Sunday, September 16, 2007

Learn to Calculate a Stock's Pivot Point

Stocks breakout from properly formed bases everyday but many investors dont understand how to locate a pivot point or what patterns to study that may contain this very important buy signal. A pivot point can be described as the optimal buy point or the area at the end of a familiar base pattern where the stock breaks out into new high territory. William ONeil, the founder of Investors Business Daily is considered the pioneer of the pivot point in modern times. As Jesse Livermore explains in his book (1941), the pivot point can also be described as the point of least resistance. When a stock breaks the point of least resistance, we are presented with an opportunity where a stock has the greatest chance of moving higher in a short period of time, especially when volume accompanies the breakout.

The pivot point can be calculated as the stock is forming the handle on a cup-with-handle base. The ideal buy price would be $0.10 higher than the highest spot during the handle, also know as the top of the right side of the base. The intraday high can qualify at the highest point and does not have to be the closing price of the stock. If the stock closes at the high for the day, then we will use this number as the high point.

The exact methods used for finding pivot points vary depending on the base pattern that is forming on a daily and/or weekly chart.

When a flat base occurs, an investor should look for a move $0.10 higher than the top point on the left side of the base or the start of the formation.

A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above.

A double-bottom formation triggers a pivot point that will be $0.10 higher than the middle peak in the W shaped pattern.

Many investors will try to cheat the rules and place a position prematurely before the stock breaks out and passes the pivot point. I do not suggest buying until the stock triggers the pivot point on above average volume also known as qualifying volume. The area considered as the least amount of resistance is weighed so heavily because all overhead sellers are gone as we break into new high territory. The pivot point usually comes within 5% to 15% of the stocks old high 52-week high.

Dont chase a stock that is 5% or more above the proper pivot point. This does not mean that you cant buy on normal corrections and pullbacks to support or moving averages, especially if the stock remains in an uptrend. This rule only applies to the pivot point area as the stock becomes extended. If you buy with the pivot point and sell when a stock falls 7-10% from the pivot point, I guarantee that your yearly performance will increase dramatically.

Chris Perruna -

Chris is the founder and president of, an internet community that teaches you how to invest your money with solid rules. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

2 Tin Cans and Some String - What You Need to Know to Start an Online Business!

Having been involved with the tech sector since 1980 you would think I was proficient in the ways of starting a businessummmnopeso what that I started my first tech business by selling software for the Deck Rainbow(hmm maybe that was/is my problem). So what that I helped to create and market a software utility that went into 10s of millions of PCs, or the fact that I represented dozens of developers in helping to market their software designs to software publishers or even that I was involved with the start up of an online company that was sold for over 600 Million dollars.cause sister, I got nothing on truly understanding business start ups... EXCEPT that... any time you go to set up a business on the internet or you want to use the net it changes quicklythe technology changes constantly.... the Internet changes constantly and quickly...and this in turn causes the entire world to change. The only thing that does not change as quickly though is the people. While we do change to adapt to the technical changes in our lives, for the most part we stay the same. Why is that important in starting an online business?

Well, I feel the reason is that if you know yourself, you will then come closer to knowing what business you want to start (because after all you do not change as fast as technology). This in turn means that if you also know yourself then you can know the people you want to approach with your business. A question you might be asking is What the hell does 2 Tin Cans and some String have to do with figuring out what kind of business I should start hmm maybe nothing... just a catchy title to draw you in. Or it could mean something that only you can understand. If you have never done this give it a try, as a kid I never had anything that would be considered hi-tech except for a transistor radio

So we would make use of what we hadin building our Tree Fort we wanted to be able to communicate with outsiders, so we would take 2 tin cans and some string and make a whole in the bottom of each tin can(with a nail). We would then thread the string though the hole and have one end in the back door of our home and the other end in the Fort (pulled tight). We could then communicate with whoever wanted to come up. Of course I am sure we could just as easily have yelled or looked out our little window but that wasnt the point. It was that we were creating something, a system of communicationa way to allow those who wanted to talk to us to do so in a cool way. We were Hi-Tech we were cool and we had fun

The same thing goes with creating a businessthe FIRST thing I always tell those that want to start a business and theyre not sure what to do, is to first find out about themselves. What do you like? What is your passion? What are your strengths? What are your weaknesses? I also tell them, whatever you do... do NOT just go and start a business because someone says you can make a lot of money. I do NOT care what anyone says... starting a business for the sake of getting rich will lead to one thing for almost 99.99% of all people and that is failure.

