Trading Lessons I Learned the Hard Way, Part 11

08/15/2012 8:00 am EST


Ron Wagner

Principal Partner,

Ron Wagner of Revolutionary Trading discusses the lessons he learned from his early days of trading, and how his trading has evolved to become profitable.

Find the previous article here. Start at the beginning here.

When I first began trading, I thought surely a magical indicator must exist that would shower me with riches. I tried a great number of them, and paid for an endless number of books, programs, and other materials that promised great success. Just as I tried to make one work, another opportunity would pop up that just seemed too irresistible.

I am a very focused person, and was willing to give something time to work, but the opportunity to trade my own accounts was somehow very different. The process seemed so unstructured, and deciding which indicator or system to use was very confusing. I could take ten lifetimes and still never get through the myriad of information available related to the financial markets.

I figured out pretty quickly that I wasn’t going to have ten lifetimes to make trading work—nor the capital to survive even one lifetime, unless I started to see some results.

As you know, I chose technical analysis as my battleground. I eliminated nearly every indicator off my charts, and now only look at price and volume candles. I do use some of the most common techniques, such as trend lines, wave principle, and Fibonacci concepts in my trading. I use them only as a guide, without cluttering my charts with those lines.

(I encourage new students that I work with to use Simple Moving Averages on their charts as a visual guide to speed up the analysis process for them. But I do not, and don’t want anyone else to take a trade based solely on a Moving Average or any single indicator.)

I use a set of very simple, common, and reliable indicators to follow as a guide of the market, and for my individual trade entries. More importantly, I use a set of what I call “Pattern Power Boosters” to score each of my trades. By recognizing how candles are forming, reading volume, plus several other factors, my trading became so much more productive. Not only did I become profitable most often on my entry candles, but usually more powerfully.

I wrote myself a time line to tackle and master each of the elements I wanted to use in my trading. It only took me a few months to get this all working in my favor.

Don’t be misled by thinking some single indicator of the more than 170 that exist, or even a combination of indicators, will work for you all of the time. Some will work well in some markets, but not always. In addition, most people, just like I did, start to either fool with the settings of an indicator, or just jump to another and think we need to find one that might work better.

It took me about a year, back in the late 1990s, to figure out that all indicators are powered by price and volume. I regret not just starting out with price and volume first.

I now have a total of ten major and 15 minor elements I use to determine the quality of my trades, and all are completely memorized. For those that I have taught this to, I give them a checklist and it only takes a few months for them to internalize and memorize it. This makes a huge difference.

Lessons learned:

  1. Don’t be fooled into thinking that a single magical indicator exists!
  2. Stop looking for the “Holy Grail” of does exist, but it exists in your personal pursuit to simplify what you are now doing to become consistent!
  3. Realize that price and volume is what powers the market and all indicators, so get good at reading charts!
  4. Either follow someone else that is already successful, or at least figure out what elements you need as a minimum to take high-probability trades!
  5. Keep it simple and realize you have what it takes to be very successful at trading your own accounts with the right elements in place!

Next, I will talk about sector rotation, and what a difference that has made in my trading...and can in yours!

Ron Wagner can be found at Revolutionary Trading.
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