Always In trading too stressful?
BPA trading room Q&A: August 10, 2015
Do you have any ideas on how to make “Always In” trading less stressful or less strainful?
Video duration: 2min 55sec
Always In — Two ways to lower stress
Not really. I have two comments about that. One is trade so small that you do not care. You trade the “do not care” size and you do not get rich trading “do not care,” but you get very good practice. You have money on the line, and I think that always affects how you trade, and that’s important. So it’s a cheap way to get good experience trading.
And the only other thought I have is: Trade the way the institutions trade, right? If you watch television — you watch anybody on television — they tell you how they trade, and they tell you a lot. So in a market like this — this is the monthly chart — they see this, you’ll hear them say, “Is this the start of the bear trend? I don’t think so. It’s the first time down, we need to see a test up — and it tests up and it didn’t pull back”. Same thing here. You see all this selling; do you get out of Always In Long below here or below here? Well, you might be able to, right? If you’re able to get back in above here, then it’s okay to get out there, but a lot of the professional traders on television, when they see this, they’ll say, “That’s not a good top. I’ll wait to sell if it tests up and gets a double top.” So in other words, they don’t get out on the first reversal down, and that’s true all the time with professional traders.
Wait for second entries
1987. You see the crash, a lot of traders, they do not get out right away. I’d show something but I don’t have the cash index on this chart. And the same following this daily chart, do the “Always In” traders get short here? No. They stay long, they’ll sit through this, and maybe get short here, second time down. Do they get long here? Yes. It’s the second time up, the double bottom, or they get long here.
So a lot of stress comes from trying to fine tune it and get as many trades as you can. But you just ask yourself below bar 5, “Is it likely the high of the day?” “No, I’m going to hold long, below 12, below 22, below 30, below anything.” Are any of these likely the high of the day? Well, I’m not convinced. And if I’m not convinced, then I assume that what is to the left will continue — will continue to work higher.
And then if you get a big bear breakout, and you say, “Uh, okay, it looks good. The bears did a good job. I’ll sell out of my longs on a rally,” and that’s what creates that lower high major trend reversal, right? You have the bears who held through the first selloff wanting to see just how strong it would be, and if it looks strong then they decide to get out on the first pullback. And it pulls back 50 percent or so and the bulls get out, and the bears who did not sell say, “Okay, I didn’t sell the first time down, but the first time was so strong we should at least test the bottom of that first selloff, and therefore I’ll sell.”