back start next


[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [ 47 ] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123]


47

Tfading By The Book - Part ill

How to Turn Lemons into Lemonade

Now, I want to show one of the best trades that can ever come my way. It doesnt matter whether it comes on a one minute chart or a one month chart, or any kind of chart. It amounts to the aggressive use of the greatest lesson I ever learned, and that is reversing my position.

When a market goes like this;

/

Whether it be for a few minutes or a few months, and then breaks out like this:

/\ /\/ And then does this:

/ V

Sell it as it breaks the lows of that congestion or range. The opposite is equally true.

/\/\/\/\/\ / \/

Buy as it breaks the highs of the congestion or range.

It doesnt matter how short or long the congestion is, as long as it can be seen to be moving sideways. Normally, this will take a minimum of 3-4 bars on the chart.

/ \ / \

\/ \

What Im doing here is to avoid taking the first breakout of a congestion or range. Instead, Im opting for the situation in which everyone else has gotten burned by the false breakout and now prices have crossed the sideways area and have broken out on the other side. I miss many trades this way because many of them never reverse and come back through the congestion. But when they do, it is dynamite, a trade well worth waiting for.

This is particularly effective in daytrading, since I dont have to wait for a long time to see many of these situations happening on a regular basis.



When position trading on hourly, daily or greater (tinne interval) charts, I take the first breakout, and then reverse if Inn still in the trade as it comes through and breaks out on the other side of the congestion. If Im not still in the trade when the reversal comes, then essentially I have the situation described above and can enter the breakout in the appropriate direction as it occurs.

NATURALLY, IF IM ALREADY POSITIONED INCORRECTLY DUE TO THE FIRST BREAKOUT I SHOULD HAVE A REVERSING STOP ORDER RESTING IN THE MARKETI

«I My general rule for reversing is, if my protective stop is able to be fairly tight upon entry, then I usually make it a reversing stop. Or, if a market has had a long run and the weekly oscillator turns in the opposite direction while prices are still moving the way they were, and if my stop is tight, protecting profits, then I may make it a reversing stop.

T hre is ng .hard and fast rule here. The reversing stop is intuitive, and the feel for it comes with practice. Start practicing immediately!

Before closing this part of the manual, I want to make something very clear. Ive shown you a weekly oscillator. In Part IV I will be showing you a daily oscillator. However, I want to state here and now that Im not all that thrilled with "Technical Trading," Why? Because the majority of traders use technical analysis for their trading. The majority of traders lose in the markets. Remember that as you go through Part IV.

No matter what form the technical analysis takes, whether Fibonacci, oscillators, moving averages, or whatever, the only thing I have ever seen work is the concept that I will now explain.

The odds are that whenever prices begin trending, they will continue to trend for some time. Lets call that the major trend. In technical analysis, the important thing is to find the major trend. Next, it is important to find the intermediate trend. Whenever the intermediate trend begins to go counter-trend to the major trend, there is a entry opportunity coming at the point that the intermediate trend reverses and begins again to go in the direction of the major trend. Tha.entry signal will then come from what Is considered to be th short term.trend. "Memorize this concept, it will be further revealed in Part IV. I am continually amazed at how few technical traders actually understand this concept. Yet if technical analysis Is to be done, it is mandatory to understand the major trend / counter-trend process.

Ill repeat it once more. If the major trend is up, then wait for the intermediate trend to turn down. When the intermediate trend begins to turn up, then consider entry into the market based upon a signal from a short term indicator, or simply from the fact that prices are correcting. The opposite is true if the major trend is down.

You most certainly do not need an oscillator to tell you which way the market is going. In an uptrend, wait for the intermediate correcting price action. Attempt to buy into this correcting action, short term, at the time the market appears to be resuming the longer term trend.

The Oscillator combination I will be showing is nothing more than a crutch. You should learn to see these things with the naked eye.



Trading By The Book - Part III Whats Ahead

In Part IV, I will show how I trade a daily oscillator in conjunction with the weekly oscillator. Keep in nnind that this is a crutch to be used only until you can read a chart.

In Part V, 1 will answer questions about what to do during congestion. Specifically, I will show what to do when congestion is less than 21-29 bars long on the chart. I will also show how to trade within a trading range. This technique will produce about 55% winners. Finally, I will reveal how and when to trade one-two-three tops and bottonns from a congestion area, so that its possible to get a jump on the breakout of a trading range.

In Part VI, I will put it all together and show on some continuous charts an entire years worth of trading, its so relaxed and easy that it is truly amazing!



[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [ 47 ] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123]