Your trading week can bear witness to the fulfillment of a lot of long range planning, and the big payoffs that such planning brings to those who are wise and patient-those who want the best of the best. Many times it really pays to be patiently waiting for a trade to burst forth and make some nice gains.
A number of the spreads we do are the result of patient waiting for the two sides to come into proper alignment. We plan these trades days or even weeks in advance.
When a major entry signal such as the breakout of a Ross hook are being made, every effort within reason should be made to be aboard, even if only for a couple of days.
Regardless of what may be happening on the intraday charts, the order to buy or sell based on a Traders Trick Entry must be in place and waiting as resting orders. Therefore, even if the intraday charts do not yield an adequate entry signal, the order will be filled. The resting orders may be limit orders, so as to avoid being filled on gap breakouts.
To ensure that everything is in place at the right time, you have to have everything prepared beforehand.
Trade selection and adequate planning go hand in hand. This is where the vast majority of would-be professional traders miss the boat.
Much more money is made as a result of proper planning than from sitting and trading everything that comes along or "looks" good.
I'll never fully understand why people think they have to trade so much of the time. Nor will I ever fully grasp why people think that they have to take as many trades as they do.
I was taught just the opposite. I want to cover in greater detail just how I was taught to approach trade selection.
It all starts with proper management-planning, organizing, delegating, directing, and controlling.
I was taught to weave them all together in my trading-they do overlap.
Although planning is the major management function involved in trade selection, you can't possibly plan well unless you are organized to do so.
You must have your tools at hand. Your charts, your data, the proper equipment etc. All of the rudiments for planning must be in place-this is a part of organizing.
You must be physically fit when you plan: well nourished, properly exercised, well rested etc., all part of having your life organized.
I was taught that to be a winning trader, I had to be the best. There could be no middle ground. There were only winners and losers out there, and to be a winner I had to be a champion. And, just like any champion, I had to train, train, train.
I was taught that there were no runners up in trading. When others were busy going to parties, I was to study. When others were listening to the radio or watching TV, I was to practice trading.
I was to study my charts diligently. The charts, as inaccurate as they were, were all I had to hang my hat on. I was to picture and imagine in my mind what made them move and form the way they did. I was to ask myself, "How does what I see in front of me relate to supply and demand?" Supply and demand are what make prices move or not move during a trend.
But there was more to a chart than that. Reflected in the chart were the emotional reactions of human beings. Reactions to rumors and news; to national and world events; to government reports-these too were on the charts.
There was something else on the charts, something that few took into account. That something was the manipulations from and by the market movers, the trading floor and also from and by holders of large inventories of the underlying commodity. These were in the days before financial futures and before electronic trading. Today, the big players have an even greater effect on the markets.
I was taught to look for evidence of any and all of these things when I studied my charts. I was told that the cumulative action of these things caused patterns to form.
I was taught to look for the truths in the markets. There were only two things that were always true-A BREAKOUT, and a TREND. I was to master these phenomena. Over and over I had hammered into my head, the truth is always the truth. When a market breaks out, no one can change that. It is history and it is true. It may turn out to be a "false" breakout, but nevertheless it is a breakout. I had to learn to tell which ones were most likely true breakouts. How would I know that? By the patterns on the chart.
The trend is the trend while it lasts. While a market is trending it is telling the truth. The trend can change, but the truth is the truth. If the market is going up, prices are going up. If the market is going down, then the truth is that prices are going down. It is an immutable fact. I was to learn to make my money by trading with the trend. I was to learn what constitutes a trend. I had to learn to spot trends early so that I could make the most out of the market while it trended. I was to learn to recognize when a trend would most likely begin, and just as important, I had to learn to be even more adept at deciphering when a trend was ending. A trend represents momentum, and momentum is what makes money for you if you are going with it.
I was taught to learn to recognize "my" trade(s), and to take only "my" trades. "Trade the formations and patterns that you can easily recognize and identify," I was told.
I was taught to trade using the tricks I had been shown and to accumulate and keep a collection of high probability tricks in my bag of tools. One such tool is the Traders Trick Entry.
How was I to do all this? Practice, practice, PRACTICE. Practice recognition of congestion areas. Practice recognition of high probability breakouts. Practice and more practice. Just like anyone who wants to be a champion at anything, total dedication, study, practice and more practice. I was to become a virtuoso at trading. I was to practice it over and over, always realizing I would never be good enough. There would always be a way that I could do things better, more efficiently, and with greater speed and finesse.
I also had to become proficient in the other aspects of management.
I was taught to write out a script of my orders and rehearse giving them. I was taught to tape my orders and write them down. I was taught to be extremely firm and insistent and to develop that tone of voice when I was calling them in by telephone. No nice guy stuff. Polite, but firm and strong, urgent and insistent was the way the orders had to be called in. This was directing those to whom I had given the authority to get my orders to the trading floor.
Then I was taught to be extremely intimidating in getting back the results. To be ruthless in demanding good fills. To ask for time and sales on anything suspect. This was controlling, exacting back responsibility for the authority originally delegated.
I was taught that I owed my broker nothing. He was the servant and I was the master. I was paying him well for the service he rendered. I was to expect the best from a broker. I was to be quick to drop a broker from service. After all, I was the one picking up the tab, not the broker.
Over the years, although markets have changed, nothing has changed in the way of maintaining personal discipline.
You must watch the market, watch every tick if you are daytrading, learn to see what is going on.
Pick your trades carefully. Pick only those formations that form well, ones that are clearly what you would like to see.
As you gain experience, you will learn to recognize even more trading opportunities.
