This brave new knight has been a trader for about a year. So he is able to write with the authority and authenticity of, say, a foot-soldier who survived having his leg blown off by a landmine. The mistakes and the conquests are still fresh in his mind. Add to this an orderly mind and a gift for communication, and you have a mighty fine teacher. This article and the article at his website provide one of the finest introductions to trading for the beginner that I've ever seen. And there is plenty of meat for the advanced technician as well. We welcome Sir HamFon to the Roundtable of Knights Who Think for Themselves. A bottle of Knight's nectar, aka Veuve Clicquot Ponsardin, will soon be dispatched in the saddle bag of a mighty steed. -DW

Hi, Don :)

I've been a subscriber of TCNet (and previously TC2000) for about a year - and find it's the ONLY program I need (other than my trading platform, of course). I have tried several other scanners, and none have the power and flexibility of TCNet.

One of the important features of TCNet is the daily Worden Reports. I have found all of them to be informative, and to lend alternate perspectives, broadening my horizons. I go back on occasion to re-read the "back issues" - and pick up additional insight.

I am writing in reference to Sir Statistician's very useful Worden Report contribution of 20 May 2003. The calculations of the True Range (TR) and Average True Range (ATR) are given as an approximation. Using Booleans (true/false) (which had also been mentioned by Sir TANSTAAFL excellent article of 22 May 2003), I've created exact calculations for TR and ATR5, as specified in Sir Statistician for use in determining the initial stop-loss price. The formulas (does anyone still say formulae?) for TR and ATR5 can be rearranged and stated with Min and Max as: TR = Max(H, C1) - Min(L,C1) ATR5 = (TR + TR1 + TR2 + TR3 + TR4)/5

Note that since the Boolean values in TCNet are (false=0, true=-1), that instead of negating the result, I just switched the terms around.

PCF for TrueRange:
L*(L<=C1)+C1*(L>C1)-H*(H>=C1)-C1*(H<C1)

PCF for AverageTrueRange5 - the average TR of the last 5 days:
(L*(L<=C1)+C1*(L>C1)-H*(H>=C1)-C1*(H<C1)+L1*(L1<=C2)+C2*(L1>C2)-H1*(H1>=C2)-C2*(H1<C2)+ L2*(L2<=C3)+C3*(L2>C3)-H2*(H2>=C3)-C3*(H2<C3)+L3*(L3<=C4)+C4*(L3>C4)-H3*(H3>=C4)-C4*(H3<C4)+ L4*(L4<=C5)+C5*(L4>C5)-H4*(H4>=C5)-C5*(H4<C5))/5

By the way, as a relatively new trader (daytrading Nasdaq SOX and BTK - and trading full-time only for the last year), I'd like to point out several *vital* things that I have learned. I'm still here after a year because I learned early to control risk, and to exit a trade when it hits my stop-loss level. Trading is a very emotional thing (if you let it be) - so upon trade entry, I *immediately* set a stop loss order - and only change it to improve profit (not to increase loss, or not to "hope" for a turnaround). I'm still not good enough at the day-to-day trading to be consistently profitable (but I'm also not consistently losing - I've been "trading in a range" ;) - so... (and I think this is extremely important for new traders) ... I trade 100 share lots - and will continue to do so until I am more consistent. There is a certain period of time where a new trader pays "traders tuition" - that is, you pay to learn. It may be a certain length of time (6 months, 1 year, 5 years, etc.), or a certain number of trades (500, 1000, 2000, etc.) - and it may NEVER happen. However, to give yourself the best chance of succeeding, it makes sense to bet small - until you are good at it. Since I pay a very small commission per share, the commission and SEC fees are not outrageous, and trading 100 share lots does not significantly run down my capital, except for trade losses.

Here are my basic rules (also in my Traders Tuition article at http://www.hamfon.com/daytrade/HamFon_TM_Article_01.htm)
1) Trade 100-share lots until consistently profitable
2) Try *every* indicator and technique, until you find the one(s) that "feel" right for you - ones that you grok (Heinlein)
3) Take trades based on your rules (whatever they are) - and NEVER on a hunch. If you have hunches that work well, define them in indicators, so you can repeat them.
4) Always set a stop loss. This helps by removing emotion from the trade - the decision is already made, so I can't waffle later.
5) Set reasonable goals. Start small - don't expect to get rich overnight.
6) Keep a trading log. I write in mine at the end of every day - even if nothing important is written, I get a second look at my trades.
7) Set a profit exit. Once I get to it, I just move my stop there, so I can gain more, if available, but not lose my target gain.
8) Losing trades are part of the game. If I get mad at myself (or the market), I take a break. If I am down $50 for the day (I can hear all of the "big players" giggling... hehe), I allow one more trade - if it's a loser, I quit for the day. This actually gives me quite a bit of trading room, since I mostly scalp trades, and the stops are no more than 10 cents, usually 3-4 cents.

Thanks again for all the great information, Don. It's helped bring me a long way - but the Worden Reports continue to show that I've reached the tops of a few hills, but there is a whole range of mountains ahead for me still to climb.

HamFon,
btw, since many people ask, HAMradio (hobby), and teleFONe (previous industry for which I did computer programming)

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