Becoming a successful trader
BPA trading room Q&A: November 13, 2015
Question: What is the breakthrough that you have gone through to become a successful trader?
Video duration: 3min 28sec
Indicators based on bars–so watch the bars!
For me, the single biggest change was — I don’t know how long ago this was, probably 20 years ago, close to 20 years ago. I just decided that having a chart filled with indicators, and using a whole bunch of different time frames, and — the main thing is the indicators. Indicators are constantly overbought when you should be buying, and they’re constantly oversold when you should be selling. And I know, personally, my eye kept getting drawn to the indicators and away from the charts, and the indicators are just based on the charts. They’re just ways of measuring how many bull closes in a row, how big are the bull bars? How many big bull bars in a row? How many bear closes? How far are the bear closes below the prior bear closes?
I’ve written a whole bunch of indicators myself. I know what the indicators are doing: they’re just a reflection of price, and I don’t need a reflection of price. If I see this [Bar 8], an indicator’s going to tell me it’s oversold. I don’t want it to tell me it’s oversold. To me, it may be oversold, but it’s going to get more oversold. I don’t want an indicator to tell me this is overbought [Bar 30]. To me, it’s going to get more overbought. So for me, the important thing was stop looking at indicators and just trying to look at the bars honestly and do what the market’s telling me it wants to do. So if it looks like it wants to go up, I keep buying until you get something climactic — 33. And if it looks like it wants to go down, I keep selling until there’s some evidence that it’s going to go sideways — like a tail on 10 the bull body on 11.
So for me, that’s the key — just trying to get rid of the biases, and do it quickly enough so that I can make money on the chart that I’m trading. You can look at the five-minute chart and say, “Well, it’s really too much to process. Can I just trade the 15-minute chart?” Sure. A lot of traders trade higher time frames — 15-minute chart. You would have sold below 1, maybe sold below 6, maybe sell this close right here, but you go long above here [Bar 24] and you sell there [Bar 36], and there’s no reason to buy here [tight bear channel]. This buy above this bar [Bar 69] never triggered, so you’d sell there [Bar 36] and you’d be short all the way until the end of the day.
Choose your own comfortable chart to trade
Some days, one time frame works great and another time frame is terrible. You never know in advance if the three-minute chart is going to be the perfect chart, the 10-minute chart, the five-minute chart, or some oddball chart — seven minutes, 12 minutes, 20 minutes. You never know, right? You just pick a chart that is compatible with your comfort level and — for some people, it’s a one-minute chart or a 15-second chart; for other people, it’s a 60-minute chart, and it does not matter. The key is: can you trade comfortably within the time frame that you’ve chosen?
And I use a five-minute chart because on most days it feels about right. Some days, for whatever reason, I just feel really, really good, and I can trade a one-minute chart and I’ll look at the one-minute chart more, or a three-minute chart, or something. Most days, this is all I do — I’m just looking at this and just trying to take as much money out of there as I can possibly take. But a 15-minute chart is just as good.