Wile E. Market And The Anvil
Picking up where we left
off yesterday, today’s early suspense seemed to be whether or not the
customary anvil would follow Wile E. Market off the cliff. We’ll call it an
early mini-anvil, after which the market provided a decent Warner Bros.-type
bounce good for a nice $0.50 – $0.80 reversal pop on the Qs, depending on how
much confirmation one desired prior to entry. Personally, I chose to first see a
let-up in the three-minute stranglehold from yesterday which required a 5/15-MA
cross with a rock-solid stop. Fighting the longer-term trend you ask? Most
definitely. Yet the longer-term 13-minute 15-MA downtrend support (resistance on
the three-minute long) provided a nice visual for exiting the trade, and they do
call this trading.
2001 10:55 AM EDT
In this type of
extreme trending market, I’ll pretty much throw my one-minute chart out the
window and will focus mainly on three-minute signals.
Don’t Cheat
MA crosses, trend pullbacks, reversal setups (or lack thereof in the case of
yesterday afternoon)…they all look so clear on the charts, have decent
probability, and clearly defined entry and stop criteria. So why do most
equipped with this or other proven methods fail at this game, and why do even
the best of professionals have drawdowns? I think the reason lies in our own
humanity because despite how automatic or robotic we try to make this business,
we’re all human (that’s a good thing, folks) and are occasionally affected by
loss of focus, stubbornness, impatience, overconfidence, and other aspects that
make us the unpredictable creatures we are.
Looking at my own trading, my greatest drawdowns over the years were usually the
result of trying to "cheat" whatever my signal might be at the time.
The internal discussion usually goes something like this:
Yeah, I know there’s no MA cross, but I can see it coming…
We’re pretty oversold (or overbought)…
Besides, if I get in now, I’ll get an even better price…
It’s paid off nicely before…
Risk? No biggie. I’ll manage it okay…
Besides, I’m having a really good quarter."
If you find yourself having a similar internal
staff meeting of one, put the mouse down, step away from the keyboard and
perhaps out of the office as well. Dave Landry refers to a similar concept as
"No Tickee, No Tradee." I’ll reinforce that concept by calling
it cheating.
Good trading.
For
a more in-depth look at how Don trades the QQQs, click here.
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