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Ask Me Anything about the software, tools and trading tactics that serious stock and option swing traders use every day.

DW Pendergast
Feb 6, 2018

I've been trading/investing since 1979 and have learned a thing or two about how to successfully trade the financial markets since the late 1979s.

Learn from my experiences and you'll be able to sidestep many of the common mistakes and erroneous presumptions that get inexperienced traders into a heap of trouble.

Ask me about setting up technical charts, which indicators work the best and why you may wish to trade volatility etf's rather than ordinary stocks.

See you at my AMA event this coming Monday!

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Conversation (63)

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What are some of the most common misconceptions about trading that lead to failures in investments?

Feb 12, 8:33PM EST0

Good evening:

Wow, there are so many! Here are a few of the real 'doozies' -

1. Believing that a 'perfect' trading system or trading indicator exists.

2. Believing that you can trade futures contracts (eminis) with a $5,000 account.

3. Believing you are smarter than - or can control - the market.

4. Believing that you are right and that the market is wrong (the market is always right, no exceptions).

5.. Trusting the advice of others rather than relying on your own proven trading system.

6. Believing that you need to quit your job and attempt to trade full-time.

7. Believing that you need to 'bet the ranch' on a 'sure-thing' trade that 'can't possibly lose.'

8. Believing that trading is the way to make 'easy money.' (it's the hardest to earn 'easy money' you'll ever make!)

Those are some of the false beliefs that get new/struggling traders into trouble, time after time. Contact me at cyclesemini@gmx.com with the trading/investing issues that you are struggling with; only $25 for a one-hour Skype session that includes screen-sharing. If I can provide you with trading wisdom that could save you thousands in needless losses, it could be the best $25 bucks you ever spend!

My Skype name: Donald W. Pendergast

Great question, by the way!

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Put my system trading and charting expertise to work for you - get your free report on trend following now

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 13, 9:34PM EST.
Feb 12, 9:42PM EST0

What are the best tips you can share with people who want to transition from the traditional trading practices to online trading?

Feb 12, 4:23PM EST0

Good evening:

Above all, find and retain a good trading mentor; such a trader/investor/educator will be able to help you avoid the countless pitfalls and mistakes that ruin the vast majority of traders in a short amount of time.

You need to learn about trading psychology, money management/position sizing and you need to have a sufficiently capitalized trading account; without all three of those essentials, you'll probably blow out your account.

I can help with mentoring to some degree, as I share tips on trading psychology and position sizing/money management with those who subscribe to any/all of my various services (see links below).

Now - to answer your question! Virtually all trading is done electronically these days, unless you're calling your broker to phone in your orders or you're a passive investor in a mutual fund, etc.

You will need a low-cost broker such as TradeStation, Interactive Brokers or Tasty Works - great commissions and top-shelf technology at all of them. Customer service is first-class at TradeStation and Interactive Brokers, too, and that's very important.

You'll need a high-speed internet connection, cell phone and backup power for your computer and perhaps several other contingencies in case you have computer/electrical issues at home/office, etc.

Great question, and please contact me at cyclesemini@gmx.com if you are interested in some tutoring at a reasonable cost. 

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 12, 8:21PM EST0

How would you explain forex or crypto trading to someone who is completely clueless about online trading?

Feb 12, 12:28PM EST0

Good evening:

All trading amounts to is this:

1. Two parties agree on a common price for a forex market or cryptocurrency (or a stock, commodity, etf, house, car, guitar, toaster, sofa, business, etc)

2. The two traders, however, have very different opinions regarding the value of the item in question.

When you buy $10,000 of a cryptocurrency, for example, you obviously believe that the cryptocurrency will appreciate, otherwise, you would never part with your $10,000 in cash. Meanwhile, the trader who is selling you their cryptocurrency stake obviously values having $10,000 cash in his/her/its trading account more than continuing to own the position in the cryptocurrency - most likely because they believe it will decline in price. Both of you agree on the price of the transaction - $10,000 - but you obviously disagree on the value of the cryptocurrency itself.

