An Excerpt from the Timely Trades Letter.
Sometimes traders will start trading more aggressively when they are down
in an attempt to get back to even. Draw downs are a fact of life in trading.
Trading is not like drawing a paycheck. You do not get paid because it is
Friday. I research the systems and then use that information when trading.
If I have a losing streak I know that is to be expected and just stay
focused on using the knowledge and skills that come from fully testing
and analyzing trading systems.
Serious traders will go through a learning curve as they study market
behavior and how their trading systems function. They will have times
when they run into situations that have not been experienced or researched
and they may be unsure of what to do. This is normal, it is the price of
admission to the trading business. My general rule is that when I am
unsure I close the position. It is hard to go broke taking profits so my
focus is on needing a clear reason to stay in a position, not wondering
whether or not I should get out. If there is no clear reason to hold I
take profits and move on to another trade.
When trading I am not holding out for the perfect trade, there is no such
thing. Trading is about managing risks and I use the current market
conditions to determine how many trades to be taking and the appropriate
position sizing to use. Setups with more room to run are prioritized above
ones with little room to run. Setups triggering on stronger volume compared
to the previous days volume are prioritized above ones with lower trigger
day volume. Setups with shallower pullbacks are prioritized above ones with
deeper pullbacks. I then look at the setups that are triggering and start
from the top of the prioritized list and work down until I run out of setups
or fill the number of positions I am interested in.
When I go to a trading conference I often ask how many traders are bullish,
a number of hands go up. I then ask how many traders are bearish and more
hands go up. I then ask how many traders do not care if the market is bullish
or bearish, this usually generates some chuckles and a couple of hands. The
serious traders do not care whether the market is going up or down, they know
it is out of their control and they have tools to deal with both conditions
so it does not matter. The traders laughing at this question usually have
interesting stories of significant drawdowns from guessing incorrectly. Try
not to be bullish or bearish, just focus on where the markets key trend lines
and support/resistance levels are and adapt to what the market is actually doing.
Sometimes I will see traders trading weaker patterns because they have had a
good winning streak and are ‘using the house’s money’. Nonsense, profits are
yours there is no house. Each trade must stand on it’s own. Do not be tempted
to trade weaker patterns after a winning streak. Stick to what works. Dance
with the one that brought you.
Sometimes traders will start trading more aggressively when they are down in
an attempt to get back to even. Draw downs are a fact of life in trading.
Trading is not like drawing a paycheck. You do not get paid because it is
Friday. I research the systems and then use that information when trading.
If I have a losing streak I know that is to be expected and just stay focused
on using the knowledge and skills that come from fully testing and analyzing
trading systems.
Steve Palmquist a full time trader who invests his own money in the market every day. He has shared trading techniques and systems at seminars across the country; presented at the Traders Expo, and published articles in Stocks & Commodities, Traders-Journal, The Opening Bell, and Working Money. Steve is the author of, “Money-Making Candlestick Patterns, Backtested for Proven Results’, in which he shares backtesting research on popular candlestick patterns and shows what actually works, and what does not. Steve is the publisher of the, ‘Timely Trades Letter’ in which he shares his market analysis and specific trading setups for stocks and ETFs. To receive a sample of the ‘Timely Trades Letter’ send an email to sample@daisydogger.com. Steve’s website:www.daisydogger.com provides additional trading information and market adaptive trading techniques.
Terms of Use & Disclaimer:
This newsletter is a publication for the education of short term stock traders. The newsletter is an educational and information service only, and not intended to offer investment advice. The information provided herein is not to be construed as an offer or recommendation to buy or sell stocks of any kind. The newsletter selections are not to be a recommendation to buy or sell any stock, but to aid the investor in making an informed decision based on technical analysis. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment or trade. Trading stocks involves risk and you may lose part or all of your investment. Do not trade with money you cannot afford to lose. All readers should consult their registered investment advisor concerning the risks inherent in the stock market prior to investing in or trading any securities.
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