August 22, 2011
- in Uncategorized by schooloftrade
Avoid Chasing Trades with this simple technique
Chasing Trades
It’s when you see a pattern, and you miss the exact entry and you try and ‘chase’ after it to get into the trade.
What are the problems when you chase?
– You risk getting filled at the HIGHS (end) of that move
– Slippage will be a major concern as the ‘move’ takes off
– Risk/Reward Ratio may be too high
o Example: Entry @ 100
· Stop @ 90
· Target @ 110
· R/R/R = 1:1
· 10t stop and 10tick target
o Chase Example: Entry @ 105
· Stop @ 90
· Target @ 110
· R/R/R = 2:1
What am i doing when I chase?
– I’m trying to get into a trade that I missed
o Not paying attention/ not prepared
§ Anticipate trades before they happen in the ADV Course
o No trade to take
§ Was there NO trigger for the entry?
§ Next time sit on hands, don’t even take the trade.
§ We dont trade JUST because the market is moving
o Happened too fast
§ Anticipate trades before they happen
§ Be ready for the AREA/LOCATION to be tested and get ready quickly to qualify the pattern
§ Sometimes good trades can get away from you because the price action moves too fast.
o Big Money showed up late (guilty)
§ I see the pattern, and I see the rules lined up, all I need is the big money
§ Big money comes in late, the move is 50% complete and now im chasing.
Most important thing to solve this problem is to define and set rules for chasing.
Joe’s Rule = I will not chase more than 7 ticks above my desired entry.
Example:
– Breaker Long
– Desired entry long @ 55
– I will not enter long above 55
– If I see big money, everything confirms above 55, im sitting on hands and waiting for the next.
3 different rules for chasing a trade:
– 7 ticks = aggressive
– 5 ticks = average
– 3-4 ticks = conservative
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Change the font on your charts
– Right clicking on your charts
– Select the chart properties
– Change the font from there
– Save your template and save your workspace
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Contract Rollover:
– Crude rolled over today 10-11
– Gold rolls over every 60 days 12-11
– Emini, Dollar, Currencies, Bonds all roll over every 90 days 09-11
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Overbought and Oversold Momentum
– The best long trades come with oversold
– The best short trades come with overbought
– Can i trade long with overbought?
o Yes, but I need to be aware its higher risk
o Yes, I need compensating factors
§ News comes out extremely bullish
§ Sellers failed recently
§ High Speed & LOTS of big buyers
§ Use other timeframes as your guide (more risky)