That's all trading is - agreement on price and disagreement on value, and that's the underlying principle that every noncoercive financial transaction in the world operates under.

Great question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 12, 8:07PM EST0

What is the best trading strategy if a person buy, share, and hold for a couple of days, say one week? Do you think the intraday strategies work in this case?

Feb 10, 9:42PM EST0

Good morning:

The trading strategy most associated with trades lasting a week or so is called 'swing trading' and many swing traders use 60- and 120-minute charts to help time their trade entries and exits, using the dominant trend of daily and weekly charts to confirm their trade entries.

A simple way to swing trade is to simply apply a short-term oscillator (CCI, Stochastics, RSI, etc..) to your daily charts and look for times where the oscillator drops to an extreme low; this generally indicates a 'pullback' against an uptrend. The idea is to enter long on such weakness and then (hopefully) ride the subsequent bounce higher for anywhere from several days to two weeks (or more).

There are times this method works wonderfully - if a market is trending upward at a steady pace - but at other times it can fail 'spectacularly' as many traders found out the hard way early last week. Many, many large-cap stocks were oversold heading into last week's trading session, and those trying to enter early Monday morning probably got their heads handed to them; the market continued to drop, relentlessly.

I prefer trading VXX signals with a defined entry/exit parameter, and that's the service I offer to prospective subscribers - at a very modest monthly fee. I also offer a service where I can seek out all the stocks making those short-term oscillator pullbacks, and another where I analyze any stock for you and give an unbiased 'buy' 'sell' hold' or 'stand aside' ranking, also at a very modest fee. You can learn more by clicking the link below:

http://puertoricool.wixsite.com/trendzetterz

Thanks for your question!

----------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 12, 9:47PM EST.
Feb 11, 1:33PM EST0

What according to younare some of the effective tactics for spread trading?

Feb 10, 6:29AM EST0

Good morning:

I've never traded intra-commodity spreads, nor stock spreads. However, the basic strategy is to look for the following:

1. Locate two liquid (large-cap) stocks that have inverse correlation AND which are both at an overbought/oversold extreme likely to result in a mean-reversion move in both stocks.

2. For commodities, the general idea is to use seasonal charts to identify high-probability mean-reversion moves in liquid futures markets, often within the same commodity family - for example, long May 2018 Cotton and short October 2018 Cotton. 

I find this a fascinating area of technical analysis; here are some resources you may wish to investigate for more information - by the way, I am not affiliated with any of the companies or books referred to in the following links:

https://www.mrci.com/web/index.php

https://www.amazon.com/Buy-Whats-Hot-Sell-Not-ebook/dp/B01GLRY9KW/ref=sr_1_2?ie=UTF8&qid=1518283800&sr=8-2&keywords=pairs+trading

Please let me know if this information was helpful to you and thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 10, 12:32PM EST0

Do you feel that the average volatility of the current stock market is greater than it should be?

Feb 9, 12:49PM EST0

Good morning:

The $VIX.X (CBOE volatility index) is trading near 37.34 as I write this; for reference, the 50-day exponential moving average (ema) price for the VIX is 15.26, the 100-day ema is 13.07 and the 200-day ema is right near 12.23.  Certainly, the volatility index is trading far above each of these key moving averages at the moment.

Over time, I expect to see these three averages creep higher, with the 200-day ema settling back into the 15-18 range as we move deeper into 2018. Near-term I expect a 'capitulation' event by Monday or Tuesday, with a massive amount of short-sellers in the S&P 500 futures (and individual stocks) scrambling to cover their short positions. It would be no surprise to see the S&P 500 index rally 100+ points off the soon-arriving lows before the profit-taking kicks in again.

Lots of action should be coming to the markets over the next week to ten days!

Thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 9, 1:29PM EST0

Good morning all:

My Optionista del Sur 2 system recently fired a new trading signal:

http://puertoricool.wixsite.com/trendzetterz

I am also offering a new chart analysis service on a first-come, first-served basis, and it's fast, low-cost, and high-quality. Here's how it works:

Email me your chart analysis request and include the following:

* Your name

* Best email address - I will email you a PayPal invoice for $4.99

* The stock, etf or forex  ticker symbol (one ticker only, please)

* The time frame chart (intraday, daily, weekly) you desire

For only $4.99 (via PayPal) you'll receive my unbiased analysis of a stock's:

* Trend

* Cycle structure

* Elliott Wave and/or Harmonic patterns

* Support/resistance/money flow

* Price targets (stop loss, profit target)

* Current trailing stop price

I'll give you an unbiased view, right on the chart, stating whether I believe the stock (etf, forex market) is in a 'buy' a 'hold' a 'sell' or a 'stand aside for now' chart configuration.

As long as the ticker symbol you desire analyzed is in my database, I'll have no problem sending you your fully-detailed technical price chart (and all other key technical information), generally within a few hours, possibly less.

Look at the daily chart for Square Inc. (SQ) below; I identified it as an extremely overbought stock a week before it plunged by 30% - in just a few trading sessions! Spend $4.99 with me and help avoid trading wipe-outs like these by using my analysis services - and maybe even stay with your winning trades longer even as you avoid stocks that aren't a good buy right now:

Contact me today at cyclesemini@gmx.com with your chart analysis request!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 9, 12:09PM EST0

Could you suggest some good books to read in order to gain in depth understanding of currency trading?

Feb 9, 7:42AM EST0

Good morning:

Here are a few Forex titles to consider: 

https://tinyurl.com/y7yxmsq3

If you are a brand-new trader, you may want to learn the basics of charting here - there are many free tutorials, and they are all excellent:

http://stockcharts.com/school/doku.php?id=chart_school

You should also learn about trading psychology:

https://tinyurl.com/y9bsrtpm

And position sizing/money management, too  - check out the free trading simulation game, it's an incredible tool that helps demonstrate the single most important factor in trading success - position sizing:

http://iitm.com/

I am not affiliated with any of the above websites, by the way.

If I can be of further help, contact me via the links listed below, anytime.

Thanks for your question!

---------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 9, 11:27AM EST0

Aside from computers and the way it can be done exclusively online and practically anywhere you want to be, what would you say is the biggest difference of forex trading online and the old school trading done decades ago?

Feb 9, 3:41AM EST0

Good morning:

If by 'old school' you mean 'pre-1990s' then the biggest difference would be in trading system design. Many, many trading systems in the pre-90s era were based on channel breakouts (Donchian, etc.) and moving average crossovers; they were simple to understand and very easy to design and implement, even without access to a computer.

Such systems worked very well in that era, and for two reasons:

1. There weren't a million other traders using the same systems (which leads to rapid performance degradation).

2. The currency markets trended much more smoothly than they do today, and with far less intraday volatility (because there were almost no retail day traders back then).

Really, those are the two most striking differences when one compares the FX markets of today with those of a generation ago. By the way, channel breakouts and moving average crossover systems can still work, but you need to be more 'system savvy' to get the really big gains nowadays.

Thanks for a great question!

--------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 9, 11:05AM EST.
Feb 9, 11:04AM EST0

Do you believe that Bitcoin and other cryptocurrencies are here to say or are these just bubbles waiting to burst?

Feb 7, 10:41PM EST0

Good evening:

That is a good question, and it's also one that I have no sure answer for. Certainly, some of them will disappear in due time, with only the strongest, most transparent and liquid (massive daily trading volume) destined to survive. Monitor those three factors on the ones you follow, and you may get a clue as to which ones will be around for awhile.

I believe that blockchain-related stocks will fare better (more survivors), but again, only the strongest, most transparent and liquid ones will go on to become big winners in the decades to come. 

Which cryptos or blockchain stocks will become the next Amazon, Microsoft or Apple is anyone's guess at this point!

Thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 7, 11:40PM EST0

How do great traders go about finding their approach to the markets? What would you say sets them apart?

