dick diamond

45 Years ofAdvice From a Trading Legend Close the gap between analyst and trader with time-tested lessons from legendary trader Dick Diamond We hope you enjoy these tips from trading mentor Dick Diamond. was an early fan of Mr. Diamond has an MBA from the University of Michigan with a Bachelor of Science degree in economics from the Wharton School of Business. Roberto quickly caught Dick’s eye when he used Elliott wave analysis to make amazingly accurate forecasts of the DJIA’s intraday moves. first heard about Dick’s course through EWI in 2002. Diamond. I could have accelerated my trading progress by more than 20 years!” Diamond’s protégé. He left the floor in 1965 and has been trading his own account since then. Dick’s approach is highly technical though it does not include Elliott wave analysis. Through partnership with Elliott Wave International. who set a new record for options trading in the U. he worked as a floor broker on the American Stock Exchange. Sincerely. 4-day comprehensive trading course. Mr. After active duty in the Marine Corps. Dick Diamond has been trading for a living for over 45 years. 6 Key Trading Principles from the Trader Who Lost 70% of His Account — and Made a Comeback II. He has worked with Diamond ever since and now assists him in teaching his trading course. Roberto Hernandez. Which Technical Indicators Can Help You Trade the E-Mini? III. Diamond’s hands-on approach provides the student with a custom-tailored methodology that accommodates his or her individual skill level. S&P/Nasdaq futures and Dow/Amex/Nasdaq equities. The EWI Education Team 2 . Dick has taught his trading discipline to over 1.45 Years of Advice From a Trading Legend I. however. Roberto.000 students in a live. Closing the Gap Between Analyst and Trader Dear EWI Community Member. His expertise is in trading OEX options. Diamond often says. During the session he attended. Diamond’s Methodology and Advice on Discipline and Trade Execution VI. The Two Times of Day the Market has a High Degree of Predictability IV. Trading Championship in 1984. “If I had known these teachings at the beginning of my career. rarely makes a trade without checking his Elliott wave indicators. Preview “Trading Insights” from 45 Years of Trading Success V.S. Elliott Wave International’s President Bob Prechter. A good trader lets market conditions dictate short-term feelings. Focus on the NOW). A trader should have the ability to buy higher than he bought on the last completed trade even though only a short period of time has lapsed. Alas. Market conditions can change many times during an active day. As Diamond applied them. Never get aggressive after short-term success or failure in your trading life (and don’t dwell on the past. you must fault yourself if you break the trading rules. Here are six of his trading principles: 1. Don’t fault yourself for a losing trade — you’ll be right 70-80% of the time if you are trading properly. That’s the year he lost 70 percent. they sell. a trader should be able to short at a lower level than the last completed short trade. or sell because prices seem too high. He has not had a losing year since the 70 percent loss.I. Trade only a small percentage of your overall capital at any one time (once you get over your “core position” you’ll get emotional and bad things will happen). He even says a losing month is unacceptable. How did he recover? He established trading principles and vowed to stick by them. But as 1969 unfolded. the trend was no longer his friend. Conversely. However. he did indeed make a comeback — which has lasted until this very day. He had positive returns in all four of those years. 3. good or bad. Losers hold on to hope. Don’t buy because prices seem too low. 4. The more basic truth was that he simply remained on one side of a favorably trending market. Diamond says this is a dirty word for traders. he fell into a trap that is too common among traders: he believed his personal investing “genius” was behind his profits. If you find yourself wishing or hoping — get out! 5. Intraday trading winners come into a trade for a quick profit and if it does not work out. He could do no wrong — or so Diamond believed. And he started trading his personal account in 1965. 6 Key Trading Principles From The Trader Who Lost 70% Of His Account — And Made A Comeback Learn 6 Key Trading Principles from the Trader Who Lost 70% of His Account — and Made a Comeback Dick Diamond traded on the floor of the Amex between 1960 and 1965. 2. 6. Be open to change. as he rode the wave from 1965 through 1968. 3 . 