Reading: Secret Methods

There are so many trading offers out there that supposedly have “little-known” or “secret formulas” for profitable stock trades. After 18 years of trading and reading over 200 books on the subject I can tell you that even the best trading "secrets" are just old concepts viewed from another perspective.

Here’s the most profitable secret you need to know…NO trading method that is supposedly “secret” or “little-known” will work. You must come to understand that the very premise of making a profit in the markets is to enter trades (long or short) that other profitable traders are trading.

Now think about this…If it’s “secret” then very few traders are using it. Doesn't it take more than a few traders to move a stock price? The aggressiveness of buyers or sellers in a single direction is what causes a stock to rally or decline in the first place. This concept is so simple yet so many traders are suckered into thinking that there is some method, system, technique or indicator out there that no one else knows about and will give them the “winning edge.

You don’t want to be a lone wolf with a winning edge in trading; you want to be part of the pack on the right side of the price moves. It is, always has been, and always will be that plain and simple.

 Kevin Brown

Angry Trader

Self Feeding Loops

While I was in primary School , one day our science teacher showed us an experiment.When a burning candle was covered with a glass tumbler, the candle burned for a short while and the flame died out.She explained to us that it was because of non availability of Oxygen.

Then I was wondering how the gun powder packed tightly inside the Diwali cracker is getting Oxygen to burn. I was afraid to ask her. Later, I could learn that Gun powder releases Oxygen while burning and this is used to continue the chemical process.It is a self feeding mechanism.

Markets, especially the Futures,move in self feeding loops.Order flow is the Oxygen that provides energy for the Market to move. When order flow dries up,Market will cease to exist.Like any other living organism, the first priority of the Market is to ensure its own survival.

The beauty of the Futures Market is that nobody can close an existing position without taking an opposite action against their own position.So every fresh order creates a future opposite order.Sooner or later Market is going to trap those who trade the current move.Market will force them to create order flow in the opposite direction.

Your success as a trader will depend upon your ability to accurately anticipate where the Market is going to do this, and to take decisive action without hesitation.

29062012

A soft trend day. Nifty gaped up above PDH.  BPB of the IRH gave a long trade.Much awaited BOF of BRN came too late.Very boring.

28062012

Nifty opened above PDC , but within yesterdays range,Traded within the IR till 12.45 testing our patience.Finally broke the IR low and gave a BPB signal which moved well.BOF of PDL gave a long signal.

Trading cannot be contained in a few simple rules. We need to assess each and every set up on their merit.Every moment in market is unique. For example if you traded a BOF at point A, you will get stopped out.Price remained below the IR low for nearly half an hour." A "was a weak attempt by bulls which failed immediately.First you need to focus on the rules and slowly "defocus".
 I will write a separate post later on why you need to "Defocus" to achieve Automaticity

27062012

Nifty gaped above PDH. Did not move above the first candle with topping tail.Expectation is a range move between PDH and first candle high. First signal was a short at HOD-DT . I would have taken profit around point marked A. Notice the point marked A. If you were not short from the HOD, you will surely go long here as BOF of PDH and will get stopped out.If your trade at any DP fails never reverse a trade. Most of the time it will chop.