PostHeaderIcon Trading: Where The Battle Really Is

The battle for trading success primarily takes place internally for the trader. The external results of  long term returns are generally caused through behaviors that arise from within the trader themselves.   

Most successful trading systems arise due to the discipline of the trader to do the work to create the robust system. Robust trading systems arise from an internal work ethic not luck.

Profitable traders have learned to fight and win over their ego and stop trading so big and letting losses run hoping they will come back. Controlling ones ego is an internal job that can make a trader profitable.

Traders that make large returns in markets with favorable conditions are able to keep those returns because of the internal discipline to stay with their trading plan when the market dynamics change. They do not give back their profits.

Traders that are profitable long term are those that have learned to not trade based on their own fear and greed but trade off of others over reactions. They are not controlled by their own internal emotions but have changed and trade based on actual external price action based on their signals.

Profitable trading is an inside job. It takes strong internal anchors to do what is right to be able to sail through the external storms of price action and reach the shore of profitability.

PostHeaderIcon The Three Primary Time Frames Traders Have To Consider










In trading, the past is where you go to test ideas. Studying past price data will reveal historical patterns and trends. You will see how the emotions of fear and greed can effect financial markets causing things to move far beyond what should be possible based on fundamentals. The past is a great place to see how the market reacts to popular technical indicators, support, resistance, and key moving averages. The past is also a great place to curve fit back tests until you find noise that you confuse for a signal. The more simple and the less degrees you use to find a trading signal the higher the probability that it is real and will work with out of sample data. Just because something happened in the past it is not an indication that it will repeat again it is only a possibility. The proper use of past price data is to see if you trading idea would have worked historically through mulitple types of different  historical market environments. The past is a great place to get an good idea of possibilities and probabilities of your trading systems future success.

The present moment is the only place we can trade because we are not time travelers. In the present we take a robust signal, we set a stop loss, and we position size to avoid the risk of ruin. We don’t expose ourselves to too much open risk with multiple positions and are careful with having too much correlation between or positions.

The future does not exist. No trader or subscription service knows the future becasue they do not possess a crystal ball or a time machine. The future is where we will be stopped out, trail a winning trade, or exit a trade to lock in a profit. Since we do not know what is happening in the future we have trade based on the current price action and use our trading plan and react as time unfolds.

PostHeaderIcon Ten Fast Facts About the Current Stock Market

  1. After the long run up from the recent bottom the risk/reward has shifted against the bulls. The downside risk of a pull back is  greater than the potential upside for bulls to gain more profits at these lofty levels.

  2. In the short term time frame $SPY has begun a trading range with basically a $199 support and $201.00 resistance. This is the first five day trading range since the bounce off the near term bottom at $191 and near the 30 RSI level.

  3. The stock market indexes need to create a longer price base here before the potential of higher prices are sustainable.

  4. Historically the 70 RSI on the daily chart has acted as resistance as an overbought indicator.

  5. $SPY $200 and $SPX 2000 are going to be key resistance levels here.

  6. The Geo-political risks always create the potential of a sharp sudden sell off with any unexpected news that is not already priced in.

  7. I would be a buyer of a pull back to the 50 RSI and/or the 50 day sma level.

  8. I would open a weekly bearish credit spread at-the-money with a break above the 70 RSI.

  9. What the hell does volume have to do with these last two $SPY rallies? Why do so many still mention it? They were both low volume rallies. Only price pays, you can’t trade volume.

  10. All the doomsayers with all their predictions are just noise. Trade price, trade a robust system, follow the chart and it is possible to make money in the markets.


PostHeaderIcon Five Great Trading Articles For Weekend Reading 8/30


Mental Model: Circle of Competence

The Essence of a Trading Process

Goals vs. Systems

Why Being Yourself Is The Key To Being A Successful Investor

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