Why is that? Well answer it yourself do you like the IDEA of the business someone just told you about (not of making the money), are you passionate about the business that will make you rich? Do your strengths lend them selves to that business? Will your weaknesses cause the business to grow or fail?

If you answer yes to 3 of the 4 questions then go for it however if your answers is I am in doubt then throw it out! On the flip sidemore often than not an idea that you are passionate about, that lends to your strengths and you know that people will like can be exciting to do. So when the long hours come around, you wont mind that the pay is low to non existentand finally one day when you become successful. It will be because you were passionate and people saw that in you, then the money will come. But only after you take 2 tin cans and connect them together with a piece of string.

Bonus: So I like to cook a lot and I like to pass along some minuscule experience on my is one little bit of fun:

Cooking Da Peeg Island style -
So you want to have a taste of Hawaii but live in Medicine Hat, Montana and you find it a little hard to grab the kids and drive to the islanders local favorite restaurant in the North Shore? Well you can try this Pork BBQ to either feed a few family members or the whole Ranch.

Kalua Pig
- this is similar but different from your North Carolinian BBQ(mine is moister). You do start with the Butt of a Pig... NOT THE SHOULDER.... about 10 -15 lbs, take the Butt and cut it into pieces about 2 by 4 inches and lay it in a pan that is about 3-4 inches deep(like a turkey roaster pan)

Take kosher salt and shake it generously all over the meat(pork is very forgiving). You can take garlic powder(I prefer fresh chopped garlic) and spread about 1/3 cup over the meat. Get liquid smoke and place about 1/4 cup over the meat.

Poor into the pan about 2 1/2 inches of water. cover the pan TIGHTLY with foil. Place in the oven at 325 degrees for approx 4-5 hours. You can test it by opening the foil and with a fork see if the meat falls apart. (also if you have a party that is later in the simply turn the temp down to 200 degrees and let it continue to cook...this will easily stay moist for 5 more hours at that temp(just make sure there is at least a little liquid in the pan)

When ready to serve take two forks and shred all the meat mixing it in with the liquids. You can serve this with a spicy BBQ sauce of your making or off the shelf on top of a bun with slaw on the side or on top of the sandwich, or serve it with baked beans, corn on the cob...or if you want it island make sticky rice, mac salad and island slaw(let me know if you want the recipes for these)

Aloha Ya'all

A Simple Swing Trading Strategy You Can Put To Use Right Now!

I started to develop a swing trading strategy after 2 years of trying to day trade the EURUSD. I found trading the longer time frames were not only far more profitable but also less stressful and freed up allot of time to do things I enjoy.

A good swing trading strategy must trade with the longer term trend, all we are looking to do is cut our losses short and let our profits run. It must be simple, anything complicated is only making our trading decisions more difficult.

Lets go through what rules I follow and how I identify a good trade. I trade the 4 hour charts with this swing trading strategy, it works well on this time frame and I suggest you do the same.

First we need to find the trend direction on the daily charts, if price starts in the bottom left and finishes in the top right of your screen then we are in a up trend. If price starts in the top left and finishes in the bottom right then we are in a down trend. If you have trouble show the chart to a child they will get it right every time!

Next we have to go back to the 4 hour chart to find an entry point that gives us good odds of price going in our favour. Look for retraces to the 50% fib level that coincides with good support/resistance levels, I also like to target 00 areas as this is what the larger institutions will be targeting for there orders. Remember only take trades with the trend on the daily chart!