3. or Nasdaq Index futures contract. the associated tools and indicators developed by Mr. But the S&P E-Mini’s value is equal to 20 percent of the full contract. The “E” is for electronic. Moving Ribbons identify changing trends by placing a large number of moving averages onto the same chart. Rahul Mohindar of VIRATECH.II. and his approach to E-minis trading is based on what these indicators show him: 1. MACD Oscillator is a trend-following momentum indicator that shows the relationship between two moving averages of prices. RMO or Rahul Mohindar Oscillator. TRIX displays the rate-of-change percentage. you probably know of the E-mini. Which Technical Indicators Can Help You Trade the E-Mini? Which Technical Indicators Can Help You Trade the E-Mini? If you’re familiar with the risks and rewards of futures trading. 7. Walter Bressert Oscillators are based on the cycle analysis and trading methodology developed by Walter Bressert. Stochastics is an oscillator that measures the market’s relative momentum in the current time frame.] For example: 1 point in the full S&P 500 contract equals $250. This can make index futures trading more affordable. of a triple exponentially smoothed moving average of a closing price. Williams %R is a momentum indicator which measures overbought and oversold levels. which help determine overbought and oversold market conditions. Keltner Channels are “envelope” indicators based on volatility. 9. 8. E-minis are one of Dick Diamond’s favorite trading vehicles. 2. Dow. Moving Averages reflect the direction of a trend by smoothing the price and volume fluctuations (or “noise”) that can confuse interpretation. “mini” means this trading vehicle is a “miniature” version of a full-size S&P 500. [Always remember: futures trading is not for the risk-averse. He calls them the “best day-trading or swingtrading vehicle to come around Wall Street ever!” Diamond has undertaken what he calls “primary studies” of ten technical indicators. 4 . 4. 5. Specific CCI readings help determine overbought/oversold territory. and serve as buy/sell signals. 6. Commodity Channel Index (CCI) is an oscillator that mostly fluctuates between -200 and +200. 10. so 1 point is $50. If the Market Opens Down and the contra move is weak. the market will likely go down for the rest of the morning. If the Market Opens Down and the contra move is strong. the market will likely rally into prelunch. there are two times of day when the market has a high degree of predictability: 1. Implications in the Morning 1. the market will likely have a sell-off into prelunch. The Two Times of Day the Market has a High Degree of Predictability Learn the Two Times of Day the Market has a High Degree of Predictability According to Diamond. which could mean an exaggerated move into the last part of the day. 3. 2. Morning (time of day) is from approximately 9:50am to 10:10am (Eastern Time). Implications in the Afternoon Afternoon contra moves follow the same general principles as the morning contra moves. Afternoon (time of day) is from approximately 1:50pm to 2:30pm (Eastern Time). 5 . If the Market Opens Up and the contra move is strong. If the Market Opens Up and has a weak contra move. the market will likely rally into pre-lunch. 2. This move has the potential to be much more important than the morning.III. 4. demonstrating a real-time trade before a live audience is very risky. • If you are trading a 5-minute chart. Preview “Trading Insights” from 45 Years of Trading Success Preview “Trading Insights” from 45 Years of Trading Success No matter how skilled a trader may be. • Never have a position in anticipation of a major report. A good trader lets market conditions dictate his/her short-term feelings. Good traders are not gamblers — good traders stay in control. and regardless of his track record.” Diamond absorbed what worked and what didn’t. because marginally attractive trades come along more frequently than the high-confidence trading set-ups.IV. • After the market has been in an extended trading range for 3-4 days. • Strictly adhere to technical data. • Trade into the “white heat. This takes discipline. sell them. • Don’t be inflexible (be open to change). Focus on the NOW. In trading — you should always have control. • In gambling — when you let go of the dice you don’t have control. Do not consider economic or corporate fundamentals. • Don’t buy because prices seem too low or sell because prices seem too high. Trading in all kinds of markets taught Diamond a lot. Market conditions can change many times during an active day. What began as “trial and error” became “trial and success. expect a big move up or down when it comes out of that range. • Learn how to handle short-term success & failure in your trading life. • Don’t dwell on the past.” One of Diamond’s principles is the 80/20 trade — he teaches students to shun trades which offer less than an 80/20 chance of success. He doesn’t just talk — he shows them how he “practices what he preaches. Yet Dick Diamond routinely does exactly this with his trading students. Here are some of the lessons he learned: • Stocks that are positive early and can’t hold their gains are frequently good short candidates. Instead. Better to get out when you can instead of when you have to. • Nothing is harder than to try to pick a top or bottom. • Trade the chart and the indicator — not the money in your account.” If they want them. Never get aggressive after either situation. 