Feb 7, 10:25AM EST0

Good morning:

Van K. Tharp goes into great detail about that very topic in his book 'Trade Your Way to Financial Freedom' and it would be well worth your time to read it. 

From my own experience, finding my own approach has been a combination of trial and error and ongoing education. I have traded every kind of system imaginable (mechanical, discretionary and combinations of both styles) and over the past five years became most comfortable with the style of trading I now utilize.

Your pathway will be different than mine and every other trader, but once you do find your style, you'll have a good solid foundation upon which to build. It won't happen overnight, so in the meantime keep educating yourself, test lots of different kinds of systems, newsletters, advisory services, etc., until you finally find the one that most closely resonates with your trading personality and trading goals.

Thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 7, 12:14PM EST0

At some point in a trader's career they can go through quite bad demoralizing losing streaks – how do a good trader handle that?

Feb 7, 8:46AM EST1

Good morning:

Several things can be done, including:

1. Take some time off and get away from the pressures of trading; use the 'vacation' to get in tune with your emotions, examine every key aspect of your trading plan and then determine if it's your own errors causing needless losses or if instead it's a flaw in your trading system's logic causing the drawdowns.

2. Trade in substantially smaller dollar amounts (as long as your trading system's logic is valid, of course). This will lessen the emotional pressure and also mitigate the added drawdown from additional losing trades.

3. Remain emotionally, spiritually and physically strong; don't view a temporary (or even major) failure as a trader cause you to view yourself as damaged goods, incompetent, etc. .... keep a sharp delineation between what you do for a living and who you are as a person. 

 Those are just a few ideas, and I have used them all at one time or another!

Thanks for your question!

---------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 7, 10:21AM EST1

What advice would you give to non-professionals who would like to start trading?

Feb 7, 4:28AM EST0

Good morning:

I believe if you'll check out my previous three posts that you'll find at least some of the answers to that question.

Thanks!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 7, 10:24AM EST0

What are the suggestions you want to give to the new entrants to the field?

Feb 6, 11:26AM EST0

Good morning:

I believe that if you would refer to my previous two comments, you will find a satisfactory answer to your question. 

Thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 12:05PM EST0

How tricky is the trading today? Is there any learning tool to help the traders?

Feb 6, 11:03AM EST0

Good morning:

Volatility has come back all of a sudden after going AWOL since late 2016, and that makes it more important than ever to really know what you are doing as a trader/investor. 

Some educational resources you may want to consider before becoming a trader/investor might include the following:

https://www.optionseducation.org/en.html?gclid=CPqQ77zckdkCFQJngQodYJUEjA&gclsrc=ds

Van K. Tharp's free 'trading simulation game' is a great learning tool; I downloaded it back in 2004 and you'll be amazed at what it can teach you about position sizing:

http://www.vantharp.com/regform.asp

Books by trading educator Mark A, Douglas you may want to check out; great info on trading psychology:

https://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447/ref=sr_1_1?ie=UTF8&qid=1517935287&sr=8-1&keywords=Mark+A.+Douglas

(I am not affiliated with any of those people/companies/urls, by the way. )

I wish you well on your educational journey!

----------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 11:47AM EST0

Do you think an individual should gain an education in a specific area before starting out in trading? If so, what's it?

Feb 6, 10:48AM EST0

Good morning:

Yes, one should definitely study 'trading psychology' along with 'position sizing and money management' for traders before putting one dime to work in the financial markets. Doing so would give a potential trader an incredible competitive advantage over lesser-informed traders.

Many years ago I read 'Trading in the Zone' by Mark A. Douglas and 'Trade Your Way to Financial Freedom' by Van K. Tharp; both are definitely worth a read by anyone considering trading or investing with risk capital.

Great question!

-----------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 11:32AM EST0

How do you know where to place the frame when you analyse a chart, isn’t there something true on a weekly frame but inaccurate on a yearly one?

