Today is Monday, September 28th and the Index’s had a nice day back up. This is the price action reversal that I was talking about last week. We needed to see a day like this after the most recent sell off and it came right on time. The Dow bounced  right off support from Friday’s session and set the stage for today’s rally, very nice.

This last pivot low is going to be very critical, in my opinion. We will need to stay above this point to keep the trend intact. If it is broken, I will have to believe that others will see it as a sign of weakness and take profit off the table. That could cause a rush for the exits and we could get a much bigger pull back. Right now, no one knows which way it is going to turn, but you can have a conditional set-up. If this, then that. If pivot low is broken, look for a meaningful pull back. More work needs to be done to establish a continuation of the current up move before a long position can be taken, so we wait and see. This is all for the daily market, which I really don’t trade off of, but follow, because everyone else does.

I trade out of some very small time frame charts that aim to capture just a small piece of the days movements. Today was a very slow day. A lot of the price action came in the pre-market, but there was some nice trades to the upside, just after the open. A little later during the New York lunch time, 12: 00 pm to 2:00 pm, things slowed considerably. This happened to be right at the high of day at that time and the market virtually stopped. A little move up, a little move down, and so on. It can be hard to try and trade during this slow period, because it will many times not produce the gains that you are looking for and frustration will set in. When that happens, it never usually turns out well. You start forcing trades and not waiting for conditions to present themselves to you.

One rule or thing traders can remember that will be of great value when you find yourself struggling. “Trade by Exception”. What do you mean, someone may say? Well, by taking this advise, you will wait until your most favorable conditions are before you, but when they are, that is when you will not hesitate, but take action immediately. If you tell yourself that, you do not have to take a trade, if my conditions are not met. I will not trade, plain and simple.

This will take the pressure off of you to perform. Relax, and know that you are in control. Wall Street is banking on you loosing control as most traders do. If you are trying to trade out of the slow time of day, you had better know what you are doing and have great timing. If you don’t you will get spanked and sent to your room, without dinner,  (lol).  You will need to learn from those mistakes or you will do it again.

Trade with purpose and definition, know what you are doing and why it is that you are doing it. After it’s all said and done, you will have the ability to go back over your trades and see which one’s were done right and which one were a mis-trade. A loss is not considered a mis-trade to me. A loss is the cost of doing business, if you are trading with focus and purpose. A mis-trade is when you force the trade, trying to make something happen. I still do this on occasion myself, but I know what I did wrong and why. I go back over the trade and see that I did not wait for the trade to shift overwhelmingly in my favor. Even if the trade is for a small target, you still need to wait. Your percentage win/loss ratio needs to be high when trading for small targets only. In a choppy market, this may be all you have available and need to adjust your thinking for very modest returns.

Today, I choose to trade at a slow direction-less time and area. It would have been better to trade the open or wait until after the lunch period, but I adjusted my expectations on direction and took what the market gave me. I was not imposing my will on the market, but taking what the market could safely give me at that time. If I was not willing to accept these conditions, my only option would be to wait the period out for more favorable conditions or not trade at all, both of which is quite alright. Remember, you live to trade another day when conditions are favorable.

Maintaining control and knowing your limitations are very important. Every trader should not think more of themselves than they ought to. Having a humble attitude towards trading is essential to a winning mindset. That does not mean you should not feel confident, you should, but your confidence should be in following your method and not solely in yourself. You will let yourself down, when you think you know better than your method. If you take a non method trade, the best thing that can happen is for you to get stopped out. This way it will force you to trade correctly and stay with what you know. Going outside, can often produce bad habits that are hard to break, only instilling a more difficult journey for you overall.

The moral of the story, know what your abilities are and try and stay with what you know. No sence in pushing yourself to become the trader that you are not. This process take a long time. It may be that you need to focus only one setup and condition and trade that. The rest will come over time. A modest daily goal of two points per day is a great place to start and finish, I might add.

http://www.screencast.com/t/IZjv1ndi                Today’s turning points and few small trades