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 November
14, 2004 Commentary (weekend edition)-
Today I'll do
a brief update on the printer situation with Trade Management, talk about one
more order of business, and then we'll look at some charts.
My printers
still haven't returned, and the rumor mill says they aren't going to return. I
don't know about that, but my self-imposed deadline passed this week, and I had
to go elsewhere. That is fraught with new setup costs, adapting everything to
new machines, establishing new relationships, proofing everything for the new
machines, and on and on. All done 'under the gun'.
I played this
one like a new trader with a bad trade. I just kept giving it one more day, as
it kept going against me. Can you hear that inexperienced trader? "I have so
much to lose already I'll just ride it out. Surely it will turn. If I quit
here…" Well, so far it hasn't turned, and I'm in the hole.
I just never
expected a thriving business to fold with no notice, not even a 'we are
folding' notice at some point. The equipment is all there; it looks like
business as usual, except no one is there. I fully expect, just like the bad
trade for the new trader, to get the same response. Now that I have hung on way
too long I fully expect the second that I 'cut my losses', the 'trade' will
reverse sharply. Given that, I'm betting they will be back Monday, ready to do
business.
It's a crazy story, but the bottom line is I am working with
another place, and if all goes well (which would be something to see), I will
have copies by the end of the week, which was about my target when I started
the 'pre-orders'. If you haven't ordered yet but want to take advantage of the
free shipping, that will be available until I get the copies, then I will
switch it to regular shipping.
I have gotten a few inquiries asking me if I
would reconsider doing a members' section after the first of the year, when I
plan to be going to once per week on the free commentary. My immediate thoughts
were that I don't want to do that, as I don't want to make any more commitments
that take up my time. As I mulled this over, though, I decided to change my
mind to 'I'll think it over'.
I was thinking that I could cut out from the
members' commentary for the free commentary and save that time. I would be able
to provide a lot more detail and specifics as far as my methodology in a
members' section, and I could go on with my musings and ramblings, which
apparently both myself and a certain number of my readers like. That's the
appeal for me.
I am just pondering if I could do it and not spend too much more
time than I do right now. I am looking at some things that would reduce the
posting time, as the methods I use now are slow and cumbersome, to put it
mildly. At this point I am not asking for any feedback, as I plan to put up a
small feedback page, outlining this and asking for specific input. I will then
assess interest and possible content, and make an evaluation.
My immediate
thought is that I wouldn't have enough committed subscribers to make it worth
the effort for me, and I really, really don't want to make any commitments
right now, especially ones that have any kind of 'deadline'. I am only bringing
this up in here now because I like to address questions I get from readers and
book buyers, and not just skim over the requests or dismiss them
outright.
I'm willing to mull it over and see if it might be worthwhile for
all of us. Watch the What's
New section for a link to the input page. One reason I am willing to
give this some consideration is that I have a lot of overseas readers and with
this service being 'electronic', it could be very beneficial for them.
Let's look at
some charts. I commonly receive e-mails asking me about trends. I am always
saying that I like to use my methodology to get on board well-established or
existing trends, in the direction of the trend (obviously). The question comes
up, then, what if the 'market' isn't trending? After all, it only trends some
small percentage of the time, or so they say. Do I stand aside most of the
time, then? This is a great question.
I have explained in my books that I try to
gain a small edge in all aspects of my 'Trading Plan'. This is where I feel I
differ from most traders. I think most traders put 90%, 95%, or even 99.99% of
their effort into the potential trade area i.e. 'the market call'. As I have
explained elsewhere on many occasions, I just don't think I can develop a huge
edge anywhere, and to me a 'Trading Plan' that has only one component will need
a huge edge to have a net positive outcome.
I try to
develop every aspect of my plan, seeking these accumulative small edges. I feel
I have areas within the plan that I am better at than other areas. I like to
think of myself as 'pretty darn good' at all the areas, but great in a few
areas (just my opinion, and that's all). One of the areas that I think I am
better at than the other areas is timeframe use (the other is 'context', which
is very closely tied to timeframe use). Timeframes are my
specialty.
I have said many times that I will trade any issue, on
any timeframe, if I can find a setup. What I am doing is stalking the
timeframes for the setups. I find setups all over, but they are integrally tied
to a particular timeframe. Change the timeframe and the setup
disappears.
If I don't build around the correct traded timeframe (correct for
my 'Trading Plan' and methodology) I won't be able to apply my plan. Changing
the timeframe changes the whole trade. The entry trigger, the stop placement,
the trade management, even the vehicle I choose for the trade, it all changes
if the timeframe changes.
This is where I feel I shine, within my 'Trading Plan'.
I can really do a lot with timeframes. I know what the differing timeframes do
to my 'Trading Plan', and I know how to adjust to that. I have timeframes I
like to trade better than others, but I am willing to trade them all. I am on a
constant hunt for the setups.
Let's look at some examples of price action.
Keep in mind here that I am not inferring any great setups on any of these
charts, or anything of that sort. I just want to overall, holistically, look
for trends. I'll start with the ES on a 13-minute chart, over most of the last
five trading days.
The ES went into a fairly tight range for
almost five days. No trend here. Sure, at some point it will pop, and a trend
may start. In 'the old days' many breakout traders seemed to have success
playing such breakouts, but nowadays most breakouts are 'false'. So, am I done?
Do I sit and wait until a trend like the one leading into this range gets
going? Let's look at some other charts.
Now, there's a nice trend. Again, I'm not
commenting on anything here but the trend. I'm just trying to show some nice
trending action, and that's all. Let's look at another chart.
Not bad. Here's some more solid trending
action. It's getting clear the difference between the range-trading and the
trending action. Maybe you have guessed the 'punch line' by now, but perhaps
not. Let's look at another chart.
Now that's a really nice, smooth trend, the
kind my methodology tends to keep me in for most of the run, using my trailed
stop/scaled exits plan. Let me show this same trend on another
timeframe.
That is a very smooth trend there, making a
solid move down. There is more to this series of charts and discussion, though,
than my ability to find trending charts, so bear with me. In the meantime, let
me keep beating this dead horse, and show one more trending chart.
This time I chose a trending chart where the
trend was a little more 'choppy'. I still see this as a tradable trend, just
not as smooth as the previous examples. I also noticed something interesting
that I want to point out. I want to focus now just on the trending nature of
these charts, but I will highlight the interesting feature before we move on,
at the risk of creating a distraction from my overall point. Let's look at
that.
Curious little pattern there, right before
the drop, wouldn't you say? So, let's get back to the point. Did I do all this
to show that there are trending charts that I could find out there? No, not at
all. Did you figure it out? What am I trying to show here? Here's the punch
line, and it is quite profound to me.
All of these charts were from the time period
when the 13-minute chart (the first chart) was range-trading. So, the ES was
range-trading and trending at the same time? The answer to that is absolutely
yes. It just depends on the timeframe. The 'context' of your viewpoint. I was
able to adjust my timeframe and find trends all over the place, where someone
stuck with one set timeframe was 'waiting it out'.
Imagine if
you were willing to trade from monthly charts down to tick charts, on any
liquid issue, from stocks to futures to FOREX. That's the approach I take in my
own personal 'Trading Plan'. So, you can see why I think it is kind of funny
when I hear people, like on television, mention those poor trend traders, who
can't find much in the way of trends any more. I find more setups and trends on
a given day than I could ever hope to trade. It's all about timeframes and
'context'. In my opinion, I know where, and how, to look.
The next
commentary will be the mid-week edition, posted by Wednesday evening.
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