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Friday, February 16, 2007

Viewer Mail - 021607

Rich sent me the following email, and he makes several good points:

"Trader-X, I just wanted to write and thank you for your efforts and providing all of the information you do.

I have been reading your blog for over a year, but it took your post last week to finally make the light go on. You and Tom were talking about understanding price movement and charts as opposed to just looking for a setup that will work 51% of the time. I have been doing the latter for the past 5 years, but now I recognize the folly. You and several other bloggers have given me the tools to start understanding why something is happening and as a result what is likely to happen next. That gives me more confidence than just looking for a setup and hoping the odds are in my favor that time.

It really rang true for me yesterday when I was reading a thread on ET about gaps. Someone posted:

"...I am doing a statistical analysis on gaps to determine the best trade direction for gaps up and gaps down, i.e., whether the best trade was up, down, either or neither between 9:30 and 10:30..."

That is how I used to think, and now I realize how I have been missing the boat. And frankly how scary it is, and how I am glad I didn't blow out my account. There is a huge difference between hoping the odds are in your favor vs. understanding why something is happening, and what is likely to happen next as a result.

Thanks again and keep up the great work."

Thanks Rich - there are a lot of ways to make money in the markets, and I don't "crack" on others because they do something different from me. I am sure there are people who make a ton of money finding some kind of statistical edge and throwing a lot of computing power and money at it. More power to them.

But for the average person who wants to become a successful trader, it is so important to understand price movement and how things work and why things happen (just as you state above). I think the chances of success are much higher, and I am amazed that so many people don't even try to grasp the concepts.

Check back this weekend for charts. And remember the markets are closed on Monday.

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9 comments:

Chris said...

The best thing I ever did for my trading was quit reading Elite Trader.

John said...

Hey X,

Can I ask for a link to the post Rich was referring to? I'd like to read more about what he mentions here.

Thanks very much.
John

BDR said...

It was last week's post on negativity.

R.J. said...

I'll second that Chris.

Marlyn Trades said...

When people ask me about day trading I always refer them to your site - it still is the best on the net.

Everyone has different methods but I think that the most important thing is understanding the stock and how it trades.

I learned through observation that each stock has its own "personality" which is a reflection of the community of traders that trade it.
If you understand how they think and behave in any given situation you will be ahead of the game. By observing price movements you will understand what the dynamic is for each stock and then you can exploit the weaknesses.

Prospectus said...

I for one am glad for Elite Trader--somebody needs to take the other side of my trades!

Also, there are the occasional wise people such as Acrary that make it like looking for gold in a giant pile of flaming garbage--great once you find it, but it's quite a process to get there!

I can say that the best thing I did for my trading was finding the blogs of real traders like X, Trader Mike and all the other notables.

Gary said...

Thanks Greytrader for the Fib comments the other day.

Take a look at PSYS 12th 15' bar--13th bar broke it with high volume and it still didnt work--will put it in the growing 15-20% that dont work --its one thing if they dont work but it did have the potential of a 10 R winner--my new rules got me out of the trade at 41.10 just below the 41.12 15 min bar--it looked like I made a mistake when I exited but not in hind sight since I'd have been stopped out regardless. But I hesistated to take a second entry thinking it didnt have much potential. Shows how little I know.

Frustrating trade that one--made 52 week highs and daily chart looked great --still didnt work :(

Roger B. said...

I know how Rich feels - I call it my Neo moment, like at the end of The Matrix when Neo finally sees it.

It gives you a great since of comfort to actually understand what is happening and not just taking 10 trades and hoping 6 of them are winners, or that the winners are big enough to cover the losers.

greytrader said...

Glad it helped Gary.