KND - 042611

I made this post* back in 2005 (have I really been blogging that long?):



If you follow that advice, it frees up your capital and your brain to take trades like KND. The trigger bar is marked - as you can see, it was a nice offsetting bar pattern, with price bouncing off the 50% retracement and moving up with support from the 5 EMA. I closed half of the position at the Fibonacci extension (FE) and held the other half for the $28 whole number. I usually don't do this (ie, I usually exit my entire position at the FE), but I saw this pattern in a lot of issues today, and it was a bullish sign. You can also make the argument that there was a "beyond the Fibonacci extension" setup in there somewhere.



*link to original post

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More reader comments

I took today off and enjoyed a nice four day weekend. I'll be back at it tomorrow and will post some charts later in the week. In the meantime, here are a few more comments from readers in response to Michael B.'s excellent post that also came from comments.

From Flowtastical:

"Grove,

The key to consistent money is knowing what you do best and executing only what you do best. I spent a good 5 hours writing that in my journal yesterday and it was amazing how much time I spent on executing things that aren't my strengths. Make your own private blog and post your most profitable trades every single day. Over time it will add up.

If you spend today writing in excruciating detail what you do best and execute exactly what you do best next week, your numbers are going to improve.

I don't think most traders overcome odds. I think they overcome themselves.

Spend some time on traderfeed.blogspot.com. Specifically read all his posts on "solution focused" trading."

From Ken:

"Flowtastical makes some great points.

Grove Under, here is my shot:

1.) Being selective is easy once you break the habit of overtrading. Michael B. said as much in his comment when he talked about being conditioned to make a lot of trades. It is all about discipline...you have to develop it and maintain it. But it is easier to maintain when you are making money from being selective as opposed to losing money from overtrading, and trading even more to try and get it back.

2.) Slumps - I don't think X hits them with his win rate. It doesn't sound like Michael B. does either. For me, a slump is a few break-even days but I have not had a losing week since mid-2010. That is what being selective does for you. And I don't view myself in competition with the best and brightest. I trade setups that I know work. I don't know what other people are doing, and I don't really care. I see something, I execute, and I take profits...usually in a very short time period.

I think the slumps go away (or, are redefined) once you learn to focus. Again, a slump for me is a few b-e days...so it doesn't carry the same weight mentally.

3.) Turning the corner - I think you get the answer to this question every day on this site, and you certainly did from Michael B.'s comment. Focus. Be selective. Don't overtrade. Don't force trades. I think X posted once that his job was to eliminate the bad setups...once you look at it that way, you have won half the battle. Eliminate the bad, take the good regardless of when they happen, and at the end of the day you will be in the green."

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Meditation follow-up

I read this quote on the MeditationShift blog, and thought it was a nice follow-up (or supplement) to my post on meditating last week:

"Reality is constantly changing; as the Greek philosopher Heraclitus said, you can't step into the same river twice. Success and failure, gain and loss, comfort and discomfort — they all come and go. And you have only limited control over the changes. But you can exert some control over (and ultimately clarify) your chattering, misguided mind, which distorts your perceptions, mightily resists the way things are, and causes you extraordinary stress and suffering in the process."

- Buddhism for Dummies

Read my original post here.



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Reader comments

Michael B. made this comment on the last post, and I thought it was worth sharing:

"Interesting conversation, and I feel compelled to chime in because my shift to profitability finally happened in 2010 after I came to terms with what you guys are discussing. You talk about failed "Trader-X" setups, but when you reference them there is always something lacking, such as no support from moving averages, not a valid candle signal, or in the case of the 15-min chart you posted Grove, I would not even have considered that because of the long upper tail on the first bar. What I am saying is you can't call them failed Trader-X setups if they don't fit the criteria to begin with. Grasping this concept turned me profitable. In the past, I made 5-10 trades a day. Once I finally forced myself to get selective, I started making 5-10 trades a week. And 10 in very rare. Most weeks I average 5-8. And guess what? My winning percentage is well above 80% for over 10 months now. Being selective and not trading as much is the key. But it is hard to do when you are conditioned to making alot of trades. Can you go a day without making a trade? It was darn near impossible for me a year ago, and forcing myself to do that some days was the hardest thing I have had to do in my trading career. But once you overcome that obstable, that mental block, the success is there."

