Wednesday, December 29, 2010

Thoughts and Definitions

As mentioned in this blog, the purpose is for myself to find a way to solidify concepts and make them concrete.  There are only a few rules/concepts that I have developed and they are actually simple but, at times difficult to follow.
The reason as to why they are difficult to follow relates to our life principles that influence our thought.

The concept of buying more at higher prices is just plain difficult to say, and if you said it out loud at a party strange looks would ensue.  Most people suggest to buy more at lower prices, average down.  Sure it makes sense while grocery shopping, it doesn't make sense in trading. 

Time Stops are difficult to describe but instrumental in trading.  If the market does not react shortly after making a purchase then how good of a trade could it be?  If everyone has plenty of time to put on a position and the price is relatively unchanged then how could it be a good trade.

The concept of Next is vital for our ego.  Remembering that there are endless supply of good trades, there is no reason to focus on something you were stopped out of weather it be because of time or price.  Your mental capital is sometimes more important than your actual money.
Remember what the current bias is.  If you can't figure out what the bias is then don't trade.  Wait until it is apparent, and once it is determined place some capital in that direction and see how the market reacts.  There are many ways to understand the bias, and the way I do is opening range break outs in relation to prior time period pivots.  The earlier in the time period the more likely the trend will continue.

Define the time frame you feel comfortable with and in my case I don't really jump around. 

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