There is a fine line between following your gut, and swinging from the hip. While I believe you have to trust your instincts in trading which is part of why there is no black and white set of rules, I also believe that impulsive decisions will lead to disaster.
You have to find middle ground. Here is what helps me make sense of it. When I am evaluating a trade, I try to routinely ask myself "what is everyone else planning to do here?". Remember, the goal in trading is quite simply to beat everybody else, or at least the vast majority. You want to ride the coattails of the market and let the market carry you into winning positions as the market is forcing losing positions to be liquidated. It's always important to know your enemy, the other traders, and know where they might be trapped and forced to liquidate.
I find that when I approach each trade by asking the question "what is likely to happen here, what is everyone expecting?" it helps. It is also helpful to ask "what would inexperienced traders do here? what would cause them pain and force them to liquidate their position?".
It is often not enough to ask what is logical. The market is really not rational. Some say the market is always right. Fine, I can get behind that thought. But you don't have to be rational to be right. That is why I don't really try to understand the market in terms of "why did Crude Oil just move up 150 ticks, then down 100 ticks, and now back up 150?". The truth is, who cares why it did this. What is important is simply that it did. What is important is that you positioned yourself for minimum risk and damage, and maximum reward and potential during each move.
I hope these make sense and are helpful to you.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
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The following user says Thank You to Big Mike for this post:
Thanks Mike for sharing your evaluation method with me. For me (at this stage), I may have the answer to the above underlined question before placing a trade. Not sure about others' expectation and/or inexperienced traders' action unless price is at a S/R level.
Luckily, I do have a predetermined PT/SL strategy incl BE/Trail. Until I trade successfully on a consistent basis, I will not be missing home runs.
Goal Accomplished: An A trade and B+ for me! Why not giving myself a higher grade?
1. I missed the first 2 shorts. Will have a better schedule in future so that I will not be upset. The comfort part is: There're always high probability trades waiting for me. At least I do not jump in a trade when it's choppy.
The following user says Thank You to wgreenie for this post:
Initial Balance: 1102.50 - 1113.75 (11.25 points) Value Area as at 10:35 am: 1113.25 - 1108.25 - 1106.25 (7.00 points)
Price opened @1113.00
Today's High and Low as at 10:35 am: 1113.75 and 1101.50 (continues falling as I prepare this post)
VPOCs: Top 1128.50 and Bottom 1099.00 (1110.25 was touched)
I spent some time comparing the Snapback and MACDBB indicators. Now that I better understand the MACDBB one, I will choose it over Snapback. Don't be surprised if I do the change next weekend, ie possibly replacement and not addition else my 4-Range chart will get more crowded. Let's play it by ear.
Last edited by wgreenie; June 17th, 2010 at 10:41 PM.
2:30 CST is a well known reversal time, it does not always happen, but it is a time to be aware of.
Another time to watch is 2:40 in the indexes. This time is not as meaningful as it once was, but watch it for major reversals. This time used to be much more important when the pits were dominant, as the pit traders had to square away their decks, especially if they were extended past their max margin levels, not that anyone in the pits would ever do that.
The following user says Thank You to aslan for this post:
Surprise surprise .. price is not trading too wild overnight/this morning (as of this moment). Maybe it will when the market opens?! Please bear in mind that we do not have any important news today that will move the market substantially. Hmm, a quiet Friday? Have not done any analysis on trading days .. don't know Maybe you know and will consider sharing with me. Thanks in advance.
Overnight High and Low as at 8:00 am: 1113.75 and 1108.25
VPOCs: Top 1128.50 Bottom 1106.25 (if price stays above it else will be 1099.00)
Enjoy a Successful day.
Beth (I may not trade today as I am running a slight fever. Joined Nelson for his evening lead in a nearby city and stayed in the car (chilly when it's getting late). Will play it by ear.)