Another drop and pop back to the original trend. cover the shorts and go long. 1/2 hour until end of day.

SRS

SKF

FAZ

Momo looks to have ended for now so it's a good place to take profits and either trade them the other way or find some other plays

SRS

SKF

FAZ

Another trick to use

Another arrow in my trading quiver is to closely watch the 5 minute clock. In this instance SKF SRS FAZ have been in an extended uptrend all day. Going into the afternoon session the momo slowed down and they started to drop.I sold the longs and went short. The coresponding volume rise in the markets was minimal so it said to me that a quick drop then a pop back to new highs was a greater probability. The trick is to feel/see  the momentum change right when a new candle appears. I  covered my little shorts and went long. The risk is minimal if I'm wrong. If I'm correct then I've gotten a good jump on everybody else.

First chart is FAZ.

SKF

SRS

Momentum and high probability charts

The following two posts demostrate why the combination of momentum and high probability charts are a preferred way to trade. Knowing from past experience that charts like this have a better chance of a profitable trade than something that is jammed up or choppy, it's easy just to follow your trading plan. Make an entry , set a stop and let the market momentum take over until it exhausts itself. 

The key is truly believing in the probability.  I never think I know what it will do. I acknowledge what it is more likely to do and trade it that way. I always protect myself from the unknown forces afoot in the market by deciding on where my buy or short decision will be proven wrong though. Many times a perfect "A trade" set up will fail just as easily as an ugly dog set up.

Charts continued

Here's where the earlier charts ended up a short time later. As always take the $ and trade them the other direction. Will the trends continue later? I don't know. Better to be ready for anything.

FAZ stalled , shows doji like candles. Time to take the $ it's showing you

ZION gives a $1 in 5 minutes, you'd have to be nuts not to take it.

SKF shows same chart as FAZ

JPM drop has slowed and shows a little green, again time to take what it's offering you.

SRS just like FAZ SKF

High probability chart patterns

Some charts this morning are showing classic high probability patterns and continuing their trends. Trading these patterns with the market momentum is very low risk.high probability. 

FAZ breaking to new highs.

ZION rolling over. Note all other bank stocks were making new lows at this time. SO waiting for this to roll over can pay off huge.

SKF making new highs

JPM making new lows after consolidation

SRS ramping up in a trend continuation.

Exercise

Going to the gym and lifting weights is great for getting into shape and bulking up your muscles. Your mind can be transformed into better shape with sharper mental acuity through exercise as well.

Last week I touched on some exercises in concentration that would help you out. Lets expand on those ideas now and see what else can be done to get to a higher level when trading.

As ever, goals should be in the forefront. " I want to become a consistently, profitable trader". Writing down goals turns them into something more than just random thoughts. It sets them into your mental pathways. The words on paper have a physical form. You can see them now. Your muscles have taken a command from your mind and turned it into a tangible thing. This sets the basis for learning habits. The mind commands, the body responds.

If you’re having trouble in certain areas of your trading, you can focus your mental directives there to help you escape them. For instance if you have a bad habit of adding to your losers, write down “I will not add to a losing position” 50 times. It’s kind of like doing affirmations. Repetition helps you ingrain a command so that eventually you can overcome a bad habit if your will is strong enough.

Write down as many positive trading affirmations that you can think of. For example:

- I always follow my trading plan

- I accept that losses will happen

- I take profits when the market offer them to me

- I believe in my decisions

-I never risk too much in a trade

- I always use stops

You get the idea.  The more you have, the more you can pratice with. Record them on an MP3 player and listen to them in your sleep. You brain has a wonderful habit of learning what you practice and the more you bombard it with  the correct way to trade the more likely you are to turn into a great trader.

Pattern recognition can be learned through the use of “ flash cards”.  If you review my site you’ll notice that most of the chart patterns look the same. Buying as it breaking to new highs, selling as it breaks to new lows, selling or covering when shorter candles or dojis appear after long runs. If you were to view a bunch of charts in rapid secession, you can get a sense of what patterns give a high probability trade. I never am sure what a stock will do in the future, but I know that probability is on my side with the pattern that has demonstrated it time and time in the past. Your eye and brain can be trained in this way.

Develop your contra ideals. By that I mean that trading often requires you to do the exact opposite the situations in normal life require you to do. You may hold onto a loser because you are seeing your money disappear and you don’t want to end the trade without getting it back.  The contra response is to cut that loser soon so you don’t dig yourself a bigger monetary and psychological hole. If you go into your third loser in a row, it may be natural to have negative thoughts about the next trade, but all that will do is attract more losses to you. The contra attitude is a positive one that focuses instead on your proven 80% success rate because you KNOW that you can follow your trading plan and the law of averages will return in your favour.

Having a winning attitude is what it is all about. If you approach trading trying to protect what you have, you will most likely not succeed as a trader. You have to think that you have a system (you actually have to have a system) and it works more often than not and the winners are always more than the losers.  Trading becomes a probability game then.

 You become what you think about the most.

 

If these things don’t work for you, then visualize if you had Tony Soprano seated next to you and had to explain every trade. It would make you feel very uncomfortable to have to justify why you were breaking your no adding to losers rule.

You: “ I’m gonna average down ‘cuz I think it’s going to move higher in the          future”.

Tony: “Cut your loss you frickin’ idiot. You’re already $300 in the hole and now you’re going to tie up more money hoping it’s going to rise? What are you a moron? Find another trade”