INTELLECTUAL TRADING

 Have you ever thought about this - Are good traders born that way or can someone be trained to become one? During 1983, Richard Dennis - a successful & popular trader had an argument with his friend William Eckhardt about this subject - whether great traders are born or made Richard: We can teach and create good traders Eckhardt: No, there are certain aspects which cannot be taught They decided to do an experiment. They published an advertisement in the newspaper that they will train a group of people in their proprietary system & also give them the capital to trade the system. Interested candidates can apply, experience in market was not necessary. They got over 1,000 applications and 13 were finalized.    They were from different backgrounds. They were train

 Donchian channels were invented by Richard Donchian. He is known as a father of trend following trading. He was founder of world’s first managed fund in 1949 Donchian was born in 1905, he got interested in trading after learning abt story of Jesse Livermore. Donchian started relatively at young age but wasn’t successful initially in the market. He lost significant money in 1929 crash. Bt managed to come back & started practicing again He was a self-taught chartist and technician. He created strategies using charts and indicators and also studied company’s underlying fundamental characteristics. He also wrote technical newsletters for over two decades for well-known firms. Donchian was popular and doing good but he was not managing significant size even after being

  Range of any candle is a difference between its High and Low price. J. Welles Wilder introduced a concept called True Range. Formula of True Range: Maximum of (Current High – Current Low, Current High – Prev Close, Current Low – Prev Close).   The average price of true range over last several candles is known as Average True Range. 14-day period suggested by Wilder is popular and widely used parameter for ATR. ATR indicator is used to measure volatility. It is also used by traders while determining the stop-loss.   But if I want to compare current ATR wit

  Chester W. Keltner (1909-1998) was a Chicago grain trader. He worked with successful traders who back-tested trading systems. He talked about Ten-Day Moving average trading rule in his book 'How to Make Money in Commodities' in 1960.   He did not claim that he invented the strategy so origin of this idea is uncertain. But people started referring it as Keltner channel after the book. There are two versions of Keltner channel. First is explained by Keltner in his book, and the other one is a modified version. I will use 10-day period to explain the indicator. It can be calculated using any other period. First format: There are three parts of Keltner channel explained by Keltner in his book: 1-ATP 2-Range 3-Channel  

    Heikin-Ashi charts are said to have been developed by Munehisa Homma in 18th century by a Japanese rise trader. Hence, it is another old Japanese charting method. Heikin-Ashi candles are built from candlestick chart. A candle in candlestick chart is made of four prices OHLC.   A Heikin-Ashi (HA) candle is also made of four prices (OHLC) but calculated using the candlestick chart data. It is calculated in this sequence: OCHL (Open, Close, High, Low). So, we have two types of candle data every day : Candlestick data and Heikin-ashi candlestick data. To avoid confusion, lets call Candlestick char

Back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts. Below is some interesting information.   I was doing to design multi-chart setups. But the information in the thread can be useful for people practicing candlestick chart patterns. There are many patterns & we keep coming across more.    The data can give you a rough idea about the past performance of patterns. Patterns are defined based on the popular rules of identifying them. I have also tested bearish patterns for bullish trades and vice versa (Contra approach).    Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.   Some top bullish patterns have below hit ratio:    I

  If we collect last 52 bars and combine them to make one candle from it, the high of the combined candle will be highest high of those 52-bars and Low of the combined candle will be lowest low of the last 52-bars.     We now have a 52-bar candle. Eg – highest high of the pattern is 1000 and lowest los is 700. Its average price would be 850, that is (high price + low price) divided by 2. This 52-bar average price plotted after 26-bars typically acts as an important support or resistance line     In other words, for today, the 52-bar average range of the price bar printed 26-bars earlier, is an importan