Interview with trader: Elliot Gu

Gu Elliott is the editor of monthly newsletter "The winners of Wall Street," which helps investors manage their risk portfolios. He worked and lived in Europe for five years, where he received a degree in finance from the University of London. Elliott analyzes the market sector for the sector to find a deal with the greatest capacity and to remain aloof from the most dangerous areas. He uses different approaches to find a stock or currency market for strong medium-term trends in order to select only the best deal. In his interview, he shares his experience about how to prepare for trade and how it determines the best trade opportunities.

Question: How did you initially interested in investment and trade in the markets?
Elliot: As far as I remember, I was fascinated by financial markets and trade. My father traded in futures, so I ran to schedule and technical analysis at an early age. He also introduced me to several works on the technical analysis and trade, including technical analysis, stock trends, "Robert Edwards and John Megi. Later, at the University of London, I studied finance and economics from several professors who have worked in London. Their training in business really strengthened my interest in the financial sector.

Question: Did you ever use options and if so, what are your favorite strategies?
Elliot: I'm using the options and recommend them to their subscribers. One of my favorite strategies is to sell protection. The well-known speculator Jesse Livermore once said that the most difficult thing that any trader needs to learn - is "to be right and to adhere to their positions." In other words, define the main trend and stay with the trend you need to maximize their profits. Unfortunately, most traders, even with considerable experience of transactions go too early, leaving the market returns. One strategy options that can help is to buy protective options for some of your winning positions when the market is in extreme conditions. This strategy may reduce the temptation to take profits too early. And if the market spread, options can help preserve your profit. I also recommend that naked option positions from time to time. If you keep the size of their positions within reasonable limits, the net trade options may be a good strategy to increase your profits.

Question: What are you most like to trade?
Elliot: Trade is always fascinating and evolving business. To understand why the market operates this way and why some market-based instruments to move in such a manner, you need to stay on top of the latest news and developments in all areas of the economy. In what other business you can spend their morning by reading about the Japanese real estate market, and his day by reading an article about the latest router "Cisco"? Besides, you can never become an absolute master in the trade. There is always room for improvement, so this is a continuous process of study.

Question: How do you view the loss and how you wish your tolerance for risk before you enter the market?
Elliot: I am firmly convinced that risk management is one of the most important yet undervalued aspects of trade. Managing risk means managing limits losses for open transactions by placing stop orders as soon as the open position and movement of the stop order as the market moves in your favor. I do use charts to determine key support and resistance levels for market-based instruments, which I traded. I then set their stop-order and at some distance below or above these critical levels. The next question that you should ask yourself - the amount of risk that you can take to give the transaction a place for development. In other words, how much you lose if the deal will be closed to stop a warrant at a predetermined level. Then, define the size of their positions to ensure that the risk you take, the amount of your trading capital.

Question: Do you prefer long or short-term strategy?
Elliot: It is difficult to give an exact definition of "long term" and "short" and that is probably different for different people. As the John Maynard Keynes, "In the long run we are all dead." I think the combination of long-term investment and short-term transactions is the most sensible approach. I have no intra-day trader: in my newsletter, I try to focus on transactions that will be open from several days to several months. My analysis is primarily based on technical charts.

Q: What are some of the key rules that you think are most important to traders and analysts in the evaluation of any trading opportunities?
Elliott: First of all, make sure that you are trading with the prevailing trend. I like to use technical tools like moving averages, to make sure that I buy when the market develops trend upwards and sell when the market develops the descending trend. Attempting to trade from the tops and bases has never been a strategy that worked for me. Secondly, can not ignore the importance of risk management. Prior to the opening position, it is important to know exactly what risks you must take. Make sure that the transaction involves sufficient capacity to compensate for the risk to you.

Question: In what markets do you like to trade and track with your analysis tools?
Elliot: I primarily focus on the stock markets and trade individual stocks. I like to start by monitoring the major indexes - Dow Industrials, Nasdaq 100 and S & P 500 index and a few sectors, like the Philadelphia Banking Index, Philadelphia Semiconductor Index, the AMEX Biotechnology Index and The Dow Transportation Index. Technical look at each of them gives me the idea about the overall health of the market.

Question: What is your most unforgettable transaction?
Elliot: It may seem strange, this is a transaction that did not work for me, as should have been. In spring 2003, I recommended shares of "America West Airlines" in my trading service, as they broke from a long consolidation. At this time, the shares traded around $ 2.91. I liked the fact that almost all analysts are negative are set for this group, however, a large amount at the rally suggested accumulation. An entire sector looked ready to go up. And he made the motion up to approximately one month later, we recommend closing the position with a profit of approximately 24 per cent. But the big mistake was that the action never really moved against our recommendations, and we came out of the deal at the normal setback. Soon she went back up. Ultimately, I watched from outside the game, as the price went above $ 15. Fixed gain is normal, but the deal could make the whole year - we were not aggressive enough and when we were really right on trend, we were not able to firmly hold their positions. I think that most traders face this lesson, one way or another.

