A few weeks back, I kicked off the Intelligent Investor Series as part of my weekly commentaries. Th...
The K.I.S.S. Principle of Trading
01/16/2014 6:00 am EST
Trend trader Dave Landry offers words of wisdom to beginning traders on how best to take their trading skills to the next level without a lot of brain damage.
SPEAKER: My guest today is Dave Landry and we’re talking about the idea that sometimes novices feel like pros have an inner secret that they’re not telling it and the way that they’re successful in the markets, that may not be the case. We’re going to talk to Dave about that today, so Dave, is there something the pros have figured out that the novices haven’t yet?
DAVE LANDRY: I think the secret to trading is there is no secret and I think the pros have worked longer at it and they have a good idea where market is going but we never know exactly for sure where a market is going. Novices tend to think that we know exactly when to get out, exactly when to get in and how to do everything exactly and we know. We know on every single trade, it could be a losing trade but we have a good idea where the market’s going and once we are in the market, we just see what happens.
SPEAKER: Alright, I guess the question then becomes is what’s the path to get from that beginner trader to the professional? What do they do to as short as possible obviously but there’s a certain path that they probably have to get to.
DAVE LANDRY: Well, I think that everyone tends to go on this Holy Grail hunt where they make things more and more complicated. I’ll get charts from novices all the time and you can’t even see the chart anymore there’s so many indicators on it and I think the true alignment comes when you peel away those indicators and you just focus on the underlying chart. Keep it simple. You don’t need all those indicators. I like to see an indicator as an illustrator showing you what’s already in the chart. In fact, other than the occasional moving average, I don’t use any indicators whatsoever so learn how to read charts first and foremost and then if you feel like you want to experiment with indicators, then do that but just try to keep things simple.
SPEAKER: Is there something you did along the way to kind of really help you take your trading to the next level in terms of reading charts? Is there a way that people can really accelerate their ability to see those patterns happening as they’re happening?
DAVE LANDRY: Well, I think the secret is looking at a lot of charts daily. I look at about 2000 charts, maybe even 3000 charts every day but I enjoy doing that. It’s like being on a treasure hunt for me and what’ll happen is through this empirical research, if you’re looking at a lot of charts day after day, you’ll start seeing reoccurring patterns and you’ll say oh, I saw that stock. It took off today but I did see that stock and then that pattern will repeat itself because the technical analysis, it doesn’t have to be that technical. You’re basically reading the mindset of the market. You’re reading the psychology of the participants, what they have done, what they are likely to do next and if you look at those charts every day, every day, and study the big moves that have occurred, one thing I’ve been doing a lot lately is going back in and looking at the last six months and look at the biggest winners and make sure that I’ve caught some of those and if I haven’t caught some of those, could have caught them with my methodology so study success and just keep looking at charts.
SPEAKER: Is there a specific pattern that you love that you watch for every day?
DAVE LANDRY: I’m a pullback player so I’m a trend guy. I’m looking for reverge into the meaning and the direction of the trend. In other words, looking for a pullback. Looking for a market to first be the strong trend. It should be an obvious trend. You should be able to draw an arrow on the chart in the direction of the trend. If it looks like an electrocardiogram, it’s not a trend. I get asked all the time what about this stock and it looks like that and it’s going sideways for six months, no, don’t trade that. Find a stock that’s at a very obvious trend and then look for an entry and for me, I wait for a pullback and enter if and only if the trend begins to reassert itself so if it just pulls back, keeps pulling back, we’ll leave it alone.
SPEAKER: Dave, thanks for your time.
DAVE LANDRY: Thank you so much Tim.
SPEAKER: You’re watching the MoneyShow.com Video Network.
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