Feb 6, 8:10AM EST0

Good morning:

The choice of which time frame chart to use depends on your trading style and/or trading system. A weekly chart reveals more detail than a monthly chart, a daily reveals more detail than a weekly, a 60-minute chart reveals more detail than a daily, etc, so it's up to you to determine which time frame to use.

The best way to do that is to decide what your trading goals are:

A.) Willing to hold a stock for years? You might focus on the weekly and monthly charts.

B.) Looking to hold a stock for a 1-2 week swing move? Consider using the hourly and daily charts.

C.) More interested in capturing intraday gains (day trading)?

Then you might want to focus on 5-, 15- and 45-minute charts, or even tick/volume/range bars.

Great question!

---------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 10:06AM EST0

What is the average duration of one of your positions?

Feb 6, 7:48AM EST0

Good morning:

Currently, my best-performing trading signals service holds positions for an average of 18 calendar days and the holding periods can vary between three and forty-nine days depending on market conditions; it's definitely NOT a 'day trading' type service. Here's the link to my webpage, should you desire more information:

http://puertoricool.wixsite.com/trendzetterz

Thank you for your question!

--------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 9:32AM EST0

What would you tell somebody willing to invest $10,000 right now?

Feb 6, 1:10AM EST0

Good morning:

Quite literally, I would tell them to seek the advice of their licensed financial professional before trading/investing in the markets!

Really, only you know what your financial situation is, what your financial goals are and how many years you have available to put risk capital to work in the financial markets. All of these factors (and many others) will need to be thoughtfully analyzed before you put a dime into the markets.

Thanks for your question!

-----------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 9:26AM EST0

Don’t you integrate any macro aspect at all in your chart analysis, such as central banks press release etc, or is it just present in the logic for that it sends the tick sideways around the event?

Feb 6, 12:58AM EST0

Good morning:

I subscribe to the technical trader's belief that all known information is already priced into a financial instrument's chart, and that for the most part, fundamental analysis, and the financial news. are not generally needed for near-term trading purposes. An exception would be a quarterly earnings release on a stock, for example.

For long-term positions, I would say that having a firm grasp on fundamentals, seasonals, etc. is much more important, however.

Great question!

------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 9:22AM EST0

Isn’t there asset classes not liquid enough, such as cryptocurrencies, to be traded the way you do?

Feb 6, 12:25AM EST0

Good morning:

Penny stocks, some classes of preferred stock and/or any stock that trades less than 500,000 shares per day (50-day average) will all be difficult to trade on a purely technical basis, especially for short-term trading purposes, as the bid/ask spreads can be very wide - meaning it's harder to enter/exit at a favorable price. Technical trading signals are generally less accurate on low-volume trading instruments.

As far as cryptocurrencies, go, the higher the average daily volume figure is, the more likely it will be able to be traded actively (again, look at the bid/ask spread).

Great question!

----------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 9:17AM EST0

Do you think price fluctuation of cryptocurrencies can be technically analysed as any other financial instrument’s or asset class’?

Feb 5, 1:43PM EST0

Good afternoon:

Right now, I would have to say 'no.'

The reason for that is that there simply isn't much transparency in these markets, much less a reliable, centralized means of tracking trading volumes. Also, there are hundreds of cryptocurrencies, so which one would you choose?

At this stage of the crypto-craze, they appear to be as (or even more) risky as trading/investing in penny stocks, and I myself won't touch 'em with a ten-foot pole. Once these markets are regulated by the SEC or other governing bodies, then it might be worth a second look, however.

Thanks for your question!

---------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 5, 2:47PM EST0

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 6, 9:17AM EST0

Is there an asset class more fitting than any other for chart trading?

Feb 5, 10:59AM EST0

Good morning:

Not really, as most markets (stocks, forex, commodities, etc) tend to trend only 30-35% of the time on any given time frame (over large amounts of historical data, not just recent history). Therefore, it's not so much a question of 'which' market to trade, but 'how' to trade it.

