Article Reviews, Trading

Thomas Bulkowski’s Lessons Learned After 25 Years of Trading

Just read an article (link here) titled Lessons Learned After 25 Years of Trading by Thomas Bulkowski. The article was first published in the September 2005 issue of SFO magazine.

Quick summary of key takeaways from the article:

  • Stop placement
    • Don’t place stops at round numbers (which are common support / resistance zones).
    • Place stops below support zones (above resistance zones) to give price every opportunity to move in desired direction.
  • Trade with the trend
    • Select stocks that are moving with the general market and industry trends.
  • Enter on breakouts near the yearly high
    • Breakouts from chart patterns within a third of the yearly high perform best (statistically). If price doesn’t rise within a few days, consider selling immediately.
  • Exit only on expected significant price turns
    • Don’t be so quick to sell. Learn to predict significant price turns.
  • Use trendlines as sell signals
    • If prices are trending up and then drop below a trendline, the trend isn’t up any longer. However it doesn’t mean that the trend is down.
    • Victor Sperandeo’s criteria to determine if a trend has changed from up to down: (i) price drops below an up-sloping trendline, (ii) lower high (or failed breakout), (iii) lower low.
    • On Bulkowski’s site (link here), he recommends using a logarithmic scale for the price chart, which would signal a trend change sooner compared to using an arithmetic scale.
  • Ignore news
    • Don’t believe scenarios spun by news outlets.




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