6 . good or bad. go for a buy or sell zone. use the 30-minute chart to gain additional perspective. • Never have a position in anticipation of a major report. Preview “Trading Insights” from 45 Years of Trading Success • Don’t worry about leaving something ‘on the table. • A sign of a bad trader is one who focuses blame away from himself.IV. • Trade small to win small — Trade small to win big. There is plenty of time to buy or sell after the announcement. it’s questionable to have a bad week. • You may be right on direction but wrong on short-term timing. the better the opportunity the shorter the time it will be available. The indicators on your computer — combined with the background work — are all you need.’ • Sell when you can — not when you have to. • Everybody has good days in this business — what matters is how you can control the bad days. This is the trade that you want to buy or sell immediately — leave the 60/40 trades alone. They are able to pull the trigger. • A good trader plays excellent defense. • Focus on executing the trade as opposed to making money. This could be disastrous if stops are not used. You are the cause of your success or failure! • Taking losses and handling losses well is part of everyday trading. • Buy and sell to take advantage of the emotion of the moment. Don’t allow small losses to turn into bigger ones by riding them down. • If the market is giving mixed signals. • Never force a trade. • It’s ok to have a bad day. • Think for yourself. 7 . • Think in terms of getting on base as opposed to hitting a homerun. stand on the sidelines. it’s unacceptable to have a bad month!!! • Wait for the 80-20 trades. • Close shop when you are not 100% mentally and emotionally ready to trade. Generally speaking. • Short-term traders are not overly analytical. Be conservative. If you had to point to one thing that has kept you in the game all these years. like trading from a five-minute chart. That’s how you keep your pulse rate and heart rate low. You must wait. the 80/20 set up may come along a few times a day.V. execution took up to five minutes -. That just ends badly. It’s as important to trading as location is to real estate. be disciplined. What are a few that every trader should be aware of? Diamond: One thing is to trade within your capital. Q: What emotional factors do traders need to work on the most? Diamond: Traders must be calm and confident. you’ll be successful. when you started out in the 1960s? Diamond: When I started trading. This is essential to being effective on a long-term basis. It’s better to trade small to win small and possibly even trade small to win big. Sometimes the indicators reveal what I call 90/10 or even 95/5 trades. If you’re trading a longer time frame. the 80/20 will come along less frequently.now it takes less than a second. and then pounce like a cat when the opportunity presents itself. At the same time. Q: What’s different about trading today vs. the opportunity will be bigger. a lot of people trade big to win big or even trade big to win small. and if you trade just a small amount of your capital. one must avoid indicator overload. but when it does. In shorter time frames. Diamond’s Methodology and Advice on Discipline and Trade Execution Diamond’s Methodology and Advice on Discipline and Trade Execution An interview with Dick Diamond conducted by EWI’s Bob Stokes Q: Trading is such a tough business that it usually does people in long before 45 years pass. You can’t be a Nervous Nellie and succeed at trading. Time is money. Q: You talk about your trading principles. while computers allow the trader to see multiple indicators on the screen. Unfortunately. 8 . A trader must act on this set-up immediately. Calmness comes from learning the proper trading techniques. Then you set stops. One must learn to narrow down the number of indicators. so computers provide a great advantage to today’s trader compared to pre-computer days. like off of a 120-minute or 240-minute chart. You can think well because you haven’t stuck your neck out there. Q: Could you tell me about the 80/20 trade? Diamond: The 80/20 trade is based on indicators that create a specific trading set-up. The 80/20 trade can be especially rewarding for position traders. what would it be? Diamond: Discipline. That means that you should feel in your gut that you have a 4 in 5 chance of winning as the trade sets up. I was doing it every week and finally realized I really wanted to get back to trading because I had gotten away from trading completely. Q: A skeptic might say that your trading can’t be that great. It was very fruitful on a personal level: I met so many people through those courses. I am a human and have to take losses every once in awhile. I explain my indicators and how to use them.” You can’t really make any money on a long-term basis making trades like that. I teach