Remember These Simple, Effective Rules

Another week, another week for the "what if" scenario to play out. Will the market encounter a pullback to satisfy all the ravenous bulls who are seeking an entry into the foot race, or for individuals seeking to add to longs? Or will the market continue to drift up offering nothing but more backing and filling? As one who never tries to make predictions, it is hard to say, but like a tightly wound spring, a move is coming, it is just a matter of time.

Just like in trading, when the market becomes quiet, we tend to wander and set aside long-proven trading tactics in an effort to get something going. Writing this column has become no different. With little action to comment on and no clear technical areas in the market (with the exception of 955), I am often tempted to write about other topics or take a stab at intraday setups based on a 30- or 60-minute chart. Unfortunately, while I have demonstrated some decent success on both fronts, I am in no way qualified to comment in a definitive manner. Which leads me back to the point of today's column, consistency.

Despite my recent columns emanating the same theme (and me being concerned that this was becoming redundant), I have received several e-mails that indicate to me that this message is resonating. It is in times where minds are allowed to wander (quiet markets) that we get ourselves into the most trouble. After spending an intense one-on-one session with Richard Machowicz on Friday afternoon, one of the things I took away was this:

"Mastery is the result of following directions."

It makes sense doesn't it? Those that do things consistently tend be the ones that are most successful. So with that in mind, remember these simple yet effective rules/guidelines for HVT questions:

1. Always trade with the trend of the one-minute chart, based solely on the slope of the 20-period EMA.

2. Never buy stocks when stochastics are overbought

3. Never short stocks when stochastics are oversold

4. Look for a minimum of 3+ point moves (over the space of five to seven minutes) on the one-minute S&P chart before even considering trading

5. Trade stocks that are highly correlated to the S&P and/or Nasdaq futures

And most importantly, do not try to re-invent the wheel. I get asked questions like these all the time:

1. Do you ever look at the TRIN?

2. Do you trade SPYs or QQQs?

3. What about moving average crosses?

4. Have you ever looked at the correlation between catalytic converter sales relative to the average true range of a stock?

5. What about this? What about that?

For some reason people cannot leave well enough alone. If you have read my book (and the people who ask these questions have typically read my book), I would have dedicated a chapter to anything I thought was relevant to my style. If it is not in my book, guess what? I do not pay attention to it.

So, regardless of market conditions, keep it simple, follow your rules/directions, make minor adjustments as needed. After nearly 10 years as a trader, it is these simple ideas that have kept me in the business.

Turning to today's action, it appears as though the declining dollar may actually begin to matter. Comments by Treasury Secretary Snow at the G8 conference were a farce. To summarize;

"The dollar's value should be based on peoples' confidence in the dollar and willingness to hold them versus a the value that economic numbers translate to it."

That comment is almost as ludicrous as the so-called "strong dollar" policy that both the Clinton and Bush administration constantly mention. Naturally, neither administration had/has a technical analyst on staff, if they did they would realize that talking about a strong dollar is just that, talk.

So, will this be the catalyst that adds some juice to trading? Tough call, but I suspect that today at least will offer some better trading, so get ready. Keep an eye on gold stocks as they may begin to heat up on the heels of the dollar news.

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P.S. I also have a new trading module available which teaches how to trade my HVT style through bar-by-bar chart simulations. Click here for information about the module.