Today is Tuesday, January 26th and the S&P market closes near the low of the day.
The major market index’s close near there lows for the day, not usually a good sign. We also put in another inside day from Fridays selloff. An inside day is when the market trades inside the previous days trading range. When that happens, we build up pressure and that pressure releases itself back onto the market, but which way? The current momentum is down on the daily and 120 minute charts very clearly, but are we going to bounce?
I did not trade today, I am traveling to the S.F. Bay area from my home in Norther Cal. I had a bit of misfortune with my computer today. It CRASHED. I lost a lot of stuff. I have some things backed up on an external hard drive, but not everything. It is very sad. I don’t have my email working through vinnie@sniperdaytrading.com . I have to reconfigure everything and I really don’t know how to it. It is going to take a little time. Anyone wishing to contact me, can do it still through Skype and leave a message under my screen name Sniper Day Trading or at an alternative email, vinnietarantino@yahoo.com .
I did see late last night an email message from an interested person in my Sniper Day Trading course and mentoring program and typed up a detailed response and saved it. I was going to send it off with a small video, more fully addressing his questions. To my surprise, it was all gone with the Crash, not “Trading Crash”, but computer crash. So, I will respond here, so I can give everyone the answers to the good questions that he asked.
The first question was, commenting on “Trading Systems”. He stated correctly that it is a fairly known fact that trading systems fail over time. There developers are always tweaking the settings to try to keep up with the changing market environment. What worked well for months, now is failing terribly. That is the nature of system trading. The question and concern was with the indicators that I use. What is going to stop the indicators that I use to stop working thus becoming ineffective.
My answer is; I do not have a trading system, but a trading method. There is a big difference. A trading method, allows for unseen things like yesterdays very choppy open. On gap days, as we had yesterday, the S&P moved up 6 or 7 points on the open and the Dow around 60-70 points almost immediately. It was catching up to the futures which had already gone up substantially in the night trading. Most often, the gap gets filled, but the choppy trading action can occur when you have the two pairing back up to each other. They are temporarily out of balance and until they get rejoined, you can have opposing forces at work. Well, a system is going to take the trades without regards to things like this, where a trading method, is going to give it time to get back in sync. Many times 30 minutes is a good cooling off period. In yesterday’s case, that indeed was true, where the market started to flow better and trading price action was pretty typical the rest of the day.
To continue, a trading method uses discretion, but has rules and certain conditions need be met, before initiating a trade. A system is just going to take the trade without regard to conditions. It is trying to remove trading emotion, which in many cases, does just the opposite. You end up putting your faith in something that you have no control over. Many traders abandon systems as draw downs eat away at their equity, which is where the added emotion comes back in. When do you throw in the towel or do you keep trading only to blow your account out, thinking that your trading system is going to make a come back. The whole thing is a big trading bummer for most.
In the above, you are not learning how to trade but putting your faith and trading future in the hands of a system that showed great results before only to leave you high and dry now.
That is no way to meet your trading goals and dreams. I will continue with this and other questions latter tonight or as soon as I can.
Until then, Good Trading to all !
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Tags: system or method, trading method, trading questions, trading system
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