Monday, December 15, 2008

Timing

Timing your entries and exits is crucial to your success as a trader. The charts and price action tell you when the time is right. You just need to pay attention and recognize what they are saying.
When you can simplify your information sources down to only a few then your task will become easier. After all , how many indicators do you really need when the chart shows it is going up and the markets show they are going up? How much confirmation do you need? And confirmation of what? The future is unwritten. The more you wait, the farther way the prime entry/exit spot is moving away from you. The more risk you take on. More risk can play on your emotions. Indicators are always behind the times. I view them as pretty useless. The price on the chart and the candles are my REAL TIME indicators. Sounds simple and it is.
So if you have simplified things in the manner I describe, the next item to truly believe in is probabilities. I (and everybody else) don't know what is going to happen in the future. However, I know that profit taking will happen after long trends, pops, drops etc. Trading the probability of a reversal after a extended uptrend when the candles are getting shorter, volume is dropping off and the overall markets showing the same is only taking the view that gravity usually takes effect and that the stock will drop. This is timing the market. My mind is not encumbered by hopes, dream and predictions of what will happen. I think of only the probability. There is a huge difference between the two psychologically after you take some losers in a row. I don't take the losers personally as a reflection of my poor judgment. I just think that it's the law of probabilities playing themselves out and so I can go into my next trade opportunity unafraid and without hesitation.

1 comment:

Unknown said...

Scott,

Thank you for the post. I think the truly important thing is believing in probabilities and trusting your judgment.

I will use this in my trading today. "The longer you hesitate, the bigger the risk $ would be".

Thanks,
Jaya