Saturday, May 12, 2012

Taste the Rainbow: /cl patterns

Everything I'm looking for every day in one chart

This is the /cl chart from Friday.  It had it all.  The perfect rainbow.  Premarket is weak, then a rush of buying.. finally a clear 3 touch trendline can be drawn and /cl goes on a rampage (know your markets! - /cl loves to rip straight up... far higher than seems possible)

I also know from months of watching that a single Puke Candle is never enough to short /cl.  It can still run another 100 ticks.  In this case, a second Puke Candle formed with a long tail candle. At this point, one should be thinking -- ah - this is probably a top.

But the thing is, you didn't have to catch the top.  You almost never have to to make a living trading futures.  The moves are so big.  A while later, a new trendline formed heading down. 

I often suggest an 8 tick stop because beyond that - you're just giving up extra ticks.  If you're correct, you won't need more room to prove you're right.  /cl wiggled a bit but then went on to dive over 100 ticks from the entry point on the chart -- note how far down that is from the double top.

People love to have ideas about the market.  They love to make predictions.  When you are trading properly, with known patterns you are searching for, you'll instantly realize that most of what people talk about on Twitter (on StockTwits that is) is NOT trading.  It's noise.  Who cares what you think, I think, "gurus" think.  So what if the market "could dive another 20%". 

I've gravitated toward figuring out how to trade futures because you can make money every day and leave it all behind at the end of the day.  If the market drops 2000 points, it will have rise back up, won't it?  And the same patterns will emerge to indicate a bounce. 

I've found over the past few months that the more emotional, news-driven days tend to provide the biggest moves... and not quite often, in the total opposite direction of what everyone seems to think.

And ultimately - that's the final point I'd like to make.  YOU DON'T HAVE TO THINK.  You don't have to have an opinion and you don't have to predict.  To succeed you have to:

1) Be patient   <---- hard for maybe 90% of most people
2) Trust your patterns.  <--- Do you trust yourself?
3) Keep learning and observing new patterns/ideas.  <--- Because the market is always evolving.

Trading is simple but not easy.  Like many beginning traders, I think what will help me the most is to do less of the things that I think are helpful and just focus on the simple act of reading the charts. 

Now go on and enjoy your weekend.  Next week, let's hit some homeruns.

And be good to your mothers.

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