Traders Should Only Take High Probability Setups
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1
There was no continuation selling in the first
hour as the minor price-support zone held up with the SPX
(
SPX |
Quote |
Chart |
News |
PowerRating) hitting a
1218.07 intraday low, which was at the lower channel line (daily chart) on the
10:30 a.m. ET bar, then re-crossed the 1218.57 50-day EMA, in addition to the
1219.59 wave three high (06/22/05), trading up to 1225.63. It then reversed down
to 1220 and again up to 1224.10 before closing, up less than a point, to
1220.24, +0.07%. It was a low-risk initial entry in this zone as the stop was
very tight to the entry level.
NYSE volume was 1.42 billion shares with the
volume ratio 47 and breadth -258. The Dow was +0.3% to 10,551, the
(
QQQQ |
Quote |
Chart |
News |
PowerRating)
+0.6% to 39.07 and the Nasdaq
(
COMP |
Quote |
Chart |
News |
PowerRating) +0.4% to 2145. The programs were to
the sell side in the last half-hour as the volume ratio swung from slightly
positive to 47. The casino wheel kept spinning in the semiconductors as the
(
SMH |
Quote |
Chart |
News |
PowerRating) alternated for the eighth straight day, finishing at 36.58, +1.1% (see
08/16/05 commentary). The net difference after all the noise for eight days is
just +0.7%. Energy led the red sectors, as the
(
OIH |
Quote |
Chart |
News |
PowerRating) was -2.1% to 111.33,
declining for the fourth straight day (-6.3%). Crude oil closed down more than
4.0% to 63.30. The
(
TLT |
Quote |
Chart |
News |
PowerRating) was -0.7% to 93.10, gold went red with the
(
XAU |
Quote |
Chart |
News |
PowerRating)
-2.8%.
One of the primary reasons traders fail is
because they trade on impulse and think they must force the action every day.
This is a definite losing proposition for 90% of all traders. Instead, they
should only be taking high-probability trades that are defined within their
methodology. If you can’t find them, sit it out and preserve your capital until
you get your kind of setup that has a high probability of success based on prior
experience. You don’t have to be in the market at all times. If you get
frustrated because of a lack of good setups, don’t give in to your weak emotions
and force marginal trades because you will be a loser over time.
This is being recorded Wednesday night for
Thursday.
Have a good trading day,
Kevin Haggerty
