I was referred to Brett Steenbarger’s blog of Nov 14 ( http://traderfeed.blogspot.com/) . As I read, it struck me that the tools we use in our trading plans are of less importance than having a plan.

Brett’s approach to the markets is very different to mine. He is a short-term trader and to gain his edge, he uses internals backed by statistical testing. I have had the honour and pleasure of meeting Brett and would say that his tools suit his personality.

I too use statistical testing but because I process sensory information visually {and to a much lesser extent kinesthetically (through feelings)}, I use tools that suit my personality: Barros Swings, the Ray Wave and the Market Profile are all used as visual mediums.

A fab example of this difference was Brett’s use of the volume at the bid (as the market moved down) as a target for identifying the end of the move up. I never thought of using volume that way. Incidentally, I also subscribe to Market Delta but what I find important is the shape of the profile at support and resistance areas.

Again last night provided an interesting example.

As you know from my blog, I went long early with a position that was half normal size. I then decided to use the breakout of the 1st hour’s opening range to enter the market for my remaining positions. But, the 30 minute volume profile on the 1st breakout (at 11:30) took the form of a bell curve. This suggested that the market would rotate back into the range and it did, all the way back from 1466 to 1459.

At 13:30 the market took out 1466 but this time the volume profile for the period took the form of a one-timeframe (trending) market. Sure I got filled 3 points worse off, 1469 rather than 1466 but I had an easy exit strategy if I was wrong about the breakout. A failed breakout with one-timeframe characteristics is likely to attempt a move in the opposite direction. This meant I could place my stops at 1457 under the start of the distribution (1459). This exit strategy was unavailable to me if the breakout took the form of a bell curve since that shape said that the probabilities favoured a rotation back into the opening range.

Score another important lesson for Pete Steidlmayer: it’s not the breakout price that is important. What is critical is how the market reaches the price (e.g. the form the breakout takes) and what the market does after reaching the price.

So, you’re probably asking what’s the central point of this posting.

It’s a simple one.

Newbies worry about some secret whiz bang, never fail, tool that will bring them untold riches. But such a tool does not exist. What is more important than the non-existent, never fail tool, is to find a tool or tools that match our personality. Unless we do that, we are likely to second guess our signals; such second guessing will lead to the slippery road of breach of discipline. So, rather than engage in a fruitless search for a non-existent super tool, focus instead on understanding your personality and find the tools that mesh with it.

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