Lessons from the Pros


Keeping It Simple

Well I made it! I write these articles nearly a week before you receive them. In my last article, I mentioned that I was taking a journey along old Route 66 to teach a class in Minneapolis. By the time you read this, I should be home in California. The total tally for the trip up was: 2200 miles travelled, one broken turn signal lens, one motorcycle battery replaced, one lost mobile phone, and plenty of pictures, smiles and memories.

When I am riding, I have plenty of time to think. I realized that my approach to motorcycle trips is very similar to how I approach the markets. I plan my route, prepare for the trip, and above all, keep it simple. I do not pack extravagantly. I only bring what I feel I will need. That also includes equipment for emergencies or bad weather. When preparing for trading, I also keep it simple. In my classes and the Extended Learning Track, I show my students my Pre-Trading Routine. It only consists of seven steps but is very effective. I will not detail the full routine here but will give you an overview to help you understand the steps I use to prepare for trading any market.

This routine is part of my trading plan as yours should be. My routine starts by using tools and websites to identify the environment that I will be operating in. Even though I do not follow the news closely for trading decisions, I do want to know when announcements are being released so that they do not surprise me in thrusting prices faster into supply or demand. This is similar to my viewing the weather reports to select my route and departure times.

Planning my route is a lot like my next step of determining the trend direction of the broad markets and any supply or demand zones that may affect the trend’s progress. When trading stocks or ETF’s, the majority of them will follow the direction of the broad market. Once that has been identified, I can start the process of searching for the individual securities I want to trade. If the markets appear to be bullish, I will search for equities that offer bullish trade potential for the highest probability of success. If the markets are looking bearish for the timeframe I will be trading, then bearish stocks are in play.

Once I have found what I want to trade, I must then locate the supply and demand zones that will offer me entries and exits for the trades. There are only four set ups that constitute and entry for me: a bounce off demand for a long, a breakout of supply for a long, a bounce off supply for a short, or a breakdown of demand for a short. Simple. Of course finding these opportunities takes proper education and practice.

Just because I find an opportunity doesn’t mean I automatically take the trade. I must plan the trade and rate the trade using the same odds enhancer worksheet that is available to our XLT students. At first glance the trade may seem great, but after examination it may not rate high enough for me to chance my capital on it. I would prefer to pass on marginal trades and risk my money on the trades that offer low risk, high profit potential, and high probability for success.

Once I have done this, trading is simply a matter of sitting back and executing my trades according to my plan. The proper planning and risk management steps I use enable me to enjoy consistent success in trading as I also enjoy my rides when I have prepared and planned properly. Of course things do not always work out the way I planned. That is why I have stops in my trading and a toolkit on my bike.

Keeping trading simple and following a proven core strategy is my secret to trading success. To share this secret, visit your local Online Trading Academy center and enjoy the ride.


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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