students to look for an 80/20 trade.V. I’m still a full-time trader. For the most part. it’s worked out well. This must be a tremendous value to the students. I trade live in front of them. or you’d keep it to yourself. it’s legendary. I trade. It’s very fulfilling. At the end of day 2. Your trading is not just great. Now I get to have my cake and eat it too. On day 3. My trades are successful about 70-80% of the time. Trading is what I love to do and what I want to do. But bad trades give me the opportunity to show students how to close a position out quickly. but now I can still take time out for three or four days every six weeks or so and teach other people. I did it for a while in 1987 and part of ‘88 and Bob Prechter recommended a lot of people to me. Each course is only a four-day period. Diamond’s Methodology and Advice on Discipline and Trade Execution Q: Students spend the last half of your course applying your principles and methodology in real-time trading. But. People fail as traders because they take these 50/50 or 60/40 trades that look “okay. Diamond: This is a four-day course. Why do you feel so strongly about teaching others? Diamond: I just enjoy training people. The first two days are academically oriented. 9 . But it’s stuff you’re not going to get in an ordinary trading course. I was familiar only with trading on the long side. The key is to follow all of the rules to the letter. I had one of those nice Bloomberg terminals on my desk. It didn’t work. no matter how the market is trending. That’s what turned things around for me. He says the transition was rocky: “I lost more money trading than what an Ivy League School M.B.VI. And it started with reading a technical analysis book by John Murphy. He transformed himself into a successful trader. 10 . why did your approach cause you to lose so much money? Hernandez: I based my trading purely on fundamentals. I believe a technical approach is the way to go -. I paid a high tuition for my ‘trading education. and have corrections in an uptrend. I just didn’t know enough about trading markets. Overall. stocks can rally powerfully in a downtrend. would have cost me. I had to get rid of all of the garbage I had stored up about trading. and a subscriber to EWI publications. Closing the Gap Between Analyst and Trader Closing the Gap Between Analyst and Trader Roberto Hernandez went from working in the finance department of an oil company to becoming a full-time trader and teacher.A. but that didn’t make up for my lack of knowledge about the best trading techniques. including a chapter devoted to Elliott wave analysis. I studied balance sheets and listened to conference calls. Trading opportunities come faster during a bear market because the emotion driving market prices is fear. He devoured the text. Q: Since you’ve raised the subject.’” A turning point in Hernandez’s trading career was when a friend recommended a book on technical analysis. his trading skills improved dramatically. That’s also where he discovered the Dick Diamond Trading Seminar. not going short. Q: What if the short-term trend moves in one direction. (He even shows his trading account statement during the seminar. As a result. A trader simply has to get in and out of trades in shorter time frames. He also assists Dick Diamond in his trading seminars. He attended and “followed the rules” he learned from Diamond. But one thing I’ve learned: A trader who is flexible can do well in any market environment. Eventually Hernandez became a frequent visitor to elliottwave. while the longer-term trend moves in another? How do you trade in that kind of environment? Hernandez: As you know. A trader just has to be ready.) Here’s a Q&A that EWI’s Bob Stokes conducted with Roberto: Q: When you first started trading. Plus. Generally. And it didn’t help that I started trading in 1999 at the peak of the bubble.like using oscillators.com. what are the best trading techniques? Hernandez: It takes Dick Diamond and me four days to explain all of the techniques and rules. I’ve personally been trading highly liquid futures and forex lately. Closing the Gap Between Analyst and Trader Q: Can your trading approach apply to financial markets beyond stocks? Hernandez: Definitely. we learn that those who are the most successful are those who apply the techniques and rules exactly as we teach them. Dick Diamond and I provide students with the correct tools. The euro has been a beautiful trade.elliottwave. Trading is not for everybody. In fact.com/wave/DickDiamondTradingCourse © 2014 Elliott Wave International — www.elliottwave. visit www. To learn more about Dick Diamond’s Market Mentor Trading Course. As we hear back from former students. they can be successful.VI. But for those who really want to trade. Q: Why should a trader attend the Dick Diamond Trading Seminar? Hernandez: What we teach “closes the gap” between being an analyst and a successful trader.com 11 . and everything necessary to start trading.