Brian Shannon of Alphatrends will be hosting a free online educational seminar on April 21st, similar to his recent presentation at Trader's Expo in New York. If you aren't familiar with Brian's work, he specializes in active trading using VWAP (Volume Weighted Average Price) and multiple timeframes. Check out his site for more information on his techniques and to check out his book, or you can register online for the webinar here. I already registered, and it looks like it is filling up fast despite being a few weeks away.


Joey

I was digging through some older post's today and thought this one might be worth reposting.

Whether fairly, or unfairly, trading gets compared to gambling all the time. I think there are more similarities then most traders care to admit, as gambling has been made illegal by hypocritical governments who then sponsor lotteries, while Wall Street is revered as a place where an honest Joe can become rich by investing his hard earned money. Let's look at some similarities:

• Both deal in probabilities and on exploiting a mathematical edge over the long term.
• Both have periods where luck will override statistical probability.
• Both reward a small group while exploiting the masses.
• While odds are fixed in gambling depending on the game being played, and odds vary greatly depending on the market environment, both allow you to manage your betting to when the odds are in your favor.

I was reading through the comments on a post the other day and I found it interesting how reader compared the markets to the "house" and that the more hands you played, the more you would tilt the odds towards the house. I have a different view on who the house is in trading.

I think too many traders think of themselves as trading against the "markets". In reality, for every trade you make, there is another person betting that you are wrong. The exchanges are there to facilitate the trade, you are not trading against them. And although the majority of volume comes from institutions, there are still market makers and specialists who are human that manage each specific trade. So who is the house? In Gambling, the house is the Casino who is exploiting a statistical edge in order to make money in the long run. In trading, the house is the trader who is trading a system with a proven positive expectancy. In both, the house understands that they will experience times of loss, but that in the long run the odds will be in their favor. There are many different "houses" in trading, but you can guarantee that they have the odds in their favor.


So who is the gambler? The gambler is the person who bets without an edge, plain and simple. The gambler will win on enough trades to keep them coming back, but in the long run, the gambler will part with his money whether it's at a Casino or on E-Trade.

Another point was discussed limiting trading frequency. It is an interesting subject because there is a fine line between exploiting your edge, and over trading. In theory, when there is a statistical edge, it should be used as often as possible in order to have the luck factor neutralized. However, in trading, one has to be careful that taking too many setups results in taking mediocre or substandard trades, thereby reducing the expectancy of your system. However, if a system is traded faithfully there really shouldn't be any reason to limit the trades taken unless there are money management reasons for it.

Next time you take a trade, think about who would be on the other side of the trade and why they think you are wrong.

Who is the house and who is the gambler?

Stock Chart Analysis SY

Sybase, Inc.(Public, NYSE:SY)

I've mentioned a few times recently how Tech stocks have been showing good relative strength versus the rest of the markets. While they too have succumbed to the recent pullback in the markets, note how the Nasdaq 100 and Composite have yet to make new lows. While this is due in large part to under performance by the Financials, other sectors have fared quite poorly too. In fact, over the past 30 days, the Industrials have performed worse than the Financials, with Utilities and Materials right in the mix. Tech has clearly been the best performer, and could lead on the next rally attempt.

Sybase, Inc. (NYSE:SY), while not in the Nasdaq (it's a member of the Russell 2000), is in the Computer Software and Services sector. It has a very interesting chart that has held up well through the recent market weakness. In analyzing the chart for SY, I see a base that resembles a cup and handle. There is a lot to like in this chart. Notice the high volatility on the left side of the base and how it died down as it began bottoming. As it started to round higher volume started to increase, and there was a nice high volume gap on the right side which may of ignited a new move higher. It is now in the process of consolidating that move in what could be called the handle for the base. Volume has been tapering off as SY pulls back towards its 50-Day moving average and as it fills the prior gap. While technically the buy point would be over the high side of the base (near 200-Day moving average), there could be a low risk opportunity buy point in this area. I am keeping an eye out for signs of a reversal in this area which would allow for a pretty tight stop, with chances for a couple of targets. The first target is a test of the 200-Day moving average, and the second would be on a break of the cup and handle.



Good Trading,

Joey