A number of the spreads we do are the result of patient waiting for the two sides to come into proper alignment. We plan these trades days or even weeks in advance.
When a major entry signal such as the breakout of a Ross hook are being made, every effort within reason should be made to be aboard, even if only for a couple of days.
Regardless of what may be happening on the intraday charts, the order to buy or sell based on a Traders Trick Entry must be in place and waiting as resting orders. Therefore, even if the intraday charts do not yield an adequate entry signal, the order will be filled. The resting orders may be limit orders, so as to avoid being filled on gap breakouts.
To ensure that everything is in place at the right time, you have to have everything prepared beforehand.
Trade selection and adequate planning go hand in hand. This is where the vast majority of would-be professional traders miss the boat.
Much more money is made as a result of proper planning than from sitting and trading everything that comes along or "looks" good.
I'll never fully understand why people think they have to trade so much of the time. Nor will I ever fully grasp why people think that they have to take as many trades as they do.
I was taught just the opposite. I want to cover in greater detail just how I was taught to approach trade selection.
It all starts with proper management-planning, organizing, delegating, directing, and controlling.
I was taught to weave them all together in my trading-they do overlap.
Although planning is the major management function involved in trade selection, you can't possibly plan well unless you are organized to do so.
You must have your tools at hand. Your charts, your data, the proper equipment etc. All of the rudiments for planning must be in place-this is a part of organizing.
You must be physically fit when you plan: well nourished, properly exercised, well rested etc., all part of having your life organized.
I was taught that to be a winning trader, I had to be the best. There could be no middle ground. There were only winners and losers out there, and to be a winner I had to be a champion. And, just like any champion, I had to train, train, train.
I was taught that there were no runners up in trading. When others were busy going to parties, I was to study. When others were listening to the radio or watching TV, I was to practice trading.
I was to study my charts diligently. The charts, as inaccurate as they were, were all I had to hang my hat on. I was to picture and imagine in my mind what made them move and form the way they did. I was to ask myself, "How does what I see in front of me relate to supply and demand?" Supply and demand are what make prices move or not move during a trend.
But there was more to a chart than that. Reflected in the chart were the emotional reactions of human beings. Reactions to rumors and news; to national and world events; to government reports-these too were on the charts.
There was something else on the charts, something that few took into account. That something was the manipulations from and by the market movers, the trading floor and also from and by holders of large inventories of the underlying commodity. These were in the days before financial futures and before electronic trading. Today, the big players have an even greater effect on the markets.
I was taught to look for evidence of any and all of these things when I studied my charts. I was told that the cumulative action of these things caused patterns to form.
I was taught to look for the truths in the markets. There were only two things that were always true-A BREAKOUT, and a TREND. I was to master these phenomena. Over and over I had hammered into my head, the truth is always the truth. When a market breaks out, no one can change that. It is history and it is true. It may turn out to be a "false" breakout, but nevertheless it is a breakout. I had to learn to tell which ones were most likely true breakouts. How would I know that? By the patterns on the chart.
The trend is the trend while it lasts. While a market is trending it is telling the truth. The trend can change, but the truth is the truth. If the market is going up, prices are going up. If the market is going down, then the truth is that prices are going down. It is an immutable fact. I was to learn to make my money by trading with the trend. I was to learn what constitutes a trend. I had to learn to spot trends early so that I could make the most out of the market while it trended. I was to learn to recognize when a trend would most likely begin, and just as important, I had to learn to be even more adept at deciphering when a trend was ending. A trend represents momentum, and momentum is what makes money for you if you are going with it.
I was taught to learn to recognize "my" trade(s), and to take only "my" trades. "Trade the formations and patterns that you can easily recognize and identify," I was told.
I was taught to trade using the tricks I had been shown and to accumulate and keep a collection of high probability tricks in my bag of tools. One such tool is the Traders Trick Entry.
How was I to do all this? Practice, practice, PRACTICE. Practice recognition of congestion areas. Practice recognition of high probability breakouts. Practice and more practice. Just like anyone who wants to be a champion at anything, total dedication, study, practice and more practice. I was to become a virtuoso at trading. I was to practice it over and over, always realizing I would never be good enough. There would always be a way that I could do things better, more efficiently, and with greater speed and finesse.
I also had to become proficient in the other aspects of management.
I was taught to write out a script of my orders and rehearse giving them. I was taught to tape my orders and write them down. I was taught to be extremely firm and insistent and to develop that tone of voice when I was calling them in by telephone. No nice guy stuff. Polite, but firm and strong, urgent and insistent was the way the orders had to be called in. This was directing those to whom I had given the authority to get my orders to the trading floor.
Then I was taught to be extremely intimidating in getting back the results. To be ruthless in demanding good fills. To ask for time and sales on anything suspect. This was controlling, exacting back responsibility for the authority originally delegated.
I was taught that I owed my broker nothing. He was the servant and I was the master. I was paying him well for the service he rendered. I was to expect the best from a broker. I was to be quick to drop a broker from service. After all, I was the one picking up the tab, not the broker.
Over the years, although markets have changed, nothing has changed in the way of maintaining personal discipline.
You must watch the market, watch every tick if you are daytrading, learn to see what is going on.
Pick your trades carefully. Pick only those formations that form well, ones that are clearly what you would like to see.
As you gain experience, you will learn to recognize even more trading opportunities.
Joe Ross, trader, author, trading educator is one of the most eclectic traders in the business. His 48+ years include position trading of shares, and futures. He daytrades stock indices, currencies, and forex. He trades futures spreads and options on futures, and has written books about it all - 12 to be exact. Joe is the discoverer of The Law of Charts
, and is famous for the Ross hook and the Traders Trick Entry.