Top Traders and Trading Strategies.

Tanishk_Ojha · 2023-12-18T15:02:23+00:00

RICHARD DENNIS Original turtle trading rules ---> Volatility-based position sizing methods Pyramiding Turtle trading exits and stops One important tu...

Tanishk_Ojha

RICHARD DENNIS

Original turtle trading rules --->
- Volatility-based position sizing methods
- Pyramiding
- Turtle trading exits and stops
One important turtle trading rule of the turtle trading strategy was to vary their position sizes based on market volatility. Richard Dennis taught them to use the average true range (ATR) indicator to calculate volatility and use this to vary their position size. They were to take larger positions in less volatile markets and lower their exposure in highly volatile markets.
- The goal was to maintain equivalent risk per dollar because higher volatility indicates higher risk. The turtles could diversify their portfolio by investing in similar risk levels.
The turtle trading rules also involved using the pyramiding technique rule to maximize profits on winning trades. That is, they added more positions when they are in a winning trade, using their increasing profits to carry the extra positions. They did this systematically so that the profits from earlier positions can more than cover the new positions. If the market remains favorable, they bag a lot of profits with a much bigger position.
Only employ pyramiding when the market is trending strongly, and make sure you have an exit strategy before you start trading.
The turtles were taught to determine ahead of time when to cut losses and move on and were mandated to always exit once the market reaches its predetermined stop price.
The turtle theory is based on the fact that the market can stay in a trend for a prolonged period. In the market, it is believed that the trend, once established, remains until it is proven to have reversed. So, the logic behind the strategy is to identify the emergence of a new trend early, trade in the direction of the new trend, add more positions as the trend progresses, and finally exit from the trade once a new trend seems to emerge in the opposite direction.
- Because no one knows when a trend starts, all turtle trading rules are based on purely mechanical rules.
To identify the emergence of a new uptrend, Richard Dennis uses the breakout strategy. Specifically, the turtles used, for example, the breakout of a 20-day high to identify the beginning of a new uptrend and then enter a long position. Subsequent breakouts, such as the breakout of the 55-day high, were seen as opportunities to add more positions (pyramiding).

Tanishk_Ojha

MICHAEL MARCUS

In describing his trading approach, Marcus described it like this: “In the final analysis, you need to have the courage to hold the position and take the risk. You need to be aware that the world is very sophisticated and always ask yourself: ‘How many people are left to act on this particular idea?’ You have to consider whether the market has already discounted your idea.”
The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone.
Every trader has strengths and weaknesses. Some are good holders of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach.

Tanishk_Ojha

ED SEYKOTA

Ed Seykota is famous for his trend-following strategies – he is regarded as the trend follower wizard and father of computerized trading.
Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.
As a trend trader, Seykota prefers technical analysis. He noted that he looks out for three fundamental components in his trading style: identifying the right time to buy and sell, long-term trends, and chart patterns which he says are the basis of analysis. He places his stop losses immediately after opening a position and takes profit if there was a downturn in the market.
It can be very expensive to try to convince the markets you are right.
Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don’t play.
Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. However, if you catch on early, before others believe, you might have valuable “surprise-a-mentals.
Ed Seykota has a golden mantra: “Keep your bets small.” He never stakes a massive portion of his capital on a single trade. Instead, he gambles with only a tiny fraction. This strategy minimizes potential losses, ensuring Seykota remains in the game, even when a trade goes wrong.

Tanishk_Ojha

WILLIAM ECKHARDT

Basically, I would buy when weak hands were selling and sell when they were buying. In retrospect, I’m not sure that my strategy had anything to do with my success. If you assume that the true theoretical price is somewhere between the bid and the offer, then if you buy on the bid, you’re buying the market for a little less than it’s worth. Similarly, if you sell on the offer, you’re selling it for a little more than it’s worth. Consequently, on balance, my trades had a positive expected return, regardless of my strategy. That fact alone could very well have represented 100% of my success.
The human mind was made to create patterns. It will see patterns in random data. The human mind will tend to find patterns where non exist.

Tanishk_Ojha

The main principles are:

Cut losers
Listen to price action/follow price trends
Ride winners
Manage emotions
Don’t overtrade

The secret for winning in the stock market does not include being right all the time...The key is to lose the least amount of money possible when you are wrong.

Tanishk_Ojha

Below few posts have been taken from this website

CUTTING LOSSES

One of the worst mistakes anyone can make is to hold on blindly and refuse to admit that his judgement has been wrong.
Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
The speculator has to insure himself against considerable losses by taking the first small loss.
Cutting losses is the one and only rule of markets that can be taught with the assurance that it is always the correct thing to do.
If the stock declines, it should be sold at a small and quick loss.
..there is no such thing as cannot in the market...any stock can do anything...I was bound to be wrong half of the time...the first step I took in that direction was to adopt what I called my quick-loss weapon.
I built a fortune...with the use of a single tool: the trailing stop loss.
Put simply: When something is not going well, stop doing it.
I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in.
The most important rule of trading is to play great defense, not great offense.
Don’t focus on making money; focus on protecting what you have.

