Quote from bighog:
Trend trading is where the money is at and for sure whipsaws are the #1 reason many new traders get scared away because whipsaws are not traded properly with CONTROLLED losses to get to the days "GRAVY".
Hog, I completely understand what you are saying here and in fact this has been on my mind through the weekend. Last week I was asked whether Iâd tried Mark Douglasâs 20-trade exercise (choose one equity or future and take 20 trades on it using your particular strategy). I still hadnât at the time, but on Thursday I planned to give it a go, and for the next two days I traded all my short signals on HANS (if adhering strictly to the exercise I probably shouldâve taken ALL my signals both directions, but I was staying in the parameters of how I trade).
I missed the opening trade Thursday due to not getting filled before a sharp drop. I took all my other strong signals and only missed two due to a couple breaks away from my computer. As a result of sticking with this plan, I captured a superb 3-minute drop, which provided me with a nice quick profit. To anyone looking at the chart I posted on 3/12, it appeared that I had a magical ability to pick a perfect top and bottom on the most gratifying move of the day, but in reality it was because I was taking all my setups that I happened to catch one of the best moves.
I also traded GS that day (my opening trade after I missed the opening HANS trade). I took a short position at overbought (SPY also overbought), exited close to my max loss, then realized HANS was setting up and didnât bother with GS again. Now, say Iâd decided on open that GS would be my equity of choice for the exercise, AND I chose to trade my signals both directions. My opening trade wouldâve been long at oversold. I wouldâve been stopped out at my max loss of $250. Then as soon as GS left a hammer at the pivot off next oversold, I wouldâve been long again. The trade wouldâve moved in my favor and I wouldâve moved my stop to b/e.
I wouldâve had two choices when it reached "overbought": Take profits on half and let the other half ride, or simply move my stop to lock in a small profit and let the entire trade ride. Since it still had to test the original HOD at that point, there was no reason to fully exit the trade. Either choice wouldâve kept me in a strongly uptrending trade that need not have been closed out until the end of the day. (Chart attached.)
With trading as disciplined as this, it's hard to lose. But what would I (and most traders) likely have done after the initial loss on the long position? Either gone short (and lost again), or abandoned the stock and moved on, despite an even stronger long signal only minutes later.
The chasm between intellectually grasping a concept (knowing the right thing) and being able to implement it (doing the right thing) is huge, and building the bridge is sure taking me a long time.
P.S. - Enjoyed the song and the 6 essentials!
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