Once you have found a suitable entry point set your order with a 50pip trailing stop loss. Please note that if you trade a currency pair with higher volatility then you will have to increase your stop to suit, 50 pip stop is for the EURUSD which is the main pair I trade.

Once your order is triggered just sit back and watch, do not interfere with the trade, you have a trailing stop to do the work for you. As soon as your position is in profit the trailing stop will move up keeping your stop exactly 50 pips behind and locking in any profit along the way.

Although many new comers looking for a swing trading strategy will laugh at this simple system I can assure you that it works. The more you get a feel for the market the more you will profit with this strategy. Trading forex does not need to be difficult, it is the human physiology that makes it hard for people to see profits disappear. Unfortunately this is part of the business and you must focus on the month to month gains not the day to day gains.

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What is Expectancy?

I have been watching as a several people on a forum discuss, argue and lend their ideas about entry techniques. They are going crazy over what the proper entry should be and why one chart pattern is better than the other. One person has even said how they purchased massive amounts of software to help them enter the market. Now dont get me wrong, I always use techniques to get me in the market but I understand that this is the least important factor weighing on an investors overall success. I use technical analysis every day and I study patterns that allow me to enter with the ideal buy point (what I believe to be the ideal entry) but I know that strong up-trending stocks give me just as good a chance to make money as stocks breaking out of a cup with handle pattern. I am one that makes my living buying stocks making new highs so I can basically prove that the random entry strategy does work as long as strong money management and exit strategies exists.

By reviewing my personal trades and the coverage of dozens of stocks on the MSW Index over the past two years, I can tell you that my system with the highest expectancy is buying fundamentally sound stocks that are making new highs on above average volume. Where do I find these fundamentally sound stocks? I use multiple computerized screeners that filter out stocks with increasing earnings, high EPS ratings and increasing relative strength ratings. Once I find these stocks, I narrow them down using my own eyes by performing technical analysis. The process is simple as I am basically looking for stocks making new highs with decent to strong fundamental numbers. The process is almost random. To tell you the truth, I could probably narrow down my buy candidates each week to a list of 20 and throw darts at ten stocks to buy the following week and still have a profitable year because I do use position sizing and strict sell rules. Think I am crazy: think again as I explain what expectancy is.

I responded on the forum by saying: Entering at the right time is important and it can lower your risk and increase your overall expectancy but money management and exits are much more important than entry.

Studies have been done between random entry systems and specific systems that use entries based off of chart patterns with amazing results. The random entry system typically outperforms the structured entry system when it uses money management (position sizing techniques) and a strong exit strategy (assuming that the structured system doesnt employ money management tools).

I love CANSLIM and ONeil but the entry is not the most important aspect you should be focusing on, it is money management and exits. Most people dont want to hear this and that is why so many entry based systems sell so well over the years. How many of those systems actually make their users money? CANSLIM does use a 7%-10% sell stop rule but it ignores position sizing and never explains the probabilities of the system when implemented in certain ways.

As I said, I make money using a system based from CANSLIM (an entry system) but it is heavily balanced with strong money management techniques and a strong exit strategy.

So what is expectancy?

Expectancy tells you what you can expect to make (win or lose) for every dollar risked. Casinos make money because the expectancy of every one of their games is in their favor. Play long enough and you are expected to lose and they are expected to win because the odds are in their favor. Most games at a casino are completed in a short period of time so they can increase their odds of winning. The same holds true for investing. If your expectancy is positive; you can make more money with multiple trades in shorter periods of time. If you told me this ten years ago, I would strongly disagree based solely on beliefs. Now with experience, I continue to move down the path to more frequent trading and a structured system that is run like a business. I now have massive amounts of data based on real trading that I have performed over the past several years.

