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.