Friday, January 20, 2012


The above chart is that of the ES 37500 tick intraday chart. I have an oscillator on it that is not going to be labeled. It is really no grail believe me. It requires an insane amount of discretion to trade using this when I do use it. It shows what should be a pretty good short term sell signal, a Triple Divergence. The point of today is to talk a little about persistence and what it takes to succeed in this business. I have done some catching up with some old friends in the last couple of weeks, all of whom trade. Without exception every one of these people are highly intelligent, and also very successful in other walks of life. However, none of them trade well even though they desire too in the worst way. It just makes me realize how hard this gig is.

As I was speaking to one of them yesterday, I began to wander a bit mentally and just wonder why it was that I am doing so much better trading than they are. I then wandered further to a lunch I had with my infamous friend I mention in here so often. In both of these conversations, my friends were talking about different methods of trading. They are both in the search and destroy mode. What that to me means is they are going from one method to the next, one guru to the next, trying to find the holy grail. In this search process you wind up destroying your account balance, hence the name I gave it. 

My famous old friend last week was talking about some recent trades he made, and he literally had a different reason for every single one of them. In one instance a 60 minute chart said blah blah blah, in another a book written 50 years ago had an adage worth following, it was complete helter skelter. At this point with him I don't bother to try and talk any sense into him anymore, I just roll with it. I have learned that he will never listen, and he is getting what he wants out of trading. Subconsciously he wants to lose so he can be forced into other business ventures to make his money. This is actually perfectly fine, he will never trade profitably and somewhere deep down inside he knows it.

What I realized makes me different is my discipline. I have always known this. I have a rare level of discipline whose origin is unknown. Neither of my parents have it and I never had any close friends who had it either. It helps me in trading because it "allows" me to be patient during very difficult trading periods like we have right now. I have certain patterns I trade, and that is it. I just wait for them to come along. Sometimes they don't. During these periods I don't start chasing some unknown guru or some new "system." What I do during these periods is study my own tools and try and find better ways of using them. I don't want to know what others are doing, I just don't care. I know from experience a couple of very important things. First, I know my patterns work. Second, I know that if I let myself get too carried away outside of my core techniques I will lose money. Guess what, the decision on what to do gets really easy. I stay with what works knowing I will miss trades by doing so. I also know that if I stick to what I know, I will be profitable. I may not make the cover of Fortune magazine, but who cares?

The point for today, is stick to your discipline. The chart at the top today is a good example of this. Just watching the tape with the market moving up seemingly every single day in a slow creeping fashion, it seems crazy to even think about trying to sell this market. The adage of never selling a quiet market is actually pretty accurate. However, when I see these 3 point divergence patterns, they are one of my core techniques. As a result, I will look for a decline to come from it. I am not going to get into chasing my tail and ignoring things that I know on average work. Maybe this one does not, it would almost surprise me to see any down close at this point, but I will stay the course. This is how I keep things simple even though it does not mean every trade works.

This is a tick chart so it certainly does not have any higher time frame significance. All it tells me is that we are in an extremely overbought market, and now also in a divergent position on the intra day charts. This says to me to be careful on the long side, so I will be. I am not going to get caught up in over analyzing this. All trades don't win.

The Harsh reality aspect of this is if you do not approach this business like your whole life depends on succeeding at it, you should go do something else. It is that difficult. Further, you have to be different than most others in how you approach this. Do not let the emotions carry you away, they will if you allow them too. There will be periods of time where you lose money, accept that. Find, develop, create an approach and master it. Then stick to it come hell or high water. You will have the most confidence is something you have developed and studied yourself. This will minimize questioning it during bad periods. Refine it along the way if need be, but just absolutely own it. Tune out all the noise and follow it. I can assure you trading the stocks on the short side right now requires extreme discipline. On the surface it appears to be the dumbest thing I have ever done. It might be but I am following my approach come hell or high water. I spent a ton of time developing this method, it seems to be viable, so it is time to trade it, refine it if need be, and see what happens. It is generating sells at the worst possible time to be selling. I have mentioned that I like that because it is the truest test I could have for this. If it can work in this environment it will work in any.

I am looking for a short term dip because my tools tell me to look for one. It is that simple. If it is wrong, it is just a trade.

Have a great weekend


Anonymous said...

The next time I read a blog, I hope that it doesnt disappoint me as much as this one. I mean, I know it was my choice to read, but I actually thought youd have something interesting to say. All I hear is a bunch of whining about something that you could fix if you werent too busy looking for attention.
Welcome to my blogger [url=http://registeredinvestmentadvisor.blogspot.com]registered investment advisor[/url].

Anonymous said...

NDX swing trader...approaching a 'correction'...good luck with your trading...



Chris Johnston said...

I just went through my spam inbox and found this first jewel. I got a good laugh out of it, then I got a bigger one when I went to his/her link. Talk about worthless content.

This is one of the problems with doing this to begin with, there is just so much garbage out there. I would agree with this cats general premise about investment advisors. However, what you are likely to see going forward is fewer and fewer good traders registering due to the increasingly onerous regulations that are being put in place. I am debating this myself, and just don't feel like registering just to have some douchebag call me the next week wanted to come audit me.

If you just look at how few funds beat the averages, that tells you all you need to know. The best traders are not running them.

Back into attention whore mode! Damn I love that comment, still chucking over it.

Also from my spam inbox, apparently unlocking iphones is a huge problem, talk about a world going south. If you can't figure that out you are too dumb to own one, give it to your 5 year old who will be able to figure it out quickly.