Michael B. follows up his comment with a few setups from Thursday's trading.

There are several dozen comments over the past few posts, including charts, analysis, and discussion. Make sure you are reading them.

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The DJIA makes its highest close since June 2008

I hope everyone had a profitable trading day. Don't forget, this is a short week because the markets are closed on Friday. As such, I plan to take tomorrow off and make it a four day weekend. That is the plan for now, at least.

I will leave you with a chart of the "classic setup" from today - it eventually made it to the Fibonacci extension (FE), but I bailed at $30 (black horizontal dashed line). Please post your trades in comments, and I will try to post a few charts over the long weekend (no promises, though!).



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A few charts

I traded AGO yesterday. Here is my summary:

1.) Gap up and strong first bar.
2.) Second bar was weak, and reversed the early gain.
3.) Price formed a double bottom and worked its way up from that point.
4.) The 6th bar closed above the 50% retracement of the morning's range. The next half dozen bars formed a nice base above that level, and never closed back below it.
5.) The 11th bar formed a hammer-type candle above the retracement zone, and had support from a rising 5EMA. I entered on a break of that 11th bar.
6.) I exited at the Fibonacci extension (FE) six bars later for a 3% gain.



I have not had time to pull charts from comments this week - my apologies, but I hope everyone takes the time to look at them on their own. I did have a comment come in last night and I was looking at the chart - however, I inadvertently deleted the comment and could not get it back (I am REALLY sorry about that). The chart was MBI, and it was a "u-turn" setup. The commenter entered on a break of the 11th bar, but questioned his entry as that trigger bar seemed somewhat overextended. On the plus side, it was rallying off the 50% retracement, had support from a rising 5EMA, and was a strong bar that closed at its high.

He took the trade and exited with a nice gain at the FE. Here is the setup, and if the commenter will please claim credit for this trade I will publish his name and promise never to delete his comment again!



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Adjusting your targets

Someone asked a question in comments a few weeks ago - what do you do if you have a great setup but, in plotting your Fibonacci lines over the range (in his question, he was plotting Fibonacci lines over the morning's range on a 5-minute chart), the profit potential is not that great because the range is not that big?

In general, I would say find a better setup. Movement equals opportunity, so you want to enter a setup that has nice movement prior to your entry. However, now and then you see a setup like the one the commenter referenced, and it is hard to pass up. Wednesday I traded AG - it gapped up, but was a smaller gap than I usually have on my radar. However, the first four bars presented a compelling setup: price rose, showed strength, made an orderly pullback, and gave a nice signal with a strong candle that rallied off support from a rising 5EMA and the retracement zone (RZ). I entered on a break of the fourth bar's high.



I watched price action closely as it approached the Fibonacci extension (FE), and noticed a bullish narrow-range consolidation, so I adjusted my Fibonacci lines from the morning's range and plotted them from the previous day's low to the opening range high. This provided more profit potential (just under 4%), and the target was hit a few bars later.



Those of you who plot standard pivot lines will note that price actually rallied to R2 and then reversed for the day.

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Just say "om"

update: after reading the post below, you can read my most recent post on "the meditaitonSHIFT course" here.

I am excited to see most of you have an open mind and want to hear about meditating. There are three things I credit my "success" in life to:

1.) Hard work, practice, and study. Whether it is looking at 100s of stock charts every week (even after almost two decades of trading), or applying those principles to your chosen profession, your relationships, your passions, et cetera.
2.) Positive thinking - in my pre-trading life, I didn't achieve "success" until I grasped the power of positive thinking. I learned to write down my goals, review them daily, and visualize myself achieving them constantly. I learned to interrupt negative thinking and replace it with positive thinking. When I began trading, I initially forgot the success I had in the past, and how I achieved it. Luckily, I returned to it quickly and it made all the difference*.
3.) Meditating.