For example, let's say your favorite stock goes on a sustained multi-month trend (up or down) about 35% of the time over the past 20 years - what is this telling you? For starters, it's informing you that:

1. Unless the market is in a confirmed trend, you need to trade a mean-reversion system, most of the time. These are typically based on oscillators like CCI, Stochastics, RSI, etc.

2. When the market is indeed in a confirmed trend, you need to deploy either:

A.) A long-term trend following system, OR

B.) A 'buy the pullbacks against a strong trend' kind of system

Both of these kinds of systems will typically rely on ADX/DMI, moving averages. cycles, trendlines and linear regression channels.

Here's a link to an e-book that I recently updated, one that describes a straightforward method of identifying stocks that may be prime trend-following candidates. See if you find it helpful:

How to scan for the best stocks to follow - for big gains

Thanks for your question!

--------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 5, 11:16AM EST.
Feb 5, 11:14AM EST0

How did you get to pick that side of the analysis trenches’ war? Have you ever used economical data?

Feb 5, 6:38AM EST0

Good morning:

Sure; if I want to trade an earnings report I'll look at the company's fundamentals (especially the most recent earnings revision, if available). Trading mechanical strategies (with a bit of discretion tossed in for good measure) is what I gravitate towards, and I generally don't focus on fundamentals, as most trades are for two weeks or less in duration.

Thanks for your question!

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Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 5, 10:54AM EST0

Do you think chart forecasting is only efficient because trading as a whole is psychologically driven in the end?

Feb 5, 4:05AM EST0

Good morning:

Great question; I would say that chart 'forecasting' is little more than gambling inasmuch as you can be right about the 'big picture' but still be off on the timing necessary to extract cash from the markets.

Most winning traders use some sort of a mechanical trading system to make emotion-free (or as close to emotion-free as possible) trade entries and exits. Using technical charts can, at times, help fine-tune a 100% mechanical trade signal, however. For example, last November I identified Square Inc. (SQ) as a severely overextended stock that was ripe for a correction, but none of my systems had issued sell/sell short signals yet.

The stock corrected hard the very next session, and I was proved right in my forecast, yet had I actually entered a short without any proven mechanical sell signal, I would not have been trading a system based on rules, but rather one based on hope, greed and possibly even pride in my chart-reading skills (which are generally good, but certainly not 'perfect'). Therefore I did not take the signal and instead focused on other markets that were giving reliable mechanical signals.

Here's the chart for SQ:

Thanks for your question!

-----------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 5, 10:25AM EST.
Feb 5, 10:24AM EST0

What is your favourite indicator and how did you set your mind on it?

Feb 4, 6:48PM EST0

Good evening:

It would be difficult to pick just one favorite, but one indicator I frequently rely is the Chaikin Money Flow indicator (CMF); this works very well in identifying divergence situations and can also help confirm a short-term pullback 'buy' signal against the backdrop a strongly uptrending market. I like CMF settings based on Fibonacci numbers such as 21, 34, 55 and 89, and will often use a chart with a 21/89 CMF or 34/89 CMF to confirm the strength/weakness of a trend in progress. A 34/144 CMF combo chart can also be very useful too.

Other indicators I have found to be generally accurate are the RSI, DMI, ADX, CCI and Keltner bands. Trendlines, moving averages and linear regression channels also have a place in my daily market analysis. On occasion, I also look for certain high probability chart patterns like triple-top buy signals, double bottoms and 'Adam and Eve' bottoming patterns (I learned about that one by reading the works of Alan Farley) and specific candlestick patterns, too.

Lately, I have also been incorporating more Fibonacci and Elliott Wave studies into my workflow, as they can often help time the 'big' turns in markets with a high degree of accuracy. I have also used MotiveWave Ultimate trading software since 2014, and it has tons of Elliott Wave, Fibonacci, Gann and Harmonic studies and scans that make finding new trade setups very easy for me.

Thanks for your question!

