Thoughts on trading.

Well, if you (or anyone you know) can figure out this market - kudos to you. I sure can't. When I first started trading, I could not figure out what kind of trader I wanted to be, a technical analyst relying on charts, a fundamental analyst, or both. It took me several months and trials and errors to 'find myself' in terms of trading.

First and foremost, like I have said before, getting in a trade is the easy part. Managing the trade is what makes or breaks a trader. I think about 90% of my losses early on were due to poor money management. Things like poor stop selection, moving my stop up too soon, scratching a trade if it does not make money right away before it hits my stop, etc. Some other common mistakes (which are killers in a bear market) include chasing strength (or weakness) and not properly adjusting risk during volatile periods.

It is so easy to stray from one's trading plan and it takes lots (and I mean lots) of discipline to be able to trade your plan consistently. A few months ago, I 'found' my niche - a set of indicators that I use that gives about 80% accurate signals on the S&P (and derivatives). It can be used for pretty much any stock, FOREX, future, etc. but I have found the most accurate results come on SPY (or ES emini). E.g. March produced about 30 good signals, and only 5 bad signals - that's pretty impressive.

Feb, Jan and Dec (08), were also impressive (around 70%-80%) success rate. My biggest problem has been to actually 'trust' this system. I have been watching, studying, tweaking this system for the last few months to get it to the point where I can just sit back and wait for the signals to occur.

I have had to un-learn a lot of bad habits and break free from the 'market should do this or that' tendency that has proven to not work for me. Some people are pretty good at it who have been doing this for many many years. But, it has not worked consistently for me - besides, I have a big ego and and I would rather not have to find out the hard way that I am wrong. It takes courage (not to mention a few losses) to be able to realize your weaknesses and rectify your trading accordingly to ensure success in the long run.

Someone on Twitter (sorry, I forget who) mentioned that a good trade is like a good swing in golf - you know the moment you place the trade (like golf - you know the moment your club hits the ball) that it is a good trade. As a golfer, AND as a trader, I know exactly how that feels. Most of my trades that I take within my trading system 'feel' good. I know that probability is on my side and I accept the risk. I am less stressed and don't feel too bad if it loses money. However, when I take trades outside of my plan (like chasing strength, or news related trades), I find myself being stressed, outside of my comfort zone, and eager to just end the trade.

My point is this, if you or anyone has traded, or attempted to trade the market the last hour recently knows that you might as well play roulette. If however, you have a 'system' that consistently produces good signals, then sit and wait for your signals and don't force any trades. Let the trades come to you, and make sure you are trading your plan. It is something that I am still struggling with occasionally, but am learning to overcome.

As for me, I have come to the conclusion that I am most effective when I rely purely on TA for my trading - purely chart action. My 'hunches' are sometimes good. But they are also sometimes bad. There is no reason not to trust what I have and maybe eventually rely on my hunches after several years experience and a fat trading account that can absorb hits that do not bruise my ego. For now, I am building a repertoire of ways to look for low risk trade entries in addition to my TA system, such as chart patterns, bounce plays from trend lines and/or support/resistance, opening range breakouts/breakdowns, etc.

In the meantime, good luck and don't forget to stick to your trading plan! If you don't have a plan - STOP IMMEDIATELY! Go and write your plan on a piece of paper (a napkin if you have to).