Expectancy is your profit percentage per win multiplied by your win rate minus your loss percentage per loss multiplied by your loss rate. I will use examples from Trader Mikes: Trading 101: Expectancy ( and Van Tharp's Book: Trade your way to Financial Freedom:

Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

Expectancy = (PW*AW) less (PL*AL)
PW is the probability of winning and PL is the probability of losing.
AW is the average gain (win) and AL is the average loss

So lets do an example (assume $12,500 per position, a $100,000 portfolio using 1% equity risk):
If my trades are successful 40% of the time and I realize an average profit of 20% but I lose an average of 5%, my expectancy is $625 per trade.

(0.4 * $3,125) - (0.6 * $625) = $625

$1,250-$375 = $625

I lose 60% of the time yet I show a profit of $625 per trade. If I have a system that produces 65 trades per year, I would realize an annual gain of $40,625 (hypothetical scenario). A 40% gain on the original $100,000 (minus all commissions, fees, taxes and compounding).

Trader Mike ( offers an example geared towards a day trader: "As an example let's say that a trader has a system that produces winning trades 30% of the time. That trader's average winning trade nets 10% while losing trades lose 3%. So if he were trading $10,000 positions his expectancy would be:
(0.3 * $1,000) - (0.7 * $300) = $90

So even though that system produces losing trades 70% of the time the expectancy is still positive and thus the trader can make money over time. You can also see how you could have a system that produces winning trades the majority of the time but would have a negative expectancy if the average loss was larger than the average win:
(0.6 * $400) - (0.4 * $650) = -$20

In fact, you could come up with any number of scenarios that would give you a positive, or negative, expectancy. The interesting thing is that most of us would feel better with a system that produced more winning trades than losers. The vast majority of people would have a lot of trouble with the first system above because of our natural tendency to want to be right all of the time. Yet we can see just by those two examples that the percentage of winning trades is not the most important factor in building a system. "
- Trader Mike

Most traders look for three major factors when developing a system:
The right odds or positive expectancy
Multiple trades (opportunity)
Shorter holding periods to compound the profits

Lets look at the calculation one more time using only percentages:
PW: 48%
AW: 10%
PL: 52%
AL: 4%

(48% * 10%) - (52% * 4%) = 2.72%

Using a trade size of $12,500, each trade would return you $340 or 2.72% (profit). Lets say this system gives you 200 trades per year; your result would be a $68,000 profit with only 1% of equity risked or $12,500 on $100,000. This doesnt include compounding profits with each successful trade.

A positive expectancy can come from an unlimited amount of numbers or scenarios. You could have a system that produces winners 30%, 50% or 80% of the time and each system could be positive or negative based on PW, AW, PL & AL. An infinite number of trading systems and/or number combinations can be used to find a positive expectancy system.

The one thing I have realized over the past few years as my account grows is the fact that opportunity must exist to make money with a positive expectancy system. Think of the casino; the more you play, they more they win. The same is true for trading; the more you play with a positive expectancy system, the more your odds are for that system to return the expected number.

I have been tailoring my system to produce more trades and opportunity so I can take full advantage of the mathematical odds. As many of you know, I graduated as an architectural engineer and love numbers since my courses were based in advanced math and physics. Numbers dont lie; I love to play poker because I understand the odds so I am typically successful over long stretches of time at the table because I have the emotional stability to only jam the pot when the odds are in my favor. Like stocks, I do my best to let go of losing hands and losing positions (sometimes I follow a committed hand in poker or a committed position with stocks but the odds are no longer in my favor and more times than not, I lose the hand or settle for my maximum stop). I am attracted to games with numbers and odds and the stock market is the best game in the world (in my opinion). Poker is a close second.

I want you to think about one more example (provided from ARB Trading -

"You will be more profitable with $100,000 that you could "turn" 250 times per year, than $500,000 that was tied up in one trade for 12 months. As an example, let's say we have one trade and that trade yielded a 50% return. You just had a great year - a $250,000 profit.