---------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 4, 9:12PM EST0

I recently updated an e-book of mine; here's the link for those who would like to experiment with a basic trend-following system Idea that I developed more than ten years ago. Read it through several times and see if you can really get a handle on the 'big picture' it presents to thoughtful traders and investors:

How to scan for the best stocks to follow - for big gains

I hope you enjoy it; contact me at cyclesemini@gmx.com if you would like info on how to trade my best stock/option strategies.

------------------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 4, 12:35PM EST0

What was your most profitable trade ever and your worst?

Feb 4, 11:04AM EST0

Hi:

I bought Ameritrade (AMTD) in late 1998 and made about 116% in five weeks; the worst was buying JDS Uniphase (JDSU) call options in 2001 - a 90% loser! 

In December 2017 I closed out a 138% winner in VXX put options in only 15 calendar days and I no longer have 90% losers; generally, my losing option trades are three times smaller than my winning trades are.

I've learned quite a bit about trading since the late 90s and am grateful to the Lord for bringing me so far in what can be a very tough and challenging business!

Thanks for your question!

-------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 4, 9:17PM EST.
Feb 4, 11:13AM EST0

How quickly do you accept one trade is a mistake? What I want to say is when do you know it’s time to say I was wrong and I need to change something in my logic?

Feb 4, 8:14AM EST0

Hi:

The best way to cut a losing trade is to simply exit when your trading system fires an exit signal. If you have 100% confidence in your system's ability to produce a rising equity curve (over time), you'll have zero emotional stress when it's time to get out of a trade that simply did not work out.

Even the best trading systems have losing streaks and drawdowns, so this loss doesn't shake my confidence in the least. Eventually, this sell-off stops (maybe late in the coming week or early the following week) and a prime set of new 'buy' signals for the S&P 500 index will appear. Only those with 100% confidence in their systems will have the guts to hit the 'buy' order button at that time. The rest will listen to all the 'doom and gloom' talking heads on TV.......

Great question!

-------------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 8, 12:31AM EST.
Feb 4, 12:14PM EST0

What do you make of high frequency trading and algorithms, etc? Do you think there’s no place in the future of finance for human interpretation?

Feb 4, 6:51AM EST0

Hi:

Around 75-80% of all transactions on the NYSE are done via trading algorithms, and that percentage climbs a bit more every year. However, there will always be a place for those traders who prefer to trade on a discretionary basis (they don't use a mechanical strategy, ie: an 'algorithm'). 

Plenty of retail traders trade on a discretionary basis, and brokers surely will not want to lose their business. I trade mostly automated systems, but at times will place a discretionary trade if various indicators and/or trading systems are in general agreement about a particular chart setup.

Great question!

-----------------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 4, 12:05PM EST0

Wouldn’t you say technical analysis must not completely replace fundamental knowledge of economy for a trader? As in sometimes one has to know when to switch from one type of analysis to another?

Feb 3, 9:36PM EST0

Hi:

My own view on all that is simple:

Intraday trading and near-term swing trading (one week or less) should rely on technicals only (unless you're going to be trading the earnings reports, of course).

If you're a long-term trend follower, position trader or 'buy and hold' type, then, by all means, study the fundamentals well and use technicals to time your entries/exits.

Thanks for your question!

------------------------------------------------------

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Last edited @ Feb 4, 11:25AM EST.
Feb 4, 11:17AM EST0
Would you say there are types of securities for which technical analysis is just more fitting or is there no type to which it can not be applied?
Feb 3, 7:14PM EST0

Hi:

Low-volume thinly traded stocks, options and futures contracts should be avoided at all costs because the technical signals are likely to be adversely affected - you'll be trading 'noise' rather than the underlying 'signal.'

For high-volume markets, technical analysis and trading systems are surely the way to go, along with fundamental analysis if trading earnings or long-term positions.

Great question!

Put my system trading and charting expertise to work for you!

Donald W. Pendergast   More info on my writing and trading experiences - here

** Please remember that none of my replies to any AMA event question constitutes specific investment/trading advice for any specific person or entity. You alone are responsible for your trading/investing decisions**

Feb 4, 11:59AM EST0