How to stop picking tops or bottoms
- Thread starter jr07
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Quote from Vespasian:
I can pick a top or bottom 70% of the time intra day (If one happens) - Does that make me a psyco.
No, not if you wait for a reversal signal first - like a consolidation pattern, candlestick formation, VSA divergence, or something else. I do that all the time myself. What I was talking about was people who try to pick bottoms or tops in the middle of a strong trend that is going against them. There are times when you can get that right and watch the trend violently reverse back the other way just as you get in, but nobody can do that consistently unless they are "psycho".
Hi jr07
This might not have anything to do with your situation but it is a common problem that if a trader misses an entry (for whatever reason) example.. you should have got long and remained long for the last few months during this up trend. when the long entry was missed or maybe exited too early it's easy to get the feeling that you need to be back in the game. too late to go long so short must be the next big move. The thing is if we look back at our (entry signal) time frame, we can usually see the point where we should have taken our entry. It was not at the very bottom or the very top, it was after the trend was confirmed. If you dont believe the up trend has much further to go be patient. The sell signal will show its hand when its time. Until then sit on your hands. You will find that the smarter money will be patient. You want to be with the trend but you need to wait for it. it will do you no good if you get stopped out 5 times before a down trend takes hold. better off being a little late. One of the things that I am really trying to aim for is taking the least amount of heat on my entrys. I am way better off being late but with the trend. Some people seem to have a natural mind state for trading. The rest of us need to get and keep control of our demons every day. Knowing what to do is just part of the equation. Doing it is the hardest part. I hope my ranting makes some sense.
Good luck in your trades
This might not have anything to do with your situation but it is a common problem that if a trader misses an entry (for whatever reason) example.. you should have got long and remained long for the last few months during this up trend. when the long entry was missed or maybe exited too early it's easy to get the feeling that you need to be back in the game. too late to go long so short must be the next big move. The thing is if we look back at our (entry signal) time frame, we can usually see the point where we should have taken our entry. It was not at the very bottom or the very top, it was after the trend was confirmed. If you dont believe the up trend has much further to go be patient. The sell signal will show its hand when its time. Until then sit on your hands. You will find that the smarter money will be patient. You want to be with the trend but you need to wait for it. it will do you no good if you get stopped out 5 times before a down trend takes hold. better off being a little late. One of the things that I am really trying to aim for is taking the least amount of heat on my entrys. I am way better off being late but with the trend. Some people seem to have a natural mind state for trading. The rest of us need to get and keep control of our demons every day. Knowing what to do is just part of the equation. Doing it is the hardest part. I hope my ranting makes some sense.
Good luck in your trades
Quote from FB123:
No, not if you wait for a reversal signal first - like a consolidation pattern, candlestick formation, VSA divergence, or something else. I do that all the time myself. What I was talking about was people who try to pick bottoms or tops in the middle of a strong trend that is going against them. There are times when you can get that right and watch the trend violently reverse back the other way just as you get in, but nobody can do that consistently unless they are "psycho".
Is that what OP is doing ?
Yes I agree that is suicide and I was guilty of that myself for many years as well.
Again, thanks to all for your input.
From what many have said, I though about it this a.m. and I came to a conclusion, and important one.
About a year ago, when I started reading about TA, I understood the difference between a "trade" and a "gamble". Some people claim (I thought that myself) that trading was like gambling, but reading books about trading and TA made me realize they are not the same. Gambling is guessing at best, trading shouldn't be.
Hence, calling a top or a bottom is eactly the same as gambling. You are "guessing", trying to predict the future and therefore it is money on the red or the black. It is not a trade.
I will focus on this going forward.... I did the same mistake today a few times! Hopefully I'll learn soon enough not to do this anymore...
I just can't get this notion out of my head that this market is way ahead of itself! and needs to correct. I know, it's stupid, I'll work on erasing this from my brain.
J
From what many have said, I though about it this a.m. and I came to a conclusion, and important one.
About a year ago, when I started reading about TA, I understood the difference between a "trade" and a "gamble". Some people claim (I thought that myself) that trading was like gambling, but reading books about trading and TA made me realize they are not the same. Gambling is guessing at best, trading shouldn't be.
Hence, calling a top or a bottom is eactly the same as gambling. You are "guessing", trying to predict the future and therefore it is money on the red or the black. It is not a trade.
I will focus on this going forward.... I did the same mistake today a few times! Hopefully I'll learn soon enough not to do this anymore...
I just can't get this notion out of my head that this market is way ahead of itself! and needs to correct. I know, it's stupid, I'll work on erasing this from my brain.
J
Why exactly are you thinking that the market is ahead of itself and needs to correct? It is for fundamental reasons, like what you think about the economy?
If so, let 2009 be your lesson about why all that stuff is nothing but a bunch of crap. You can't trade off of fundamentals, because they LIE. Earnings LIE. Companies LIE. Directors LIE. Reports LIE. Economic numbers LIE. Geithner and Bernanke LIE. Most analysts are paid by investment houses to LIE to you, and in most cases they are too stupid to understand how the market really works anyways. That's why they are analysts drawing a salary for a living, instead of billionaires retired on their own private islands.
The uptrend since March has been as clear as day. Stop thinking what the market "needs to do", and start thinking about what it IS doing.
OK FIB, I hear you out,
But look at this chart. This is my medium term time frame chart for SSO the ETF I day trade the most. (2x SPY).
Wouldnt you agree that there should be some retracement to the lower trend line? from the channel that has formed since early march?
To around 32.16?
This is one of the main reasons I chase short trades on a dalily basis at the moment.
But look at this chart. This is my medium term time frame chart for SSO the ETF I day trade the most. (2x SPY).
Wouldnt you agree that there should be some retracement to the lower trend line? from the channel that has formed since early march?
To around 32.16?
This is one of the main reasons I chase short trades on a dalily basis at the moment.
Alright, let's look at this chart.
Now tell me: which way is this thing going in the larger trend right now? Up or down?
I think you know the answer. What you should have been doing is waiting for a retracement to the lower trendline and then initiating a long position, not looking for a short position at the upper trend line.
The upper trendline is not as important to an uptrend as the lower one. For one thing, trends often exceed the upper trend line, gradually pushing it higher and higher. A blow off top will often blast right through the upper trendline before it reverses back down. The S&P 500 for example hit trendline resistance at around 1052 or so the day before yesterday, which is why some people shorted there. Unfortunately, it then blasted above that to an ALTERNATE upper trendline level at 1062-1063 yesterday, where it found resistance. Yet despite that, today it blasted another 10 points higher before reversing to come back to the 1062 area. Now, we have a new "top point" to draw an upper trendline with, at 1071 or so. It's always pushing it higher.
Opposite trendlines (top lines in an uptrend and bottom lines in a downtrend) are not reliable, and you shouldn't use them unless you see other reversal signals happening at the same time. They are an indication that the move could be getting close to finishing, and if you have longs it's a decent time to start being more cautious and pulling the trigger on an exit.
Going short in these situations is a counter-trend trade, which if you remember the rules is not something you should be doing, especially as a new trader.
(Keep in mind that in this market, the lower trendline is often broken through as well, as the manipulators try to suck people in short. They did that right at the beginning of September. The whole thing is one big poker game... always ask yourself what the market would have to do to hurt the most people, and that is what it will probably do.)
One other thing. I hope you realize that double and triple leveraged ETFs are actually synthetic instruments that have time decay built into them. In other words, if you hold these things for weeks or months, they are going to lose value even if the price of the underlying instrument stays the same or goes in your direction a little bit. I would only use a double or triple ETF for very short-term trades to avoid this problem.