On the other hand, say you had $100,000 for stock purchases, and your expectancy was only 1.2% per trade but you turned over your stocks 250 times in the same year. This method ends up generating $300,000 for the year, and that assumes you never increase the position size as the equity grows. You just had a better year. And it is easier to get 1.2% per trade than 50%." - ARB Trading

Chris Perruna - Market Talk with Piranha

Chris is the founder and president of an internet community that teaches you how to invest your money with solid rules. We offer an extended no obligation monthly trial period starting immediately with two free weeks. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

How to Spot Market Turning Points Using Free Legal Insider Information

How would you like to be able to take advantage of insider information and trade with the most successful traders in energies commodities, stocks and commodities?

Well you can - with the commitment of traders report, published by the CFTC. This report shows insider commercial trading positions by professional hedgers!

The commitment of traders report is available FREE, but hardly any traders use it - yet it can predict tops and bottoms, with amazing accuracy, when used correctly.

What is the Commitment of Traders Report?

Insider trading is legal in futures markets as long as trading positions are reported to the CFTC and the report covers stocks, bonds, currencies and commodities.

The Commitments of Traders Report breaks down the open interest in major futures markets into three categories:

1. Commercials: They own the commodity and trade it for a living.

2. Large speculators: Are a group that hold large positions, and are legally obliged to report them - these traders are normally funds or asset managers.

3. Small speculators: Everyone else - but mostly small individual traders.

Every year many markets make extreme price runs - both up and down, where prices move far above, or below rational pricing.

This is crowd psychology at work - with the emotions of greed and fear to the fore.

Trader psychology is a critical element in trading, and traders very often push prices too far away from fair value - and a counter trend can occur at any time.

These emotional crowds form along lines provided to traders that are broken down by the CFTC report for easy reference:

1. Commercials: They are using their futures positions, to hedge their cash position - and are trading without emotion, as they are hedging risk, and not speculating.

These traders have an edge in fundamental supply and demand information - and have deep pockets, and a long-term outlook.

When price spikes occur they will fade the move - selling into price spikes, and buying into declines.

As they are hedging, they will only change their positions when prices move significantly away from value.

If you see large scale selling in a bull market, or aggressive buying in a bear market, chances are a trend change is at hand. This is especially true, if speculators, large and small, oppose these moves by holding the opposite view.

Large Speculators: This category is dominated by funds that make their money to a large degree based on their ability to sell a story, and greed to investors. These large speculators tend to have a poor performance overall as a group, and normally are caught at major trend changes - and lose heavily.

Small speculators: The poorest traders of all in terms of track record. Small speculators lack inside information, and this crowd tends to trade on the emotions of hope, greed, and fear - tending to be WRONG at every major turning point.

So, How do we Use the Data?

Small moves in commercial positions are not relevant - they own the commodity, and these moves should be ignored.

It is only when commercial positions buy and sell aggressively, that we know prices are away from fair value.

One point to keep in mind: We are ONLY looking at extremes here - and rapid changes from the commercials position, away from small, and large speculators. Once you see this, you can time your entry into the market, with normal technical tools.

Try using this data and you will see when major trend changes are right - the commercials are normally right - small, and large specs wrong!

Trade with the smart, professional, and savvy traders - the commercials.

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Online Futures Trading How to Trade Futures for a Living

Online futures trading is one of the few ways traders can start with small stakes, and build real wealth quickly - and the opportunity is open to anyone.

Everything you need to know about futures trading can be self-taught - using the Internet. As with all ventures in life, theres a right way to do it.

Many traders fail because they dont have a realistic plan - and thats what this article is all about having a plan that will make you huge profits by trading futures the right way.

Here is a simple step-by-step plan:

Start with the Right Attitude

If you start with the attitude, that making big money is easy, and that someone else can give you success - you will fail. The good news is that while its not easy, by working smart, the effort you put in will bring rewards.

The right attitude, means you need to learn the basics - and think you will succeed. If you think you can succeed in online futures trading then you will.

