April 27, 2011

Fear is Not a Day Trading Strategy, Use This Proven Technique

Fear is NOT an Exit Strategy:
–          Taking profit or exiting the trade requires specific rules:
o    Slowing Speed
o    Momentum / MACD Against you
o    Big Money against you
–          Moving your stop too tight
o    Just because you have a lot of profit on a trade, does NOT mean you need to tighten your stop, it may be TOO tight
o    When do I move my stop?
o    As soon as I start seeing the signs of a price reversal
o    Speed slows down
o    Momentum is overbought/oversold (almost ready to confirm the reversal)
o    We don’t see as many big buyers/sellers to help your trade
–          Entries:
o    You don’t take a trade based on the fear you might miss the opportunity
o    You need specific rules to tell you WHEN and WHY to enter
Misc Questions:
–          Different Chart Types
o    13range = 13 ticks of trading per candle
o    13minute = 13 minutes of time per candle
o    13 tick = 13 ticks of volume per candle
–          Practice drills to keep your emotions away
o    Point system with a reward if you follow your rules
o    Add a point when you follow the rule, deduct 2 points when you do not
§  Example:  take a trade, you follow the rules, you get a point
§  Example:  take a trade and you don’t follow your rules, you deduct a point
§  Give you specific rules to follow
–          Which momentum indicator holds more value?
–          Momentum applies to the chart you’re watching
–          Oversold momentum on a 34range chart means the BIG MOVE down as has likely come to an end
–          Oversold momentum on a 4range chart means the SMALL MOVE down is likely coming to an end.
–          The best scenario is when ALL momentum indicators line up the same direction
–          It depends most on the type of trade you are about to take:
–          Swing Trade (holding overnight) I want to focus on the 34/55/89-range momentum indicators
–          Day Trader (intra-day moves) I want to focus on the 21/13-range momentum
o    Slower momentum on the 34range chart is NOT really applicable
o    Faster momentum is too fast, not applicable
–          Scalper (short term moves) I will focus on the 8/4-range momentum
o    Slower 34range has no bearing on this short term move
o    I want to use the day trading time frame as my guide, 21 and 13range momentum to confirm the direction
o    There’s nothing faster than the 4range, so the next option is to read the tape
Average True Range:
–          There is no specific value
–          We want to consider if its rising or falling
–          Where are we NOW compared to an hour ago
–          Where are we @ 10am today, compared to 10am yesterday
–          Are we rising?  If so, look for patterns and entries
–          Are we dropping? STOP trading and wait for better price action
2 mentors:
–          Mr. Time:  every day I listened to price action
–          Mr. Effort: I never gave up. I learned from my mistakes

    schooloftrade

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