A few weeks back, I kicked off the Intelligent Investor Series as part of my weekly commentaries. Th...
Five Tips to Help You Start 2009 with a Winning Edge! (Part 5)
01/16/2009 12:01 am EST
Find the right tune to dance to when trading.
Now what the heck does that mean?
Do you ever feel like the markets are speeding by you, and you are struggling to find patterns and trade entries, but it’s all just going by you too fast? Or, do you find yourself chewing on your fingernails or squeezing a rubber ball because it seems to take forever for that 20-minute bar to close? You might be doing the right dance to the wrong tune!
Traders are people, and each of us has a different ability to read the markets. Some of us are long distance runners, and some of us are sprinters; some of us are rabbits, and some of us are the turtles. If you are a fast-paced trader that craves action, you will not be comfortable trading off of a 60-minute bar chart. Similarly, if you like to ponder and think carefully about each trade, then trading a ten-tick bar chart of the e-mini S&P will make your head spin!
Markets have personalities in the same way that people have personalities. Some markets are hectic and have large trading ranges each day, while others seem to move rather slowly, unfolding their moves over time. To be successful as a trader, you have to find a rhythm for your own trading that isn’t too fast or too slow—otherwise, you will be out of sync! And of course, each market you trade moves at a different speed, so if you trade three different markets, you may find you are watching a five-minute bar chart of one market, a 2000-tick bar chart of another market, and a 20-minute bar chart of a third.
The key is to get in tune with the market and find a time frame or charting frequency that works for that particular market and is also pleasing to you as a trader. Like the three bears, you don’t want to trade in market conditions too fast or too slow. Instead, you want to find charting frequencies that are “just right” for both you and a given market.
These are five important ways you can improve your trading this year. None of them are flashy—instead, they are simple, common sense ways to approach trading that can make a great difference at the end of each month. Building your own trading methodology is like building a foundation for a house in that you use solid blocks that fit together well. Flashy materials don’t last over time. Use time-tested methods that you have researched and that you know work. Once you have found a methodology that is profitable, don’t give in to the urge to move on to something more complex or flashy. Always remember that the goal for every trader should be to make money consistently. If you have found a set of tools that you are able to make money with, spend time mastering those tools instead of exchanging them for the hot new indicator. Trading is hard work, but if you can master a trading methodology, it can be extremely satisfying—as well as profitable!
I wish you a wonderful and prosperous 2009!
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