How To Find Clues That Most Traders Never See…
On Wednesday
I wrote an article discussing the importance of focus and a
particular thought process, or more accurately, lack of thought process as it
relates to successful trading. The feedback I have received indicates that the
column struck a chord. I will seek to revisit this subject in future columns.
Today I want to discuss a topic that
many traders always ask about, tape reading. As I have said many
times, there are no set of rules that I can rattle off that describe tape
reading, it really just comes from watching price action. Yesterday afternoon
was a good example. You may recall that the Oil Drillers (OSX) were
getting roughed up pretty hard. One stock in particular caught my attention as a
potential Rubber Band Trade, Valero (VLO).
Technically speaking, there were many
false starts if you relied on technicals only.
^next^
You see, prior to that long entry
there had been zero interest and or trades that were taking place on the
offer. Sure 100 shares here and there, but no “real” trades or size. Once
offers started to be taken, and the S&P’s and OSX kicked in, it was simply a
reflex to be a buyer. You will be surprised at how much is revealed after a
heavy dose of staring at a quote screen. By doing it however, it reveals what
most traders never see, subtle and even not so subtle clues about where the
stock is going.
Foreign Exchange
(FX):
It has been an interesting time in FX.
Just a few weeks ago there were numerous setups on any given day/week. Lately
however, there continue to be some great moves which
we have caught but like the trade above
in VLO, it has required patience and
selectivity. With the exception of a long trade in the
EUR/USD from Wednesday morning, most trades take a day or so to begin
to play out. Case in point at present are two shorts,
CAD/JPY and AUD/JPY. While they
both appear solid technically, there just seems to be no real catalyst at
present to let them rip. Such is the adjustment one needs to make when trading
FX. HVT techniques, at least in terms of
trade duration, have no business in FX.
As always, feel free to send me your
comments and questions.