Meditating means different things to different people. You can find 100s of different ways to meditate, and 100s of different definitions of what meditating is or is not. To me, the objective of meditating is simple - it allows me to see the craziness that goes on in my mind, and once I am aware of that craziness it helps me focus. It also greatly enables the process of positive thinking (see #2 above) and is proven to have a plethora of health benefits, more of which seem to be discovered every month.

Back to what it means to me - there is a term, "monkey mind," that goes back 1000s of years. Basically your mind is always going - 24 hours a day, 7 days a week. Most of the time we walk around in a zombie-like state and don't even realize that our mind is churning away, thinking crazy thoughts, running through crazy scenarios, bouncing from branch to branch like a crazy monkey. The initial goal of meditating (to me) is simply to become aware of all this activity, to observe it in action like you are an un-attached third party. Once you do learn to observe it, you will never be the same. You will be amazed - and scared - of what is going on, and how little control you have. That is the point where you move to the next step, learning to focus. You don't "force" yourself to quit thinking or anything like that (a lot of people will tell you meditating is about suppressing your thoughts...that is just not true) - you simply learn to observe what is going on, and when you get good at observing (becoming aware), then by default you will start to gain control over the craziness.

I don't claim to be an expert on meditating. And I am certainly not an expert on trying to explain it. But, I will tell you that - without a doubt - it will change your life if you do it with regularity. And, if you combine it with hard work and positive thinking, you will be practically unstoppable (in my humble opinion). You may find that hard to believe. It is a bit like trading - simple, yet hard. Thinking positive is simple. Meditating is simple. At the same time, they are also hard. And frustrating. You have to stick with them, be consistent, and practice daily to see the benefits. But the benefits will come, and they are life-changing.

How do you start meditating? I have read dozens of books on meditating. I took personal instruction back in the late 90s. There are a myriad of methods - becoming aware of your breathing, focusing on a fixed point or object, repeating a mantra, counting. None are wrong, you just have to find what is right for you. I started to meditate a dozen times over the past twenty years, but my most successful attempt only lasted a few months. I finally "broke through" several years back, and now I can't remember the last time I missed a day. Most days, I meditate two or three times. But every day, I meditate at least once.

Do a Google search and you will find a lot of resources. If you don't mind spending a few dollars, I highly recommend meditationSHIFT - this is the method I use now, and I think it is the easiest to stick with and make work consistently. No matter what you choose, though, just do something. I would venture to say that developing the habit of meditating and positive thinking is the most important thing you can do to be successful in life, whatever the definition of success is to you.

Read my most recent post on "the meditaitonSHIFT" course here.

*I have written a lot about positive thinking over the years - check out these tags for more: thetadprinciple, mental.

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Net worth

This cartoon is striking in its truthfulness...even if people don't realize it.



Meditation post later today, and more charts later this week. And, good comments in the last few posts!

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Reader comments, Fibonacci lines, and meditating

I am amazed at the comments that are popping up on the posts - you guys have a lot to contribute! I want to foster the collaborative environment by posting comments, setups, and charts from the readers several times a week. To make it easy on me, I need to get some uniformity in how you list your setups and trades; it will allow me to post them and provide consistency for all the readers.

As such, I am asking everyone to use the following format:

1.) Classify the trade as a success or a failed setup so everyone knows what they are looking at from the beginning. It will help people get in the mindset to provide the proper feedback if you are asking for input.
2.) Post the pertinent details - symbol, timeframe, how you plot your Fibonacci lines. If you use MAs, post what you use or just say "standard Trader-X MAs".
3.) Post your entry - "I went long on a break of the X bar. I went short on a break of the X bar."
4.) Post your rationale for taking the trade, along with any red flags or concerns you had.
5.) Post your target, and where you exited if it is different than the target.
6.) Post any questions you have (if you are asking for input from others).

You can post any other details you want, of course. But at a minimum please include the points above.

