TRADING OUR STRENGTHS

My thanks goes to the senders (from so many schools of thought) of emails with such complimentary and encouraging remarks about my articles, without which I might lack the confidence to continue writing.

STRENGTHS NOT WEAKNESSES

All of my interviews etc., have revealed my personal belief that each Trader has his or her own particular strengths, and that the first step towards excellence is to find the area and method of trading which most closely matches them, then specialise in that specific field.

I know, for example, that my main strength lies in being able to read price and volume bar charts (of anything arithmetically expressable), in a manner which I liken to reading a piece of sheet music, and that’s is my method of analysis. The next hard part is about how to trade it properly and preserve trading capital. For me, it's not about aiming for fortunes but earning a living doing something I love to do. For some others it’s about making some money which is extra to that which comes from their orthodox work.

Each of us can benefit from being honest with ourselves about what our strengths and weaknesses are, and avoiding the trading areas in which we are vulnerable and identifying the trading areas which reflect our best psychology.

Anyone who might find it difficult to accept that the notation on charts can be analogous to that of music might like to check out for themselves that the legendary WD Gann used a combination of astrology, bibliology and the 12 pitch changes of music as the basis of all his methods. Many pro traders of today follow Fibonacci numbers which are to be found in nature and music, for example, it has been shown that every branch on a tree begins at precisely equal distances apart which mathematically correlate with fibonacci ratios. The octaves and the harmonies of music are all mathematically defined and constructed, very precisely.

THE END OF THE WORLD

In the year 2000 three French scientists told us that the entire evolution of life, can be expressed in a short formula (Tn=Tc+(To-Tc)g-n), which can also be used to predict stockmarket crashes and the end of world - said to be 2.3million years (close out all your trades before then!).

TIME FRAMES ARE IMPORTANT

For intra day futures trading which earns my daily bread and butter, I believe the most important element is to get the bar chart down to the shortest possible time frame - it has taken me many years to get mine down to 2 minutes, and I am quite proud of this because the shortest WD Gann got down to was 4.

For share trading, the icing on my cake, it is end of day charts which give us the music to read. Every single bar on a chart provides some information to the reader, and all the bars together tell a whole story. Every single bar on a chart is like a note, and all the notes together make a melody. Once you learn the first part of the tune, you know what the rest of it will be. Then there will be a musical bridge which is new to learn, but after which you know that this will repeat itself later in the tune. Reading a chart this way can illuminate fantastic trading signals, and serves to reassure struggling share traders that success can have little or nothing to do with which rocket powered PC is used, or whether buckets of technical indicators or just a few, are being employed, just read the chart and trade away.

DIFFERENT PERCEPTIONS

If a thousand people in different locations are looking at a chart of the same share at the same time, yet some will trade for a profit but most for a loss, then there is one thing which is common and one which is not; that which is common is that we are all seeing the same information, but that which is not is that we are not seeing it the same way. After all, would this not be the same if we were all studying exactly the same painting or piece of music? But remember that it matters not which particular analysis method each of us may prefer to use, so long as it brings us to the best available conclusion as to whether we should buy, sell, short or stand clear.

PRACTISE MAKES PERFECT

Of course just as it can take a lifetime to become a virtuoso music reader\player\writer, the method of reading the music in the charts cannot be explained in a day which is why I have had to write an entire book on it, but it is an example of one method, and method is the first thing you need if you are going to get an edge in your trading, for without it, you are just another player in a casino.

AIMING AT NOTHING CREATES NOTHING

If we have no method, we have no plan, and if we have no plan we have no chance of consistent success, other than by accident. The absence of a methodical state of observational awareness will often explain why even experienced traders can and do regularly screw up (including me if I lose concentration). It is easy to fall into the false belief that we learn from our mistakes, but in the real world of trading we repeat our mistakes many times over - until we learn that the only mistake we really made, by tradng without method, was ever to have traded at all.

IF i CAN SEE IT - SO CAN YOU?

We will now use a daily share chart of Persimmon to illustrate what was there all the time, but was seen by only a few - all my charts (using "Analyst") are independently obtainable.

At point A - price 195.5p, you will see the volume bars showing massive buying to confirm the price rising off the bottom, price bars close on their highs, moving averages confirm new uptrend. Bought here 16th Oct 2000.

Note - the volume bars are so obvious who could fail to see them?

At point B - price 279.50p, you will see a sudden broadening of price range up to new highs, but with the highest volume bar since the 16th Oct signal - signifying that the share was now beginning to be distributed.

Note - it does not matter that price continues to rise afterwards - for we have captured the best profit, which is what trading is about. Professionals do not sell when a price is falling, they sell when it is still rising. Sold here 29th Jan 2001.