The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Knowing When to Take Money Off the Table (Part 1)
07/07/2008 12:00 am EST
Traders on the Internet, on my forums, and at the various Traders Expos I speak at often ask why I teach seminars, write books, and write articles and mentor traders. 'Why would a professional trader with 36 years experience waste your time teaching-it just takes away from trading!' is what I hear over and over.
The simple answer is that I find teaching is fulfilling. I find meeting other traders at the Traders Expos, whether they are just starting out or have been trading 40 years, is something that just makes me feel good. And I write because I like to write. I don't do any of these activities to make money-I trade my own money and manage money for three large offshore funds and that's my 'profession', but teaching and writing fills a need that trading doesn't fill. Sometimes, when I least expect it, I learn something from those I am teaching to trade; and that's a wonderful bonus. But teaching and writing is food for the soul to me.
And when I take a winning trade and then do a mentoring session a day or two later and watch a student going through their own trades with me one on one and they start diagramming out the same winning trade, it really makes me smile. I not only managed to make money on the trade, but I managed to teach someone else how to successfully read the market and use my techniques-and we BOTH made money on the same trade set up. That really is the 'icing on the cake'.
Let me show you a recent example from the 30 Year US Bond Futures:
Bond futures were in a gentle up trend, making higher highs and high lows. Then they had a nice sell off before entering a trading range. Once price restored its energy by trading in the Energy Coil or congestion area, it broke to the up side and took out a Swing High. This was the first sign of strength since the sell off, so once price broke above the Swing High, I added in a blue up-sloping Median Line and its Parallel Lines.
Once price broke out of the Energy Coil or trading range, it traded straight up in an orderly fashion, easily breaking above the up-sloping blue Median Line. But price had climbed about a full point without resting to restore its energy, so it was unable to hold above the up-sloping Median Line. You can see that the last bar on the chart above zooms lower, through the up-sloping Median Line, and closes on its lows with great down side separation-which is a sign of weakness.
More tomorrow in part two.
Related Articles on STRATEGIES
Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Profit from a market by capturing a trend. Money management is key. The battle is often from within,...
Has Mr. Market (S&P 500/Equities) priced into too much positivity, while inflation remains at ba...