back start next
[start]                                                                                            [ 92 ]                               
5 0 55?5 5469 5365
Be careful of gaps and long bar noves 5260 Bspecially when they reversaIs.
Figure 3 shows a double alert - A gap down followed by a gap up a few days later. To me that says get out, dont wait, get out now because this market is going to change direction. The problem is, 1 dont know for how long. Is this a change in the major daily trend? I dont know, so I get out and wait for developments. The second gap could be the start of a trading range, in which case I can trade within a range, wait for the breakout of the range to occur, or if it is not there long enough, watt for a 1-2-3 bottom.
The same action would occur by a gap in one direction followed by a large magnitude of move in the opposite direction, or a large magnitude of move in one direction followed by a gap in the other direction.
Dont Get Angry at a Market
I never get angry at a market. After all, its an inanimate although dynamic thing. I do get angry with myself. I am sure that no one has a weaker character than myself. It seems as if 1 make every mistake in the book, and never seem to learn to avoid them. I want so desperately to have my wits about me when I trade - to think of all the possibilities, and to see whats really happening. All too many times this just isnt the case. I repeatedly break my own rules.
Becoming angry with a market very often leads to wanting to take revenge on that market. This is when some of the greatest losses take place, because of the emotional reaction in trying to get even. It is just childish and immature and a poor way to try to make profits.
Being angry with a market can result only in lost opportunity, yet 1 know brokers who wili not trade Wheat because they are angry with the Wheat market due to losses they have had in trading it.
I know a broker who will not trade Cotton for the same reason.
Somewhat akin to being angry with a market is holding a market in disdain. I know so many traders and brokers who will not trade oats because it is too small. Yet I have made as much money trading oats as in any other market I have traded.
Now there are legitimate reasons for avoiding markets like Kilo Gold and Oats, and that is when you are a large lot trader and cant reasonably expect to get satisfactory fills. They are also poor for daytrading because of their illiquidity. But for most traders, even the smallest markets can and do offer satisfactory opportunities that should not be passed by.
1 used to worry about these smaller markets because they had low open interest, and because everyone else said to keep away from them, but now I trade them with as much pleasure, reward, and success as any other market.
There can be no more important topic that I can discuss in this manual than that of objectives. Until I learned this lesson, it cost me many dollars in lost profits. Never, NEVER, never enter a trade unless you have an objective for the trade and are prepared to get out when that objective is reached. I cannot recall how many times I have had profits in the bag, only to lose them because I failed to tell my broker in advance the price at which I wanted to get out.
--i When an order is called in, either at market or at some specified price, or even a limit order, give the broker a protective stop order and an OBJECTIVE stop order if possible. Have an objective in mind, even if it is only to be stopped out later on with a profit.
if I selling Gold at $415.00, my protective stop is at §420.00 and 1 have an objective for the trade of $409.60, I tell my broker to sell Gold at $415.00, and if that is fiiied I want to place two open order stops - a protective stop at $420.00 and an objective stop at $409.00. i do not wait to see which way the market is going to go. Ail three orders must be placed at the same time. If the objective is hit I am happy and content. I dont care what that market does after my objective has been met!
This is the approach I have to a trade when I am trying to scalp a market. Hit the objective and get out!
When scalping, without an objective there is no real reason to trade. Where is this trade going? Am I in business or am I just gambling? If Im in business then Id better have some sort of goal.
Of course, when not scalping, if the objective is to be stopped out using a trailing stop, I have the benefit of allowing a trade to build profits before having to get out.
About Techn ical. 1 nd ica10 rs
Why am i so against the wrong kind of trading with technical indicators? 1 can best answer that with a question.
Who in their right mind would carve an idol out of wood, then place this work that they have fashioned with their own hands on a pedestal and worship it and have faith in it? One might think, "No one." Not so! Every single day traders, both stock and futures, do this very thing. How? By worshiping and having faith in the work of their own hands - the indicators, moving averages, and oscillators that they themselves have created or that other humans have created for them.
Imagine that! How can anyone have blindfaith in these "tools" as compared with the reality that faces them every day on their charts?
Is it not human beings that choose how many days are in the oscillators or moving averages? Is it not humans who decide when overbought or oversold occurs? Who says that 75% is overbought, or that 25% is oversold?
I have heard people say that the markets are cruel, unreliable, merciless, and undependable. But it is faith in these false technical gods that is cruel, unreliable, merciless, and undependable. It is misplaced faith, farkets are neutral, they of themselves have no emotional capabilities. t\/!arkets cannot be cruel. Pisapppintments cpme from relying on man-made tools and having faith in them, when the markets clearly show something else.
All technical tools are good only when they confirm what is actually going on in the market. At the very best, thexlpllow the action. No one yet has invented a technical study or tool that can predict" the future.
I have had people tell me that such and such an oscillator leads the market. How preposterous! How can any something based on history lead a market? No oscillator in the world knows what tomorrows price wi!t be.
[start]                                                                                            [ 92 ]