Tuesday, November 11, 2008

I think the the following posts from todays trading session clearly illustrates my style.
- simply follow the charts and momentum
- trade the probabilities
- no CNBC news
- no VIX, fib lines or lots of moving averages
- don't know/ care where the DOW is
- no hoping, wishing or predicting what the stock and markets will do.

Trading is much easier when you can break it down into it's simplest form, charts and momentum. You can see that they are the only important items to consider. The rest is just plain garbage invented to fog your brain.
Don't get distracted, overloading yourself with too many indicators. When you see and can feel the momentum changing, don't feel the need to wait until you have 6, 8 or 10 different things telling you the moment is ripe. It'll be too late by then. Use your edge and trade the probability.

Look at my edge. It's not some super secret, undefinable mystery. Green candles mean a stock is rising. Red means they're dropping. Long candles means lots of momentum. Shorter candles mean less momo. Check out what the overall market conditions are doing. When I see a convergence I make my play. What's your edge?
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3 comments:

duane Zerwas said...

Hi Scott -

I am a new trader trying to figure this all out. I'm finding the more I read & learn about technical indicators, trendlines, pivot points, etc. the more confused I am getting. I've always felt deep down I'm making this more complicated than it needs to be and after reading your posts I think my gut feeling is right. Thank-you so much for sharing this information - I know it's really time consuming. I am going to start eliminating all the extras and just concentrate on the candles and see how it goes paper trading. Thanks again for sharing how you do it - it's appreciated!

Lorinda

3:48 p.m.
Scott said...

Yes your trading life will be much easier when you eliminate all the extras and concentrate only on the charts. Definately never listen to CNBC , or other sources of tips. No one knows what the market is going to do. All you can do as a trader is focus on what the charts are telling you to do and act on that info. Learn about support and resistance and candlestick patterns. It's smart to only sit and watch for a long time ( I spent 2 yrs watching, learning before I started in with real money) so that you can get confident that your edge and trading plan work for you. The market offer up so much opportunity that don't feel like you will be missing out by waiting. Use your brain and think deeply it's what will make or break you, get in tune with the market ebb and flow.
Most importantly , never form opinions on what the market or stock will do, only trade the probability that your edge says is likely. That way if you are wrong its easy to exit a losing position.

8:37 a.m.
duane Zerwas said...

Thank-you for the advice, trading is a lot harder to do than it looks like at first. I wonder too if it's the timing - talk about a volatile market! I started studying the markets - specifically the QQQQ - this summer. It seemed then you could usually count on a consolidation period over lunch and then clearly see a up or down movement later in the afternoon. Maybe I've just been staring at the charts too long but I'm having a hard time seeing any patterns lately. It seemed easier this summer. So it really helps just watching the markets over & over?

When you say don't form opinions on what the markets will do - that's what's so hard! This is such a mind game. I've always been the sort of person that loves to solve puzzles but this seems like one you can't really solve. Like you said, it's about probabilities. Thanks for listening.....

Lorinda

5:05 p.m.

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