A trader's journey

Like Linda Raschke, Sam Seiden, and Shoot of tradingapples.com, Dave Landry was also a major influence in the development of my trading methodology. I got introduced to Dave through his two books pictured below.

His methodology is simple but not simpler meaning there are nuances you need to learn which will take you years of study and market participation before it will become clear to you of course there are exemptions and if you're one of them lucky you.

The simple fact is that EVERYTHING BOILS DOWN TO YOU, your mentor can only guide you and show you the ropes but ultimately its you that must truly understand the concept of anything whether its trading or any other career for that matter without being rigid but rather capable of internalizing and understanding the essence of its whole. In my trading I call this the “what is”.

Here is a free webinar of Dave where he details his trading methodology. I hope as you watch you'll learn something that will further improve your trading skills.

Description from youtube:

Dave shows how many successful traders take the same exact journey. They start with a simple method but slowly make it more complex. They search for the perfect indicators, thinking that if they work hard enough, they'll find them. Unfortunately, it becomes so complex that they lose sight of basics. The true enlightenment comes when they return back where they started. They come to the realization that what they were looking for was right in front of them all along. They realize that although not perfect, simple methods can work quite well.

5 Fundamental Truths of Trading

Selected from the book Trading in the Zone by Mark Douglas the texts on the right are my short personal take.

1. Anything can happen. - Means no guarantees whatsoever.

2. You don't need to know what is going to happen next in order to make money. - Let the market be your guide.

3. There is a random distribution between wins and losses for any given set of variables that define an edge. - Nothing is 100% in this business

4. An edge is nothing more than an indication of a higher probability of one thing happening over another. - The art of anticipation.

5. Every moment in the market is unique. - Observe the market and trade the probabilities.

Three Usual Suspects

A good friend of mine has lent me one of his classic trading book, the "Street Smarts: High Probability Short-Term Trading Strategies" authored by two widely popular and highly regarded traders of our time Linda Raschke and Larry Connors. Although this book was first published in 1995 it is in my humble opinion  contains wealth of information that are useful and highly effective even in today's market.

On pages 6-8, the book teaches the three distinct trading opportunities that happens over and over again in all liquid and high volume markets and in any time frames. They are:

1. Tests of previous highs/lows. These tests forms a "double stop point" and offer an excellent trade entry.with the least risk of loss. A low test at which to go long can make either a slightly higher or lower low, but support cannot be established until there has been a test!

2. Reaction or Retracement (pullback). This is "buying a higher low" in a sequence of higher lows and higher highs (sells are reversed). In this case there will only be a "single stop point" but since the trade is entered in the direction of the prevailing trend, no test should be required.

3. Climax or Exhaustion Pattern. The most successful climax trades will occur in a high volatility environment and after the market has already reversed. You must see the "climax stop point" already in place before you enter your position! If your entry is correct the market should move favorably almost immediately.

The authors strongly encourage would be traders to learn to ANTICIPATE these three types of plays which overtime will greatly refine one's tape reading skills.