A few updates:

I told you guys last month that Kernan from TRADEthemove.com had agreed to do a guest post on different methods of plotting Fibonacci lines. Unfortunately, he has been affected by the Japan tragedy as he has friends and family there (so his time has understandably been occupied with more important matters). I received an email this week and he told me he hasn't forgotten, and hopes to get something to me before the end of the month.

I also promised you guys months ago that I would do a post about meditating - something I believe in passionately and practice daily. A few of you have left comments, and I still plan to post on meditating but it is a bit lower on my "todo" list. I will get to it, though. But you should not wait for me before you start looking into it - you can't do it wrong, and the benefits are amazing.

I hope everyone enjoys the end of their weekend.

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Some charts from comments

There are over two dozen great comments over the last few posts. You will find setups, analysis, discussion on timeframes...a pluthera of great information. If you are just waiting for posts from me and not reading the comments, you are really missing out!

Here are a few setups I pulled out of comments. The first is the primary setup we have been discussing over the past month - you might be getting bored of it, but it happens almost every day and delivers results.



Here is a chart and analysis (cut and pasted from comments) of a "u-turn" setup posted by John:



"Hey X, do you still trade the u-turn setups? I find these 3-4 times a week, and they tend to work pretty well. PAAS on 04/08 is a good example. My Fibonacci lines were over the opening range first three bars. I entered a break of the 4th bars high. It was red, but didn't close below the 50% retracement so I saw that as bullish. It made a quick move to the Fibonacci extension and I exited. It had a nice setup again above the Fibonacci extension and kept running.

John"

There has been discussion of the 15-minute timeframe in comments, and long-time readers know of my affinity for it. Before I migrated to faster timeframes, I became profitable and built my trading career on 15-minute setups. Here are a few examples from David, along with his analysis (cut and pasted from comments).





"I like seeing the faster timeframes, but I can't make them work and usually stick with the 15-minutes. Glad to see other commenters discussing them as well. I originally started trading 15-minute timeframes years ago after first discovering this blog, so thank you for everything Trader-X and Tom C.

Two from Friday were SLW long and CCL short. SLW was a break of the 5th bar's high and target of the Fibonacci extension - Fib lines plotted from the previous day's low to the first pivot of the current day. I was actually late on this entry, as a break of the 4th bar would have been perfect. The main rationale was support from the rising MAs and bars 2-4 never broke the 50% retracement and formed hammer candles.

On CCL, I went short later in the day after price broke the morning low and retraced to resistance from that area and falling MAs. Entered on a break of the 11th bar low and target was the Fibonacci extension - Fibonacci lines plotted from the previous day's pivot high around 12:30 to the morning's first pivot low. This was one of those Trader-X "magic" reversals where price bounced right at the Fibonacci extension. It was very low risk and the distance to my stop was so small I could take a larger position.

Have a good weekend everyone and keep the great comments coming!"

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Thursday roundup

I was hoping to get back to some normal posting this week, but I have had a lot of things come up that pull me away from the computer once my trading day is through. There are some great comments, setups, and charts in the comments of the past few posts. I encourage everyone to check them out and participate in the conversation. I will try to post a few charts tomorrow or over the weekend.

I hope everyone is having a profitable week!

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MCP - 040411

MCP was an interesting trade today. At first glance, it was not a setup that jumped out at me because of the long upper tail on the first candle. However, the first four bars showed a lot of resilience as they refused to close below the 50% level of the opening range (which, in the case of MPC, was the first candle's range). The fifth candle appeared to signal a bearish turn, but the sixth candle formed an "offsetting bar" and closed back above the retracement zone. Price had support from a rising moving average, and I entered on a break of the sixth bar's high.

I closed the position just above the Fibonacci extension at $65.



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The Hangover - Part II

I've seen this posted around the Internet today, and it looks pretty funny. Here is hoping it is half as good as the first.



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Steve Jobs resigns from Apple

An oldie but a goodie.

I hope everyone has had a profitable week thus far. I will be back to a normal posting schedule next week. In the meantime, there is some good discussion on 15-minute charts in the comments of the previous post.



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