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I guess the debate continues as to whether we should be using fundamental or technical analysis. Rhythmic moves like today’s only further exacerbate the dilemma.

Is it possible we need to use both?

I am a student of market dynamics using technical analysis. The extent of my fundamental analysis is rudimentary at best: Is there a report or market moving event? What time?

That’s pretty much it.

I am not smart enough to know how to interpret the fundamentals, and certainly not smart enough to know how other traders are going to react. Who knows, maybe the price is already built into the market and added credibility is given to the well known Wall St adage, “buy the rumor, sell the news”.

If I were trading grains, and the Midwest is hit by tornadoes, drought, etc, I certainly would expect some of that to filter into the market. But how much effect on price? Where do I place my stops? How do I know what it does to the backward contracts?

I like to keep it simple.

In the arena of trading, split second decisions need to be made.

As a technician, I can do that.

I will leave the research to academicians like the very scholarly Andrew Lo. If you want to delve deeply into this subject seek out people like this who are a lot more knowledgeable than I am.

If you want to keep it simple, talk to me.

 

spotting reversal bars intraday

spotting reversal bars intraday

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I was at an interesting seminar today. Tom Williams gave a fascinating demonstration of his VSA methodology, sandwiched around the vendor sponsoring the event.

I happen to believe the methodology he discovered is sound, and is a valuable resource to aid us in our understanding of the markets. Their interpretation of the charts gave added credibility to some of my signals, and is intended to help us recognize manipulation.

As luck would have it, some of the best signals went off during the “commercial”. I read the signals as they appeared, but the presenters waited for confirmation, focusing on their favorite indicator rather than the market dynamics.

Trade logic never once entered the discussion, by the presenters or any of the attendees. In my opinion, trade logic is one of the most important and misunderstood concepts in trading.

A few of the attendees were rude, as if they expected all the details of successful trading would be explained in a free one hour seminar.

There are many effective tools and techniques available, but none quite so good as the one we develop ourselves. No need to re-invent the wheel; just find a reliable methodology and tweak it with a few variables that make it easier for us to see the trades coming.

In the heat of battle, it is important to “keep it simple.” Too complex, paralysis by analysis; too simplistic, sitting ducks for the stop runners.

Just read the tape and understand the basics of offense and defense.

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The early morning Citi news gave the market thrust at 6:30 am, and that was it for today’s excitement. It was range trading the rest of the day as the boys left early for the shores on a gorgeous summer day.

The market threatened to break out several times but lacked the volume to muster an attack in either direction. Marking time and killing options seemed to be the MO for options expiration.

Scalping from the outside in was the winning strategy for those who hung around and played both sides. The best bang for your buck, however, was the gap fill trade. The First Hour trade was done, and paid off handsomely for an hour of work.

Trading doesn’t need to be a full day of work every day. Lighten up and enjoy life while you can like the boys do.

A dedicated and serious student of the market is Naturus, who specializes in teaching and coaching emini sp traders to take trend and contra-trend scalps.  Her track record is impressive, so you may want to take a look at her site.

Although we do not endorse any particulur “guru”, we are committed to expose you to traders and websites that we feel may benefit you, whatever your level of sophistication with the market.

 

double down on 41 and range trade

double down on 41 and range trade

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The noise you heard today was the crashing of the bulls hopes and dreams.

Umbrella’s were up all day long, and everyone who kept buying the low for a bounce got beaten up pretty badly.

Body bags were issued for all the traders who get it wrong and average in going the wrong way.

Intuition is a trader’s best friend, (after the stop loss, of course) and seasoned traders were not interested in the long side today if they understand how markets work.

Differentiating between a normal rally and pullback scenario is quite different from yesterday’s reversal.

Several key charts were available, as well as the code sells that occurred premarket and during the regular trading hours.

The Wolfe wave on the daily that began May 19 completed it’s destination right on schedule. There are so many good ideas out there, just find these tools and use them.

Every month or so you get a fierce trend day that belies belief. If you cannot recognize this type of day, then you are doomed as a trader if you keep fighting it. You will give up a week’s worth of gains or more.

Give it your best shot, then if your normal plan isn’t working, stop trading. Live to fight another day.

If I were a salmon, I would fight the stream. Since I am just a dumb trend trader, I prefer trend trades until they stop working.

Forget the analysts, forget the gurus.

Learn how to trade what the chart is screaming at you.

Click to enlarge.

A Picasso

 

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Last Friday was the summer solstice, and there were approximately 30,000 party animals celebrating the event in Stonhenge.

Imperceptibly, but without dispute, we know the longest day of sunlight has already occurred for 2008. We are not ready to plunge into darkness; summer has just begun.

The seed for that season has just been planted.

I like to imagine a ball being tossed into the air. At it’s apex, it sits momentarily weightless, as if suspended by a thread, taunting none other than Sir Isaac himself.

This is that pivotal moment in time that Jesse Livermore would observe the current pyschology shifting from bullish to bearish.

As traders we need to observe the same reversal of momentum. I try to forget the talking heads on CNBC and use my powers of observation.

What tools do you use to recognize the reversal of trend?

After range trading for an hour or so after the FOMC minutes were released the market tested the upside.

With no clouds in the sky and sunglasses on, it was time to reverse.

 

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Do you have a trading plan?

Is it in writing?

Trading is no more about a single trade than a single time at bat is to a game of baseball.

And your trading plan is what keeps you focused on the bigger picture.

I hate rules in my life; they are confining and restrictive. I must admit, they do save me from myself.

The effort to think through a plan shows us where the holes in our thinking are. It makes us concentrate on offense as well as defense, and like a general surveying a battlefield, determine where and when our precious resources should be committed.

Starting with a plan, any plan, is better than nothing. As you evolve as a trader, refine it.

 

 

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Mini Turtle Soup

The boys sure do know how to steal our money.

One of the ways they do this is affectionately known as Turtle soup.

The Turtles are trend followers, with clearly defined rules. They buy breakouts, and stay with the trend as far as it will take them.

Today’s morning action had a headfake short, then pulled back into the range. In the afternoon, the market gave a headfake long, then pulled back deep again. A strong rally late into the close, only to nosedive the last 15 minutes.

Trapping traders is part of the game. The mini turtles found themselves in the soup (underwater) several times today.

All systems are prone to frustration. It’s the tuition we traders have to be willing to pay if we choose to play.

We have a technique to trade both of those fakeouts, and our rules were high odds trades that had the turtles doing the backstroke today.

Not every day is this easy, so we need to stay humble; sooner or later it’s our turn to get smacked.

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