of entry on the basis of compelling price formations, an immediate exit at the first sign of failure) can often save you from big losses, even if the position is a failure.

44. Intraday solutions are almost always wrong. Do not engage in intraday trade.

45. Always check the market before closing on Friday. The situation is often seen more clearly by the end of the week. In such cases, the best entry price or output can usually be obtained before closing on Friday than at the opening of the exchange the following Monday. This rule is particularly important if you hold a significant position.

46. Dreams of the market may well serve as a basis for action (when the memory of them explicitly). Such dreams often come true, because they represent your subconscious knowledge of the market, which breaks through the barriers set by the conscious thinking (eg, "How can I buy here if I could open a long position at $ 2000 below last week?").

47. You may not be immune from bad trading habits. The best thing you can do - is to suppress them. Laziness and carelessness quickly lead to their return.

Pricing Models

48. If the market is setting new historic highs, and not falling, there are great chances that the price movement will continue. Sales at new highs - is one of the biggest mistakes traders dilettantes.

49. Narrow market consolidation at the upper edge of a wide trading range - bull shape. A similar narrow consolidation near the bottom of the trading range - a bear figure.

50. Play breakout with a long narrow range of stop placement near the other end of the range.

51. Breakdowns of trading ranges, which are held one to two weeks or longer - one of the most reliable technical indicators of impending trend.

52. General and particularly useful form of the above rule: the flags or pennants that are formed over an upper limit (or below the lower limit) of the previous long and wide trading range, tend to be very reliable figures to continue.

53. Trade in the direction of the wide gap.

54. Discontinuities arising posle long periods of consolidation, in particular, after months odnogodvuh trade in a limited range, are often excellent signals (a figure works especially well in a bear market).

55. If the gap resulting from the breakdown level is not filled within the first week, it should be seen as a very strong signal.

56. Break to new heights or depressions, followed in the next week or two should break with a return within the range, is particularly robust figure, talking about the bull or a bear trap.

57. If the market does breakdown to new peaks or troughs, and then returns to the previous trading range and forms there a flag or pennant, consider that there was a trend reversal. You can open a position in the direction of rotation, putting a stop overseas flag or pennant.

58. Breakdown of the trading range, followed by a deep return to the range (for example, three-fourths or more inside the range) - is another significant form of a bull or a bear trap.

59. If the apparent V-trough should be nearby Consolidation formation, it can serve as additional confirmation of the basin. However, if this consolidation and then breaks down and the prices are close to the minimum V-trough, it should wait for the resumption of falling trend and reach new lows. In the latter case, one could take short positions when using protective suspensions near the top of the consolidation. Similar comments would be suitable to the case of V-vertices, followed by consolidation formations.

60. V-tops and V-trough, followed many months of consolidation, which begin to form immediately after the pivot point, often long-term highs or lows.

61. Narrow consolidation in the form of flags and pennants are often reliable figures to continue and allow you to enter an existing trend is sufficiently close placement of a stopping point.

62. If a narrow consolidation in the form of a flag or pennant leads to breakdown in the wrong direction (for a turn instead of going on), expect a continuation of the movement in the direction of the breakdown.

63. "Curved" consolidation often leads to an accelerated movement toward the bend.

64. Breakdown of short-term "curved" consolidation in the opposite direction to bend, it is often a good sign of a trend reversal.

65. Wide-range days (days when the trading range is considerably wider than the average range for the previous day) with the closure in a direction opposite to the main trend, often provide a reliable early signal of a trend reversal, particularly if they also include a reversal signal (eg, filling the gap acceleration probe pre-consolidation).

66. Almost sheer significant price movement over a period of 2-4 days (with breakdown of the relative maxima and minima) tends to continue in the coming weeks.

67. Spikes are good signals of short-term reversals. Extremum of the spine can be used as a stopping point.

68. In the presence of thorns analyze the graph twice: in view of the spike without him. For example, if ignoring the obvious spike flag, the breakdown of the flag - a significant signal.

69. Filling the gap acceleration can be regarded as evidence of a possible trend reversal.

70. Island reversal, soon to be returning in a recent trading range or consolidation of the figure represents a signal of possible long-term achievement of the maximum (minimum).

71. The market's ability to stay relatively stable, while other, related markets are experiencing significant pressure, may be regarded as a sign of inner strength. Similarly, the weakness of the market at a time when the related markets are strong, can be viewed as a bearish sign.

72. If during the greater part of the daily trading session, prices are constantly rising, assume closure in the same direction.

73. Two successive flag with a small gap between them can be regarded as a figure to continue.

74. Think of a rounded cavity, followed by consolidation with a slight bend in the same direction near the top of the figure, as a bullish construction (cup with handle). A similar observation can be applied to the top of the market.

75. Cool mood of players relative to the market with a strong trend may be a more reliable indicator of the likely continuation of price movements, than a strong bullish or bearish mood as an indicator of a reversal. In other words, extreme mood may frequently occur in the absence of long-term peaks and troughs, but long-term peaks and troughs rarely occur in the absence of extreme sentiment (current or former).

76. The fact that a trade signal has not worked, is a more reliable signal than the original signal. Open position against the original signal and use the maximum (minimum), which occurred before the appearance of a false signal, as the level of the stop. Some examples of such nesrabotavshih figures are given in rules 56-58, 62, 64 and 69.

77. Market failure to follow the great news bullish or bearish nature (eg, key reports USDA) is often a harbinger of an impending trend reversal. Pay special attention to such developments, if you have open positions.

Analysis and verification of

78. See daily schedule, especially if you are very busy.

79. Keep checking long-term charts (eg, every four weeks).

80. Religiously follow the rules of keeping a diary trader, attaching thereto schedules for each transaction undertaken, and recording the following things: the causes of the transaction, expected to stop and purpose (if any) price at which the position was closed, observations and lessons (errors or correct decisions notable model), net profit / loss. It is important to list devoted to the transaction was completed at the time of opening the position, then the reasons for the transaction will accurately reflect your thinking at that moment, not for its reconstruction.

81. Keep a collection of chart formations, making it all seen the market model, which seem interesting to you. This will help you test your prediction about their outcome or pay attention to how the figure eventually resolved (if you did not know what to expect from this model). Be sure to watch out for each schedule until the very end to see the final outcome. Over time, this process can improve your skills in the interpretation of graphs, giving some statistical evidence of the predictive reliability of various graphic shapes (when they are detected in real time).

82. Check and update trade rules, the trader's diary and a collection of graphic figures on a regular basis (for example, a complete upgrade in three months). Of course, the test can be conducted more frequently if you think it would be useful.

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Jack Schwager manages the fund with a capital of more than $ 75 million. He is Director of Research at Prudential Securities, Ink., Managing director of Wizard Trading. In addition, in the field of futures trading, he - the authoritative consultant with 22 years of experience in market analysis. People like him are usually called "financial gurus". He has published in leading financial publications U.S., giving lectures and publishes books. As one of his colleagues: "Jack Schwager in this century has had on trading futures more influence than any other author».