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50 1 had a three count going two bars before the last bar of the day. Even if I were to got brcakour going into the last bar. i would not chance it. SP 5 tllMJTE J cut Hill 3 0 Fhl 1 7 60 3VB10 37820 37800 37700 377b0 37740 37720 37700 37680 37660 37610 37620 37600 75 0 37560 37540 37520 37500 374B0 37160 37110 37120 371D0 3730G 37360 I didnr feel too bad about not taking that last trade. The market ended up lookiig like this; SP 5 niHUTE 3 8 Jhl 1 37860 37810 37820 37800 377BG 37760 37710 37720 37700 37660 37660 37610 37620 376D0 375B0 37560 37510 37520 37500 374B0 37460 37440 37420 37400 37380 37360 I was yiad it was over, f had enough risk for {)ne day. I thought to myself, "Next time, Ill trade the NYFE. An irtiportant advantage to irading the NYFE is not having to put up with the program iraders. This was a good day for ne in the SSiP. I did not go through dozens of charts looking for a day in which I would be a winner, VVIiat Ive shown here is a day of trading almosi exactly the way it happened. In actuality, there were a couple of trades on which 1 came out afioad, that I shouldnt have taken, f felt that to show them would be a disservice to my readers. You have plenty of bad habits without acquiring some of Rtine.
I pushed too hard on those trades, snd although I made a small profit on them, I was overtrading when I took them. They were inconsistent with what Tve been trying to teach. One of these days, I will videotape a day of trading. Then you will see and hear some of the stupid things I do- There are plenty of days when I lose amounts greater than I made this day. Overall, I come out ahead. I do not trade the S&P every day. In fact, most of those who road this book who are familiar with my trading know 1 dont trade nearly as olten as others. Im quite content to take a living cut of the markets. I collect data on most markets, keep an eye on some of them, and do most of my trading in about eight. \ make most ot my money in the currencies and the S&P or the NYFE. Given the choice. I actually like the NYFE better than the S&P. There is less competition and less of a frantic feeling trading the NYFE. It is only about sixty percent as volatile. The fills are a tick or two worse. When I do trade, i am extremely finicky about trade selection, I like to win. I hate losing, f wiJI not trade just to trade. I refuse to trade every day as though I were under some obligation to do so - except when Im writing a book. IVIost traders I have met feel they have to trade every day. Each day they pick out something and put on a trade. How their brokers must love them! I trade for me, not to make my broker hafjpy, The next chart I sfiow is how the S&P looked overall. Perhaps the reader can come to see why I selected to enter a stock index trade. SPltJ.5 nifiUIE 38030 38040 38000 37960 379Z0 37BB0 37840 37800 37760 377Z0 37680 37640 37600 37560 37520 37480 37440 37400 reasoned that the stock index futures coud not go on and on doing nottirng for very long, I (ell that an explosive day or part of a day was due. Although pri£;es wore antsy for only part of Ifie day it was enough to make some bucks in the S&P. After the iniila! trading Irenzy, the S&P simply cfiopped around in the same trading range it had the previous day. Its interesting to note that money can be made in a trading range if the market js volatile enougfi and tfie trailing range from t0[) to bottom fias sufficient distance to allow it. looking at the previous cliart, it should be obvious ifiat overall the market was going sideways, When a five minute chart is going sideways, flow much trend can thert! possibly be on the daily chart? I look for potentially explosive situations to trade, Ive shown Ihem in this book, A breakout from rr.aichmg congestions, niy four major entry signals, my intermediate and minor signals - all are explosive situations. Wly own preference is major entry signals. They dont hapj:)en every day, and that is one of tte main reasons I will nor trcide every day 1 v/ant the greatest cfianccs for success when I trade. Explosive siluatiofs give mc that chancc- Wfien 1 began trading tfils day. I had no idea how well it vjould turn out. Jot all my trading days do as well. Yet I find I fiave trading ciays like this quite often. ! HONESTLY BELIEVE fS MY TRADE SELECTION THAT IS IN LARGE PART RESPONSIBLE!! Ninety to ninety-five percent of traders overtrade. They trade too often ancf too much, I fiavo seen many futures contracts make bcatitiful one day moves on ttie daily cfiart, yet had I traded them intraday, I would have liecn ctioppcd to pieces. Conversely, I have seen "nothing days" like the one I just completed in ttie S&P, wtierc on the daily clrt the wfiofe thing amounted to not rnuch of anything, yet intraday Ive rTiade a lot of money. This is not an uncommon occurrence when daytrading. If a nice move on the daily chart occurs gradually intraday, I often lose because I get whipsawed by the shallowness of the ascent or descent. On the other hand, if the market moves steeply while still giving me a char.ce to get in, I may have a great day intraday, while the daily chart shows a "nothing day". Such was the case with this last S&P trade, A significant lesson I hope I have taught here is the in-portance of si2e, and correspondingly taking just a few ticks out of tlie market on a portion of the posilion. If the market runs, the remainder of ttie posilion will take care of the big profits.
Chapicr 27 SomLhiiig Old - Something New Before moving into the final chapter, Ill give a recap of the techniques ve shov\;n for identifyrig congestion, Idunlifying Congestion Congestions are spotted vuhen or \ / is on thn chart. The smallest possible or \ \/ is found when there ts a series of reversing open-high-close-tow or opendow-close-high bars. Such a series woutd involve at least four bars. Any series of four or more price bars involving reversing opens and closes, dojis, or both, constitute congestion. Or, I wait until I see a breakout of a low of a third successive lower-low series of price bars. Sel 1 breakout f tihe 1 ow Snggirg Tops and Rising Bottoms A second way to find the trend is by watching for sagging tops and rising bottoms. <-Soll a breakout of the third low even though not all three bars made new lows. The tops are sagging. though not ail three made new highs. The bottoms are rising. I <- Buy a breakout of the third high even Congestion exists when there are any four price bars with closes inside the trading range of a single preceding price bar even if one or more of those bars have fiighs or lows outside the range of the bar containing the closes. Identifying Trends Ive shown several ways to identify a trend. Ill recap those and add more. SLiccessivc New Extremes The first way is. I wait until I see breakout of a high of a third successive higher-high series of price bars. Buy breakout of the high Segment Method The tfiird way is to connect segments until there are tfiree segments defining the trend. Here is the segment method: Sell bruloit d hijli The next way is ific one 1 have traded the longest, lls the one I was originally taught. I traded with this method for three years at the beginning of my career, and have never abandoned it. Ill show it here just as it was shown in the sixth issue of my newsletter Traders Notchook. If youVe read Trading Is A Business, Ws in tfiere loo. I apologize for repeating it, but it is important. True Trend Method "Some Very Basic Trading "Over the years, miy trading has become somewhat intricate, and very intuitive. This is due to viewing thousands upon thousands of charts, and trading in every time frame from one minute charts to weekly charts.
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