If you cruise through trading blogs and web pages you can surely fill your head with enough crap and opinions to confuse your brain so much so that you won’t be an effective trader when the time comes to pull the trigger. These are days of much confusion in the markets. Are we going up or down? I say who cares what happens. Trade what you see on the screens in front of you. You don’t need to know what will happen and besides no one really knows anyway. So the best defense against this plague of too much information is to simplify.
I preach keeping it simple for a good reason. It works. After all, how many indicators, expectations and opinions do you need to put on a trade? How do you know what are right and what ones are wrong? My simple system is as follows: when I see red candles and the markets are tanking, I short sell. When I see green candles and the markets are rising I buy. I know when I see red candles people are bailing out of that stock. I know when I see green candles, people are buying into it. The market doesn’t lie and I don’t care to educate myself to try and out think it.
Further to keeping it simple, I practice only a few steps on my checklist before I put on a trade.
- Get into the flow. (I watch and recognize what the charts are doing in front of me)
- Feel the momentum. (Sure as shit if the stock is tanking, momo is on the downside)
- Confirm the markets. ( If the S&P and Q’s are tanking too, momo is there as well)
- Check the clock.(What time is it in relation to the 5 minute candle)
- Enter the trade. ( Since my trade parameters have been met, pull the trigger. That’s why I’m here)
- Set stop. ( Mental or hard since I never know what will happen in the future).
- Mange the trade. ( I’m looking for the momo to stop. Nothing else).
Now you can see that my role is reduced to a mere lever puller so to speak. My system does the work for me. I know my system works more often than not . Loses are kept small. Winners are left to run. I have no emotional interest in if stocks go up or down. I am both a machine operator (my system) and a machine ( I do the same things time after time without variation).
If you are having trouble trading because you have been inundated with too much information, give yourself a break and empty all the crap out of your head so that you can see clearly what is happening in the here and now.
Oh and get out of the big city for a while and do something in nature. Appreciate its simplicity, its way of doing things. Nature only works by one set of rules and it should be the same way with you.
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4 comments:
I am working hard to follow your model; trying to break some bad habits. Simplicity. Clarity. Focus... that's my goal. You set a great overall standard for others to aspire to. I believe in your method as I think "reading the tape" is the method by which many successful traders prosper. Thank you for presenting your version of it to us.
Scott after seeing you make 50 trades in a day last year I can testify that you are indeed a machine.
I like what you said, just follow the momo. I have a very hard time with that in this market, because momo on most days is short lived. That feeds into my counter trend style. The big money is following the momo and letting the trade run. It takes a lot of practice to know that you've got a winner that just needs a little room to run vs being patient with a drawdown that turns into a loser. Understanding where the momentum lies has to be the key.
Trying to figure out the importance of where on the 5-min clock the trade takes place. Why is it relevant, if you don't mind taking a moment to explain? Thanks.
Watching the 5 minute candles in conjunction with the clock will open up greater profit avenues to you. Many, many times you will see moves made right as a new candle is due to arrive or has just arrived. Under various market conditions: I take profits if a stock has suddenly shot up but is kind of lagging, or get a great short entry if a weak stock suddenly shoots up that looked ready to drop. Lots of MM games seem to be played around that time. I keep my computer clock directly below my 5 minute chart and refer to it all the time. Once you start watching you will notice how it works.
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