Question: With all the diversity of the various technical and fundamental tools such as a new trader can avoid information overload or "analysis paralysis"?
Elliot: Select methodology and work with it. You can always justify their position or the market view, finding the indicator, which converges with your thoughts. With literally hundreds of indicators available to traders, there is always something that will justify your opinion. I prefer to follow a few simple techniques and methods that worked in the past. This includes Moving averages, trend lines, graphical models and the relative strength index. I also think that the amount is underestimated, factor in the sale of shares.

Question: How would you describe your approach to the markets?
Elliot: I primarily oriented to the technical side of trading. I believe that technical factors dominate all others in the short and medium term. For long-term investment, should be a full understanding of the fundamental factors. However, I do not appeal to completely ignore the fundamental factors for traders and technical factors for investors. An analysis of weekly and monthly charts for your long-term portfolios makes sense, but for short-term transactions, understanding the fundamental factors will help you understand the catalysts behind the market movements.

Q: What do you think the major misconception among novice traders on the markets?
Elliot: Many novice traders think that the best way to make money is to have a high percentage of winning deals, in other words to be right all the time. This does not necessarily. It is necessary to identify market-based instruments, which, in your opinion, move a certain way and establish a strict limitation of what you are willing to risk - in other words, try to cut their losses as soon as possible. When you are in a win, try to maximize their profits. I recommend rolling a stop-order, so as to capture the increasing returns on the transaction. Or as I mentioned earlier, you can use options to protect their profits. This way, you can let the market decide when you close the position. Losing by a reduction and maximization of the winning entries of your profitable deals should be much greater than the loss-making. In this case you do not need a huge percentage of the winning transaction in order to remain in profit. In fact, many of the most profitable traders argue that had the winning percentage of deals a little more than 50 per cent. You can not be right all the time, so just try to use the good opportunities and reasonable risk management.

Q: What advice would you give a newbie trader?
Elliot: Well a long-term view on the market, but do not let that limit your presentation. In other words, it's a good idea - to try and trade on both sides of the market does not become too loyal a party at any time. That is, if you're on the side of a bear, do not let it close down your opinion in relation to the long side, and if you are on the side of bull, do not ignore the sale. Too many traders try to use every turn to sell only to one side and ignore the good opportunities for trade to another.

Question: Can you describe your average shopping day of preparation before the performance of the transaction?
Elliot: For a commercial service, I do a lot of preliminary work after the closing of tenders. I make about 3 or 4 technical display for each market every night, looking for shocks with a large volume, market-based instruments, burst above or below the major moving averages and stripes Bollindzhera. On average I watch about 200 to 500 market-based instruments in the evening, burst from the ground looking at a good level of support or correction within a rising trend. I note some interesting graphics and place them in a list that I watch every day. Normally, I do some basic fundamental analysis for the observed instruments. When I see something interesting, I would recommend this to my shopping service. As you can imagine only a few market-based instruments that pass through the full process and become the actual transactions. I also regularly review the major market sectors and indices to see whether there are any topics that are being developed. For example, if the Philadelphia Gold and Silver Index is set for the rally, I watch the group in search of the best candidates for trade. Much of this analysis occurs when the market closed, because I prefer to concentrate on the analysis at this time. I am inclined to hold my day by reading the analytical reports and news messages, doing further research on markets and trends that I see.

Question: What is the decision-making process do you go to choose certain transactions and certain sectors of the economy?
Elliot: With regard to long-term investment, I am more oriented to macroeconomic factors. I like to determine the long-term investment trends and try to determine what actions and the group will bring a profit. For example, we covered the commodity markets for some time - this includes the oil and metals as well as food products, like soybeans and wheat. The fact is that Asia is growing and becoming a more important part of the world economy and hence require more oil, food and basic goods. I believe that this leads to long-term market bychemu group. I'm using my macro presentation to maintain my long-term investment advice.

Question: What kind of analysis methodology do you use to find great investment opportunities?
Elliot: I have always thought that both fundamental and technical approaches can help in locating investment ideas. But in the trade, as I said, I am inclined to pay more attention to the diagrams, rather than with long-term investment. I like to watch the market sector for the sector and then "dig" further, to find some good opportunities in the preferred sectors. For example, last year we have identified oil as a tool that can outperform the rest of the market. Oil stocks were cheap, on the basis of any fundamental analysis and technically, the oil was to establish a rising trend. We then determined the company "ConocoPhillips" as a good way to participate in the trend. In particular, we liked the way the company restructured and repay debts.

Forex Magazine
based on www.optionetics.com