Podcast
Questions and Answers
What is the main concept introduced by the author for technical analysis?
What is the main concept introduced by the author for technical analysis?
- Trend line analysis
- Statistical modeling
- Scenario analysis (correct)
- Price action trading
What percentage chance does the author suggest that the Dow will trade down to the lows seen on Friday if it does not exceed Thursday's highs?
What percentage chance does the author suggest that the Dow will trade down to the lows seen on Friday if it does not exceed Thursday's highs?
- 95% (correct)
- 90%
- 50%
- 75%
How many occurrences were noted where the Dow did not trade above the highs of Thursday?
How many occurrences were noted where the Dow did not trade above the highs of Thursday?
- 30
- 21
- 20
- 24 (correct)
What does the author believe will handle situations where the scenario analysis does not work well?
What does the author believe will handle situations where the scenario analysis does not work well?
What timeframe did the author reference for their analysis of the Dow Jones?
What timeframe did the author reference for their analysis of the Dow Jones?
Which of the following best describes the method the author compares scenario analysis to?
Which of the following best describes the method the author compares scenario analysis to?
What does the author consider to be a potential outcome if the Dow does not exceed Thursday's high?
What does the author consider to be a potential outcome if the Dow does not exceed Thursday's high?
What kind of analysis does the author express uncertainty about regarding its classification?
What kind of analysis does the author express uncertainty about regarding its classification?
What mindset does the author adopt before entering a trade?
What mindset does the author adopt before entering a trade?
How does the author feel about trading predictions made by others?
How does the author feel about trading predictions made by others?
What lesson does the author emphasize about losses during trading?
What lesson does the author emphasize about losses during trading?
What approach does the author take when experiencing winning trades?
What approach does the author take when experiencing winning trades?
What was the financial consequence the author experienced during the flash crash of 2010?
What was the financial consequence the author experienced during the flash crash of 2010?
What mindset does the author believe is necessary to avoid being in the 90% of unsuccessful traders?
What mindset does the author believe is necessary to avoid being in the 90% of unsuccessful traders?
What effect does the author suggest the majority of traders experience after making money?
What effect does the author suggest the majority of traders experience after making money?
How did the author describe their emotional response to trading losses?
How did the author describe their emotional response to trading losses?
Flashcards
Scenario Analysis
Scenario Analysis
A technical analysis method invented by the author; identifies market scenarios based on how Friday's trading compares to Thursday's highs, to predict Monday's movements.
Dow Jones Friday/Thursday Highs
Dow Jones Friday/Thursday Highs
Friday's trading performance compared to Thursday's highest price point
Monday Dow Jones Prediction
Monday Dow Jones Prediction
The author's 95% prediction that the Dow Jones will fall to the Friday lows (and possibly lower) if it failed to close above Thursday's high.
Historical Data Source
Historical Data Source
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Stop Loss
Stop Loss
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Technical Analysis
Technical Analysis
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Trading Strategies
Trading Strategies
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Trading Mindset
Trading Mindset
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Avoiding the Herd
Avoiding the Herd
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90% Market Sentiment
90% Market Sentiment
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Aggressive Winning Strategy
Aggressive Winning Strategy
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Mental Discipline
Mental Discipline
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2010 Flash Crash
2010 Flash Crash
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Study Notes
Trading Strategy: Scenario Analysis
- Scenario Analysis: A custom technical analysis method, focusing on the Dow Jones.
- Method: Analyzes if Friday's Dow trading failed to surpass Thursday's high. If this occurs, a 95% chance exists that Monday's trading will fall to Friday's low, often lower.
- Data Source: Manual analysis of Dow Jones charts from 2008 to 2019.
- Frequency/Occurrences: In the previous year, 24 occurrences witnessed Friday failing to exceed Thursday's high. In 21 of these cases, Monday's trading was below Friday's low.
Trading Mindset
- Discipline and Preparation: Acknowledges the potential for significant losses, like the 2010 flash crash. Emphasizes mental preparation and discipline.
- Jocular Approach: Enters trades optimistically and aggressively, aiming to maximize gains.
- Avoiding Preconceived Notions: Rejects predetermined market predictions, wanting a clear mind to avoid following the majority of traders' expected target behavior.
- Increased Bet Sizing: The trader significantly increases trade size (betting) when a trade is successful instead of reducing it.
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