Home On The Range
On Monday, the Nasdaq opened lower and after a brief
bounce, sold off fairly hard. It then chopped back and forth for the remainder
of the day.Â
The S&P chopped lower then higher.
So what do we do? The big blue arrow still points down.
However, the indices appear to be stuck in a trading range. Therefore, focus on
those sectors that appear to be either in strong downtrends or those that are
rolling over. The semiconductors and banks respectively seem to fit this
description. Above all, continue to keep it light until we see more conviction
in the indices.
No setups tonight. Start watching the aforementioned banks
for their first pullback and/or Bow Tie formations. For example, stocks like
Greenpoint Financial
(
GPT |
Quote |
Chart |
News |
PowerRating) could set up soon.
K.I.S.S.
Dear Dave:
I am a full-time proprietary trader with a relatively small trading firm. I teach a weekly course on trading psychology, mental discipline, and risk management to the junior traders in the office. I teach my students that they must develop absolute mastery of themselves first before they can begin to master the ability to trade effectively. The first and foremost concern is to have a highly specific, relatively simple, and well defined
method with a statistical edge. The method should be written down and all
actions to be taken by the trader should be clearly spelled out for as many
foreseeable situations as possible. This allows the trader to focus on how well the plan is being implemented rather then on him trying to determine
what he should do as situations arise. Obviously this is something you know very well. Your trading method is the best overall method that I have found
in all the trading books that I’ve read. I actively mentor junior traders using your method. The funny thing is that when the new traders first use
your method they do very well with it. As they gain more and more experience in trading their performance gets worse and worse. In the beginning they
follow your method with strict discipline as they don’t know any better; as they learn more about the markets and trading they begin to
override the method as they begin to interpret market events and make trading decisions
based on their knowledge and judgment. I don’t know, Dave, either your method is too simple, or these traders are too smart!! You should see some
of the ways these traders have “improved” your trading method. They just wonder why they can’t improve the results…It must be because of the
market right now…yeah…it’s a bad market right now! That’s it!! Anyway, kudos to you for helping so many traders by giving them such a clear cut,
well defined, simple, and conceptually correct method. Lets just hope that more people can actually adhere to it!!
Rick DiGiovanni
RedWood Trading, LLC
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!