this question could be the key to trading success
TRANSCRIPT
www.netpicks.com
I want to go back to something Marty Schwartz said that actually occured
this past week for me.
It is something that I struggled with when I started trading, not so much now and when the opportunity to
jump was there this week, I continued to exercise something that can keep you on the winning side of a career.
I exercised patience on a setup and in the end, didn't take the trade.
One thing many traders forget is that a setup is not a trade. A setup is when variables come into play that give a
potential trade.
Setup = Potential Trade.
Marty says: "before you put on a position, ask yourself if you really want
to have that position."
Asking yourself that helps to show the difference between a good setup and
the itch simply to trade.
Here is what unfolded for me in a swing trade on the AUDUSD.
The weekly chart will show a big picture down trend and a bounce off
the lows of .8660.
Since Feb 2014 though, price has been travelling sideways.
However you define a trend, I like to keep it objective and will generally use
an indicator for that purpose. I will keep in mind the bigger picture when
taking a trade although it rarely influences my trade unless I am
trading the weekly trend.
The trend for me was up on the Daily chart and I will use that trend for a
four hour chart setup.
There were two areas on the four hour chart that I was interested in an
opportunity if price fell into those zones.
The first area was 9015 and the second area was lower at 8940
On this chart, you can see an area that I have
blocked off with two lines. Price came into the
9015 area and I was looking for a trend
resumption to the upside. My trigger was the
breach of a higher high.
Price sat in the area for 40 hours in total.
That said, 16 hours after I placed the
order, I cancelled it.
I asked myself "do I really want to be in this position?". The answer was no
and I cancelled the trade. The bull/bear battle was taking too long at
this zone and I much prefer taking trades from zones where there is a big
imbalance of bulls and bears.
That question allowed me to focus on something other than the trade
execution and I could see unfavorable conditions. It was a good question
because......
Price broke back down and landed in my second area of interest. I dropped down to the 30 minute chart, saw an area that would indicate a
resumption of the up move and placed my order. Two
hours later, I was in the trade....a position I wanted.
Being selective and patient waiting for a prime setup conditions saved a
losing trade and allowed for some decent profits on the triggered trade. I
usually split swing positions into two parts.
In this case, the first was scaled out for 75 and the
other half was trail stopped for 30. Swing
trading does not require monitoring every blip of a trade and at times, your
exits are not as concise as you would like.
As well, conditions in the AUDUSD are a little ugly and we need a resolution
in direction.
Patience and asking yourself if the potential position you want is
something you really want to be in.
That can't be overstated.