Mr. Marketz goes to market

You've got to be right often in order to make money in the market. Anything else you may have heard is a crock of shit.

tootles.

I frequently find myself in situations where a trade gets put on with little consideration of it's "technical quality". Don't get me wrong, it happens with much less frequency than it used to it... but still slips in there every once in a while.

By "technical quality", I am referring to the actual behavior of price. Traders who use indicators will fall prey to this far more often than those that don't. Not knocking indicators either... if they help, use them.

I'll explain:

Let's suppose you use stochastic divergence as a trading signal. Ok great, divergence is a very powerful method to use. However, and I'm sure we've all seen this, sometimes price will have oscillators pegged throughout a powerful trend with divergence occurring many times over. If you take those signals blindly without considering the technical aspects of the PA... you're going to get hurt... many times over.

To remedy this, you'll need a pre-order filter. No, I don't mean that 200SMA to tell you which direction to trade in. I'm talking about asking yourself an important question before placing the order.

The question is:

Is this a great setup?

Well, it's diverging.

Ok, great now how does the price look with that divergence. Does it appear to have a similar structure to other trades I've taken that have mostly yielded positive results? If not, it's not a great setup.

Not a great setup = no trade.

It's a lot of fun to watch a trade in real-time. There's the acceleration of the pulse knowing that you're seeing it unfold as it happens. You're ready to use your quick reflexes to manage the order as new price data comes in.

It all sounds pretty efficient. Why am I still not showing a profit?

Try the following if that sounds familiar to you. Get out of the way. Put on a trade based on your entry method, set a hard TP and SL level, then close your trading station. You obviously need to mind your R:R ratio (no less than 1:1) and position size, but once you've set a comfortable loss value - fire away.

Try doing this for the next 10 demo trades, and see how you like it. The only rule is that once the trade and SL/TP values are set... you're done. You cannot touch that trade until the market takes you out. Remember... get out of the way.

Here's a chart in reference to my previous post about looking for great setups. In the example below, divergence is recognized. However, I most certainly would not consider this a great setup. pass...

Just wanted to update quickly. In the example above, the trade ended up dropping 40 pips after I posted it. One could have easily made money trading the divergence signal alone. And that's great... but it doesn't change the fact that I knew it was not a great setup for me. I never get agitated when the market surprises me. However, I do get mighty upset when I take shit setups and lose money.

Know your great setups (1 to 3 of them is all you'll ever need). Extremely important, imo.

That's perfectly human, acting on impulses. It's like the -50% off sales, even if the reference price is a lie, it's hard to pass a half price deal, so we might buy those items even if we don't really need them.
We're not machines without feelings, we don't want to completely erase this. There must be a bit of imperfection in everyone Sometimes we make mistakes, and as you pointed out what matters is that the frequency and severity of our mistakes shows an improving tendency.

That's it. See the FACTs. Quite a challenge, try to separate opinion, hunches and guesswork from FACTs. Rules, they will help.
The "similar structure" can be quite different for you, or for me, it's really at the heart of your trading approach but I think I'm catching your drift.

Spekitox,

That's a great analogy with the 50% of clearance sale. Just because one sees price jolting around does not mean they need to be placing an order. If the setup is not looking right based on what you need, you don't need to be in the trade. Similar to when we buy sale items without first considering whether or not the item is truly needed.

At first it may appear that a trader gets paid to follow price, but eventually a trader must realize that he/she gets paid to anticipate where future prices end up.

It's called speculation for a reason.

In other words, chasing trends is for suckers.

I remember I've read an article about the so called "four basic fears". The fear of missing out, is the one we discussed above. And the others here you'll find
http://www.tigersharktrading.com/art...ars/Page1.html

Number three is the biggest pain in my backside, the others I tend to handle better.

Hey!! Where's the Mona Lisa avatar? I liked that quirky smile.

Panda is better than the Mona Lisa... check out the video.




Also, thanks for the link. I'll check it out.

Yeah, I remedied that a while ago by setting firm targets. Letting profits run was definitely not inline with my psychology.

Lolety lol. Revenge of the Panda Quite cruel, actually, the hospital scene and the kitchen I prefer to stay away until my anger goes away. Can take some time, weeks, months or more. But I have time ...

You're right about the get out of the way and set firm targets thing. I'm gonna have to work on that a bit, thank you for the tip.

There are a ton of systems out there. Many of which have some kind of "proprietary indicator" or software. Before committing your money, or worse yet, your beliefs to such things - consider the following:

There is nothing new under the sun

The generic RSI or stochastic that comes with your B-grade piece of shit trading platform is all you'll ever need if you chose to work with such tools.

The reason I say this is because I'm seeing some new System threads popping up, and that's all very fun and exciting. Unfortunately, all of them continue to achieve one thing - taking it's readers further away from learning about the market. Instead of absorbing how the market works, one's focus is shifted to focusing on how "this kick-ass new indicator works".

There are Oscillators, Moving Averages, and Volumes... that's it. And there's nothing anyone can do to make them more precise or "magical".
Many spend years in this little circle jerk. My advice here is simple - hit the charts and stop searching for systems.