This means having confidence and taking responsibility for your actions. If youre going to be rich, you have to do it yourself.

Getting Started

To get started in trading futures on the Internet, you need the following:

. A computer.

. An Internet connection.

. A charting software package.

You can learn all the basics free on the net about contract sizes, how to place orders, etc. - the real key is having a method - and being able to execute it with discipline.

Your Trading Method

Markets trend long term - and your aim must be to catch these trends - as the big trends yield the big profits.

Forget day trading - its the big trends you want - and the way to catch them is to use a breakout method.

Breakout systems work - and have worked for hundreds of years, being based on human psychology. Most traders wont use a breakout system which explains why 90% of traders lose money. This is good news for you - because if you use a breakout system correctly, you can win at futures trading - and win big!

Applying a Breakout Method

To apply a breakout method to futures trading, you need to apply the system with discipline - and this is where most traders fail. Most traders dont have the confidence to stick with their system - but you will, if you learn the basics of human psychology.

Theres some great books you can read Market Wizards, and The New Market Wizards by Jack Shwager, also, any books by Larry Williams, Jake Bernstein, Ken Roberts, and Dr Van Tharpe.

Applying Your Method for Maximum Profits

This is where most traders go wrong when futures trading - many traders have good methods - but cant apply them with discipline.

They also fail for two other main reasons

1.They lack staying power.

2.They dont understand money management.

Many traders want to take as little risk as possible - and they always get stopped out - you need to take risks to make big gains! Its a fact of life. This doesnt mean that you should be rash - but when you see a trade - take a calculated risk.

With the above method, you wont be trading a lot - but when you do trade, youll be trading the best opportunities.

Staying Power

You need to be able to stay in the trade - and not get stopped out. Theres no better tool than options. You need to use options in the right way though with plenty of time value - and buy them at, or close to the money.


When trading futures, 90% of traders fail - so separate yourself from the losing herd - and trade in isolation.

Its vital you stay focused - a lot of the time, the news, and other people, will be telling you that youre wrong. Its essential to stay focused - most traders get swayed by others you mustnt be swayed.

So, there you have it - a simple blueprint for making money, by trading futures on the net.

Apply the above concepts, and you could enter the elite minority of traders, who win at futures trading - and win BIG!

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Online Futures Tradings

The futures markets are organized and used not only for speculation but also for hedging, which is a method of eliminating risks arising from fluctuations in prices. Hedging may be referred to as the practice of covering the risks attaching to transactions in the cash market by contra-transactions in futures trading. If a commodity is purchased for delivery after three months in the cash market, where the actual commodity is handled, the trader may hedge the purchase by selling it for delivery after the same period in the futures market.

If the price of the commodity rises, the trader may sell in the spot market and buy in the futures market. The gain made in the cash market is offset by loss in the futures market, and the commodity is obtained at the price originally conceived for it. On the other hand, an agreement to sell in the cash market may be hedged by means of a counter-agreement to buy in the futures market. However, for such offsetting of losses, it is necessary that the prices in the cash and futures markets move in sympathy with each other.

There may be two forms of hedging: hedge sale and hedge purchase. When a person buys a commodity in cash, he may at the same time sell futures of an equivalent quantity as a protection against a fall in price during the time he holds such stock. Such sale in the futures market is called a hedge sale. If a manufacturer sells some goods for cash, he may protect himself against an advance in the price by purchasing futures for an equivalent quantity.

The basic purpose of hedging is to secure protection against fluctuations in prices. This protection is secured by shifting the risks of price changes to the professional risk-takers, i.e., speculators. A manufacturer who manufactures goods according to a carefully prepared budget can save him from the upsetting results of a rise in the prices of raw materials by hedging in the futures market.

Futures Trading provides detailed information on Futures Trading, Online Futures Tradings, Futures Trading Software, Commodity Futures Tradings and more. Futures Trading is affiliated with Stock Day Trading.