This Idea Could Resurrect Your Trading

Great athletes know the value of attitude and how to play through slumps, the same is true of successful traders.  You could have the most robust system in the world, but if your were scared to press the button, what good would it be?  Well, even if you know on all levels that a system is solid, a few losing trades can put you back quite a ways mentally.  We have all been there, and it sucks.  However, it comes with the territory.  Remember, each trade is statistically independent of the last trade.  Whether your last 10 trades were winners or losers is irrelevant, it has absolutely no basis for deciding the outcome of your next trade.  Or does it?  Conceptually, no, but your mindset, happy or sad will effect your ability to be objective on the next trade.  Feel apprehensive?  The next trade will reflect that.  Feeling euphoric?  The next trade will reflect that too.

Rather than me going into details of which I could hardly do justice, let me simply recommend one of the best books I have ever read on trading, Trading in The Zone by Mark Douglas.  This book will get you to think.  I have a friend of mine (he has become a real good friend and good trade over the last 6 months) who under my guidance was taught a framework to employ HVT.  His initial results were excellent, like all new traders.  It was not long before the wheels came off and the confidence was shattered.  His voice and posture (through the phone) was one of a defeated man.  I am never surprised by this, I have never worked with a trader who has gone on to become successful who did not get taken the mat first, it builds character.  Kind of perverse huh?

I suggested he read this book.  Within a week, this guy turned it on.  His attitude deep down anyways was always that of an optimist, a key ingredient to successful trading.  With a few simple techniques and a new way of thinking about trading, compliments of Mr. Douglas, he has become a force to be reckoned with.  I can honestly say that I want to work more closely with this guy in future trading endeavors.

So after the last few days of chaos compliments of Mr. Greenspan, what now?  Well, as mentioned in Tuesday's article, I was short the EUR/USD which played out very well as well as GBP/USD, AUD/USD and NZD/USD.  All positions are now closed with substantial gains.  My experience with FX however dictates that large moves require sideline viewing for a few days after.  The dust seems to take longer to settle in FX.  So, for now, I am flat.

HVT:

HVT continues to really come on strong.  While the beginning of the week was bit slow, the last two days more than made up for it.  The market still demands that you seek where the action is rather than focusing on only 1 or 2 stocks.  I can honestly say I never imagined the day where I was seeking stocks rather than stalking 'a' stock.  Such is life and adaptation is the key to longevity.

Yesterday there were some HVT set-ups in MGM, COP, TRI and HOT.  The one thing I am noticing however is that there need to be a bit more of a reliance on the 5-minute chart.  Lets face it, the S&P's do not move very much over short period of time when looking at a 1-minute chart.  As a result, basing your whole trading decision on the movement of the 1-minute chart can maddening, choppy to say the least.  Rather, use the 1-minute chart to fine tune the entry, but use the 5-minute chart to determine the exit.  The result will be a slightly longer duration, but more consistent results.

As always, feel free to send me your comments and questions.

Dave