BPA trading room Q&A: May 14, 2015
How did you develop your trading edge? (Plus follow up related comments by Al on topic a week later.)
Audio duration: 2min 49sec — Scroll down for images
Al’s most important trading edge
That is a question that I could talk about forever, and the single most important edge that I have, I think, is my ability to stay calm, and I’m constantly thinking about how to structure trades. You hear me talk about selling in bull trends, buying in bear trends, because if the market is channeling and if the swings are big enough, and if the market’s stair-stepping – pullbacks going beyond breakout points – you can do that. You also obviously hear me talking about trading with trend as well. And it does not matter to me whether I buy or sell, and whether it’s against trend or with trend. All that matters to me is whether what I’m doing makes sense.
Have I structured a trade that makes sense mathematically? Will I manage it correctly? And, I talk all day long about where stops are, and to me that’s the single most important thing when trading. If you take a trade and it makes sense mathematically, and your stop is correct, the math is on your side, and that’s the single best edge that you have. So you see 8 or you see 9, that you buy for any reason and stop down here and keep your fingers crossed, and then anywhere through here we’re Always In long, you can see the stops, new breakouts—stop below here, new breakouts—stop below here.
You buy for any reason and you just use the correct stop, and then once the trade goes your way, you decide how strong it is and whether you should remain in the trade and where you should take profits.
Follow up edge comments 21 May, 2015
Letting trades go when trading edge diminished
So what do Sell the Close bulls do at this point?
Usually, they get out below a bear bar. Sometimes, they’ll get out even below a bull bar. So I think right now, everyone is flat. I chose not to buy this. I thought about it, but I did a lot of trading today and I was tired, so I’m resistant. And if I’m resistant I know I will not trade my best, I will not make my best decisions. And I don’t like to give anything back.
So by the end of the day, a lot of times I’m tired in the final hour, I become very selective, and I let trades go, trades that I would take earlier in the day when I’m more alert, better able to maintain my attention, and better able to make clear, quick, confident decisions. And after six hours or so, I’m just not as good as I was several hours ago.
And that’s okay. I mean, that’s just a limitation of being a human. Especially now that I’m getting old, I want to be careful. I’m competing against computers and they do not get tired. They trade as well right now as they did six hours ago when the market opened. So whatever edge I had over the computers is less, and it may not even be an edge right now, and I only want to trade when I’m confident that I have a good edge.