Wednesday, 11 September 2013

Reacting versus Predicting in Trading

Most of the best traders I have read about and know of personally do not predict what will happen they trade what is happening. New traders always want to predict, they want to argue about their beliefs and why something must happen or will happen. Most rich traders are rich because they are flexible, they have no strong opinions and are just looking at possibilities and ready to take a setup  buy a break out or short a break down. A new trader believes that ‘conviction’ about a trade is important, holding through an adverse move is usually a bad idea, especially if a key level is reached that is showing the trader that they are wrong. A rich trader is waiting for some price level to trigger their entry then another price level to trigger their exit. A new trader is trading off a belief and has no real exit plan most the time because they are sure that they are right.

The money I have pulled out of the market over the past 10 years has come from trading price action not predicting. I have entered at high probability moments on breakouts above resistance levels. I have trailed my winning trend trades with a stop and sold when the trend reversed through key short term support. When I was wrong I stopped out for a small loss, when I was right I let the winner run up for a very big win. I am always trend hunting, always taking my high probability trades, always cutting losses short, and when not seeing a great trade doing nothing and waiting.
By: Stephen Burns 

Quote for the day

"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes." - Jesse L. Livermore

11-Sep-2013 CSE Trade Summary

Crossings - 11/09/2013 - Top 10 Contributors to Change ASPI
Following Stocks Reached New Low on 11/09/2013