Trading Ideas Worth Sharing.
When it’s a matter of life or death, a simple checklist can make the difference.
In every high risk industry from medical surgery, flying a passenger jet, building a skyscraper and trading leveraged stocks or futures, you need a process for implementing all the specialized functions. When the medical community was asked how to decrease the risk of surgery from complications or death, systematized team work was the answer. This is something that on the surface sounds easy but in real time it is one of the most difficult processes to implement.
In the Post Information Age period – today’s Digital Era –knowledge has exploded leading to professionals in every endeavor being specialized. Thirty years ago the successful trader/ speculator was the daring independent cowboy. Today the cowboy knows he can’t do it all himself, he can’t know it all himself. When he thinks he does he is quickly humbled by a detail he has overlooked.
What risk managers have learned is that a comprehensive system, a system of systems if you will, is needed which has the three following sets of skills:
1. The ability to see both failure and success. A Specialist can only see his own results, he needs data to find what is being overlooked by others, i.e, the details being missed leading to failures.
2. Devise solutions to the failures. This is where the majority of trader / developers are stuck refitting their technology, or getting more training, or looking at more technology. But today the technology cannot get much better; it is simply an easy scapegoat for losers or a sideshow for carnival hawkers. The solution is a checklist, what I call the “rules of engagement”, to make the specialist, the trader better at what he does.
3. The ability to get the professional trader, the specialist to implements a check list. This is the most difficult aspect of a comprehensive system. Respected doctor and surgeon Atul Gawande summarizes it this way: “The use of a check list (a system for the system) forces us to acknowledge that we are not systems in and of “ourselves!”, to embrace values that we do not normally hold close like humility, team work and discipline.”
From my point of view #3 is difficult because the vast majority of us are mavericks, cow boys (shooting from the hip!) and see it as being girl play to use a check list. Nor can most of us understand the reason behind of the “how” of not using a checklist will lead to increased risk.
However, if it is your life (money) that is on the line and the use of a checklist reduces the risk of death (loss) from surgery (trading) by 46%, maybe we would have you attention, it’s not too late.
I have long professed that trading and strategy development are two different modalities. Traders’ trade and strategist well they analyze and develop system. When I tell this to prospective clients and traders, I get a smirk from the majority. It must be the simplicity of the concept that some people just don’t get. In other words, if you execute trades, analise the markets and develop systems you are a jack of all trades, no?
The ability to trade — execute and manage risk — is just as important as the ability used to forecast condition and direction. In fact, if you do your homework and read books about the trading greats like the “Market Wizards” it should become a clear and self-evident that the ability to trade is just as important,maybe more so.
One type of person Creative Breakthrough (CBI) is looking for over the years are good traders who are good team players. What we have found is the good ones are willing to share and that the good traders use a little common sense along the way. They are not slaves to a system, that is not how they define “discipline.” They know that no matter how good a system is that on widely expected “news event” days it is better to stand aside because of fast market slippage and whip saw action. They have rules of thumb to avoid trading that would put themselves into a personal internal conflict that will undermine their trading. They understand the institutional power on major “option expiration” days to have the market pegged in a range. They have rules of engagements they check off on each and every day before they trade.
CBI has a number of good trader/clients and I wanted to share some insights with you from one of them here and many more in the months to come. He use of CBI’s Advanced Trader’s Toolkit which includes Quad Level support and resistance indicator, %C indicator, Mo trader Oscillator and the Expect-Trend and Trend Extended paint bars.
“Hello Jack, My trading is extremely different than your typical systems trader. It’s probably 50% systematic, 45% discretionary and 5% lucky. I sell resistance and buy support. There are allot of things that make my trading successful, but that’s after many years of learning and studying the way the markets move. What I have come up with works very well!!!
I wait for the market to be over bought or over sold the more the better. The Quad support and Quad resistance are extremely reliable in giving me a place to buy or sell the market and where to put the stop. I wait for the Mo Trader to show me that the market is overbought or oversold with an indication of +40 to 60 or more, or –40 to 60 or more. At that point I look at where the market is vs. where the indicator shows support or resistance.