-If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.
Don’t refuse to take a loss because of your ego...That lesson is important enough to repeat for emphasis. Don’t cling to a stock because you can’t afford to bruise your ego by selling at a loss. Remember, no one wins all the time.
Regardless of your methodology or approach to stock investing, there is only one way to protect your portfolio from a large loss, and that is to sell when you have a small loss before it snowballs into a huge one. In three decades of trading, I have not found a better way.

Tanishk_Ojha

PRICE ACTION

Many a novice will sell something he has a profit in to protect something in which he has a loss. Since the good stock usually has gone down the least, or may even show a profit, it is psychologically easy to let go. With a bad stock the loss is likely to be heavy and the impulse is to hold on to it in order to recover what has been lost. Actually, the procedure one should follow is to sell the bad stock and keep the good stock.
Markets are never wrong - opinions often are.
Of course there is always a reason for the fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations...Your business with the tape is now not to-morrow. The reason can wait.
We cannot know what the insiders intend to do, but we can see their orders on the tape when they execute them. That is why my plea is for every one of us to have no mere opinions of his own, but to allow the action of the market to tell him what is passing.
Stocks did not fly like balloons in any direction. As if attracted by a magnet, they had a defined upward or downward trend which, once established, tended to continue.
I was fascinated to realize that my buying, based purely on the stock’s behavior, enabled me to profit from a proposed merger without knowing anything about it. I was an insider without actually being one.
At first, I thought that intelligence was reality and price the appearance, but after a while I saw that price is the reality and intelligence is the appearance.
Here’s how it works: To spot a rising trend, you look at where the price is now relative to where it has been. So for example, if the price of a commodity or stock is higher than it has been for 40 or 50 days...you can buy and ride this trend.
One should always hold in mind the direction of the...trends. The major trend is the most powerful.
Follow the fundamentals in your trading but only if and as long as the charts [trend] do not cast a negative vote.
I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self- evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?
Ignore personal opinions about the market. Instead, study the day-to-day price and volume changes...
Let the strength of the market tell you where to put your money, not your
personal opinion...

Tanishk_Ojha

RIDING WINNERS

I’ve learned many things from Soros, but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
Becoming wealthy and successful isn’t simply about being right all the time. It’s about how much you win when you are right as well as how much you lose when you are wrong.
Even being right three or four times out of ten should yield a person a fortune if he has the sense to cut his losses quickly...

It was never my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!
They say you never grow poor taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market.
You know you are right because if you were not, you would have no profit at all. Let it ride and ride along with it.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock trader has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
I should rather hold on to one rising stock for a longer period than juggle with a dozen stocks for a short period at a time.
Never predict how far a market can go.
There must always be a good reason before you can permit yourself to close out a profit.
The idea is to control initial entry risk...profits take care of themselves.
You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.
If the stock goes up you buy more. You don’t care how big the position gets as part of your portfolio. If you get it right, then build [the position].
I don’t like working. I do the absolute minimum that is necessary to reach a decision. There are people who love working. They amass an inordinate amount of information, much more than is necessary to reach a conclusion. And they become attached to certain investments because they know them intimately. I am different. I concentrate on the essentials.

You sort of put some positions on; and then when the thesis starts to evolve, and people get on and you see the momentum start to change in your favor, then you really go for it. You pile into the trade.

Tanishk_Ojha

HUMAN EMOTIONS

Above all else...the stock market is people. It is people trying to read the future...What drives the prices of stocks up or down is not impersonal economic forces or changing events but the human reactions to these happenings...The main obstacle lies in disentangling ourselves from our own emotions.
Your real trading system includes your math and your own willingness to experience your feelings about following your math...Willingness to experience your feelings about your system without acting on them is essential to system trading...If you want to trade consistently, without the swings in confidence, then you have to learn to accept, even celebrate, the feeling of uncertainty.
Jesse Livermore -- One major mistake of all speculators is the urge to enrich themselves in too short a time...Such speculators are never satisfied. They continue to shoot the works until somewhere a cog slips, something happens - something drastic, unforeseen, and devastating. At length comes that final margin call from the broker, the call that cannot be met, and this type of plunger goes out like a lamp.
Day traders and very short term guys love this type of high volatility market. I avoid these periods. This is what I call a ‘hard penny’ environment. Why fight for pennies when you can simply wait for easy dollars?