Tue 7 Oct 2008
Asking the Right Questions
Posted by ray under Miscellaneous
After a round of seminars, one thought struck me. Many traders are asking the wrong questions; as Anthony Robbins maintains, you need to ask the right questions to succeed.
What are the right questions when it comes to monitoring the landscape for a trade? I hold that the first questions for ‘other timeframe traders’ (all timeframes except those entering and exiting on the same day) are:
- What is the trend?
- Is it likely to continue or change?
If you are a day-trader, you need to ask one more question:
- is the market today, rotational or one timeframe?
The answers to these questions provide your strategy. What I noticed at the seminars is that few traders asked the questions. By not asking these questions they failed to place the probability for success on their side.
Once you have a strategy, you need to enter a trade. This involves:
- A zone for entry
- A setup and
- A trigger and initial stop loss level.
Entry zones differ depending on whether you are a breakout or responsive trader (buy dips in uptrends, sell rallies on downtrends). As a breakout trader, I’ll be looking for a zone that tells me that the breakout is genuine. If I were a breakout trader, I’d be a buyer above the Maximum Extension of the Primary Sell Zone and a seller bellow the Maximum Extension of the Primary Buy Zone.
I am a responsive trader, believing that responsive activity provides more of an edge than breakout entries. I use a myriad set of tools to identify a confluence zone. But the minimum price is the line turn price of the timeframe I am trading.
In Figure 1, 7615 is the 5-period swing line change price - at that price the line will turn up. This price is the minimum retracement.
Once I have a zone, I look for a setup bar. A breakout trader would look for some sign that a breakout would be valid e.g. a contraction of price action suggesting that the breakout will be a strong one. As a responsive trader, I look for patterns that tell me a zone will hold.
That’s it for today. I’ll continue the thread tomorrow.
Figure 1 Line Change Price
October 7th, 2008 at 6:18 pm
Ray
Raschke has this time-of-day tip:Quote
Traders tend to be creatures of habit, and thus it is easy to compile market tendancy charts. There are several key patterns which have held constant over time, she said. “One common pattern might be the market rallies or sells off into noontime. At this point, a large percentage of the floor traders and brokers in New York go to lunch and a countertrend correction begins. When the late stragglers get back from lunch, the morning direction tries to reassert itself again. Unquote
This is why you have also advised us not to trade during their lunch hour break.Correct?
October 7th, 2008 at 6:24 pm
Right Ana
October 7th, 2008 at 8:14 pm
Hi Ray and Ana, In one of the markets i trade,I have notice that exactly at 4.09 pm every trading day a large order to buy/sell hits the market. I can even tell the time of day from looking at the volume. What i am unsure of is, why exactly that time? I feel that they are closing their day position.I have even scalped at 4.08 for fun but still the time is a mystery to me. Any clues why? Cheers Baz
October 7th, 2008 at 8:32 pm
Hi Baz
Difficult to say since I haven’t seen it. It may be one player either getting in or out.
October 8th, 2008 at 9:27 am
Baz
More tips on time-of-day trades:
Raschke said not to fade a move into the last hour of the day, “for there is no time to exit gracefully if wrong.
The odds suggest a better entry price the next day on the probable morning follow-through. Moves on Friday tend to end at 2 p.m., not 3 p.m. Central Time, as too many traders prefer to flatten out or even up before the weekend.
October 8th, 2008 at 3:22 pm
Thanks Ana,I always like trying to find nuances in the market.But as i am sure you will agree,Mr Barros methodology just makes perfect sense.I still have my method which i too have sweated blood and tears to develope but i do adopt and respect his ideas too. I might call it the Raz:) cheers Baz