I will make my trade at that level and risk the next level as my stop. The higher the level of support or resistance the better. The market very, very rarely ever breaks through the outer levels of support or resistance, when it does it is just squeezing and ends up going in the opposite direction very fast which is the direction you want it to go. I trade the stock index futures contracts, (S&P, ND, DJ) and have found that the easiest one to trade with the most consistent wins with the lowest risk factor is the Dow Jones. I look to make 30 points or more per contract and my risk are usually 30 points or less per contract. I don’t look to make a killing on every trade, so as soon as I have 30 points or more and the market stops moving in my direction, I take profits!
Today, 7/19/99 was a perfect example of how my trading works. Right on the open the DJ U9 went to 11340, the high of the day and exactly at the most extreme level of resistance. At this time the Mo Trader was at 40+ which was telling me the market was way over bought. I immediately went Short at the market and was filled at 11330. Thirty minutes later I was out with 50 points profit and took no heat on the trade. The market of course continued to fall, but I was happy with my profits.
I have other rules that I follow with this just being one example. But following my rules, and keeping greed out of my trading I had 66 trades from 6/15/99 through 7/15/99. 58 were wins, 6 losers, and 2 flat. I have to watch every minute of the market during real time to catch all these trades, but I never hold a losing trade overnight and very very rarely have to carry any trades overnight. If I miss a chance because I acted to slow I just wait for the next one. I never chase the market because that increases my risk.
I hope this helps you Jack.
Take Care, Patrick”
I shared a steak dinner with Patrick at Sullivan’s Steak House at my winter residence in Palm Springs , California in November 2000. He had made nearly one and a half million over the last 15 months after starting with a reasonable account of 50k. My bar tender at Sullivan’s Michael Jasilewicz was a trading student of mine, here is his LinkedIn profile now http://www.linkedin.com/pub/michael-jasilewicz/1/536/870. We taught him how to be a good trader, he does it better as a manager of night clubs.
His presentation is a must “stop , listen and learn” in 3 minutes. Not a presentation by a broker, investment advisor or a financial services sponsor. If you want to jump into the deep end of the pool, watch Dan Ariely talk that answers: “Are we in control of our own decisions?”
New screen cast video uploaded. How to trade with market dynamics as your key set up to timing! Part of the Advanced Trader’s Package, the Trend Kick Off and Trend Extended Paint Bars. How to use a top down approach to long term trade or scalp. I show two recent examples of the mini SP and the EURUSD. View my Screencast, link from here.
Trend Kick Off and Trend Extended Paint Bar indicators: USER DOC is down-loadable from the CBI member’s page from right side bar of home page.
Futures Truth Magazine Issue #4 dated Feb 3, 2012 recorded: Eclipsed Phase II trading RB is up $16,730 on a DD of $3,155 with a win rate of 59% and a percent gain of 83% in 4 months!
Big Dog Day Trader on 10 markets plugin for NT7 and TS9 remains on sale 1/2 off until the end of May, 2012. Results for all the markets will be posted June 1, 2012.
For TradeStation Brokerage Clients via the TS Strategy Network CBI’s Advanced Trader’s ToolKit is available. Just go to the TS Network pages to sign up for a free 30 day trial. Again for TS brokerage clients only.
New Gold Membership Forum Page. Gold Members, please log in and you will be able to access CBI’s inner community. I have started a topic that fits with this issue of Thinking Man’s Trader. I will post here my rules of engagement, the checklist that I review each day before trading. My goal is to isolate the missed details that lead to error in trading to make us all better risk managers and therefore better traders. I will be interviewing some of the best traders I know to get their inputs as well and posting their interviews only on these membership page. Many thanks for working with me and CBI.
Eclipsed Phase IV day trading performance, the evolution of Virtual Aberration into a modern day winner.
Help wanted, our friend Alex Pressl has a full load working on his PhD and can not keep up with demand for CBI’s product in Ninja format. Anyone interested in discussing the opportunity, contact me at your first opportunity.