Each week, I write a private letter for Advantage and Private Mentoring Members.
Here’s the “Day Trading” section from this weeks letter. To download the complete 7-page letter and to receive future issues, sign up for the Advantage membership or private mentoring…
Sept 29, 2008 – Oct 3, 2008: Weekly Trading,
Business Growth & Practical InsightsDear Client:
On a weekly basis, I plan on writing specialty information that should help all Inner Circle Advantage Members improve their knowledge and possibilities implementing the Wealth Triad concepts into their lives.
Even though some of you are focused on trading at this point in your journey, always remember that you can learn new insights by reading and studying the other topics in the Business Growth and Practical Insights sections.
Similarly, those not currently trading should read those topics because you may realize that you can add that component, as one of your tools to build a financial wealth system for you and your family. Enjoy this issue!
Nate Brooks
Harvard MBATrading Insights
On Sunday night, at the opening of the Globex session, the market spiked UP and immediately came back down and it continued to drift lower all night. For those expecting the market to shoot up, because it was all over the news that the “bailout” package was near approval, let this be a lesson for you…TRADE WHAT YOU SEE ON YOUR CHARTS ONLY! You must follow your rules and trade setups…and take those trades only. Entries are taken on the 5 min chart.
On Monday, the market crashed… it was the largest single day drop in the S&P’s history. The bailout package did NOT pass the House due to the Republicans not supporting it. There was an aggressive entry at the opening… but, the real first entry could have taken place at 12:00 for a few points and the big breakdown trade could have been taken around 12:40… this trade fell out of bed so it could have been a 20 to 30 point runner.
When you have high volatility, you have to widen your stops…take quick profits by taking smaller targets…and you are looking for the trades that just move rapidly in your desired direction to capture any type of big runner. However, never forget, grab your profits in a volatile market because it can move 5 to 10 points against you, as part of normal volatility.
On Tuesday, the first entry that met all of the high probability trading criteria did not occur until 12:15 pm (6 to 8 point trade) and the next entry was at 13:10 pm (4 to 5 point trade).
Be patient and stick to your rules…there are plenty of opportunities each day. Therefore, if you are buying pullbacks, then buy pullbacks and don’t take the breakouts. Have the discipline to stick to your plan…also know exactly when you will switch to selling the rallies…have your rules and stick to them.
On Wednesday, there were no high probability trade setups. There were several trades that could have been taken depending on your rules and they would have worked. The most important thing is if you followed your plan. Discipline is the key to your success.
On Thursday, there were five perfect opportunities to take a trade…11:15 am, 12:05 pm, 12:50 pm, 13:15 pm and 14:05 pm.
You are looking for the Early Warning Turbo Line on the CCI to form a sharp inverted V over the +100 line and for it to cross the zero line, when looking for short trades. Always develop the habit and discipline of drawing your price trend line as soon as you have the proper price pivot highs and lows. If the price is below that line, you are taking shorts because the trend is down. Leave this trend line on your charts for the next day…many times this same trend line acts as a support or resistance.
Today, the market sold off and it created a gap which did not fill. House vote is scheduled for Friday.
On Friday, we had the perfect type of trading day which could have caused lots of people to LOSE a lot of money. The market was creeping up nicely as the vote in the House on the Financial Rescue Plan was getting closer and closer to passing.
The Anaconda Trade Setup triggered at 11:45 to go long so that was a valid setup that hit the first two targets and you quickly got stopped out on the runner as sooner as the Rescue Bill was passed (this was the classic market manipulation trick… buy on the rumor that the Bill would pass… gather the novice news traders… then, sell when the news comes out because now you have these novice traders all hyped up and ready to buy… while you are selling to them… the only way to protect yourself is to ALWAYS TRADE THE CHARTS ONLY with your rules and trade setups).
The market (sold the rally…sold the news) as soon as the Bill passed…the market tanked.
The first pass down (the initial move down)…you must have the discipline to “let it go without you”. There were two excellent entry points at 13:25 pm (5 to 8 points) and 14:15 pm (3 to 5 points) to go short. The beautiful part about today’s trading is that you had one long and two short trades that worked if you were patient and wait for our trade setups to meet all of their criteria. DISCIPLINE is the key to successful trading. The news shows up on your charts…always trade your charts…if all the rules are met, take the trade…some day’s you will be rewarded with a huge runner and other day’s you should still make money when you manage the trade in a non-emotional mechanical process.
As an aside, I was talking to a potential client from Kansas and 10 minutes before one of our trade setups was about to trigger… I told him that the entry point for the trade would be at 1113.75 to go short and I told him it would trigger in about 10 minutes… well it did and I managed the trade, while I was on the phone… it was beautiful… it hit all three targets… he got to hear me manage the trade in real time while I was talking with him about enrolling in the Private Mentoring opportunity.
I told him he was very fortunate to be able to experience exactly how it works in real time because he could experience the trade setup working in real time and he could see how relaxed I was managing the trade. It was nice to hear him say, “what do I have to do to move forward to take advantage of the private mentoring that you are offering?”
Trading is exciting when you can feel confident that a trade will trigger in one or two bars, and then it does… that’s an excellent feeling.