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 September 24, 2006 Commentary (weekend
edition)-
I sure had a great week. That mentorship was
spectacular for me. I'm going to pass on a few thoughts on this, and then we'll
get started. I'll start with what I thought was the highlight point for me in
the process of work I did with this student, and then I'll once again comment
on my answer to the question I get quite frequently 'Why do you
mentor?'
I want to make one comment on the use of the word 'student' here
before I begin. I feel a bit strange using that term because the level of
people I work with is just so high, not just from a trading perspective, but
also from a life perspective. For example, I have among my clients a big hedge
fund manager, a very high ranking corporate executive, a big-time analyst, an
incredibly successful self-made businessman, and so on. Although they recognize
me as the 'teacher', sensei if you will, they are still very successful,
powerful people in their own right. When I think of student outside the realm
of my work, I think of like 'beginner' and such, and many of the people I work
with are far from beginners.
Perhaps 'clients' would be more appropriate, but that
seems so dry. And perhaps I just don't give myself enough credit. I recall when
Bruce Lee was the teacher for the three top full-contact world champions at the
time, who collectively had won every title there was. Yet they were all
students of Bruce Lee. Top in the world, but still students. In fact, I
consider myself still a student of the market.
The point is, just because I call
them students doesn't mean they are necessarily new to the game. I do teach
some people who are fairly new to trading (so don't be afraid to approach me if
you are new), but I also teach some individuals with amazingly impressive life
and trading backgrounds. Oh, and before we continue, my example using Bruce Lee
was just an example, I'm not trying to imply I think I am the Bruce Lee of
trading!
So, while working with this student he mentioned that a key thing
he was getting from me was seeing the weight I placed on this or that aspect of
the methodology. It was all in the books, for the most part, but to see me
construct the premise and do the work first hand pointed out what I considered
most important, and what I weighted much less in the equation. This can be very
clear to see one-on-one, but somewhat difficult to convey in a book, hard as I
may try to. This comment really stuck with me, and it made me see and better
understand for myself just why I do what I do, and why I developed the
methodology as I have.
I find that I am never more sharp than I am the first
week after I do a mentorship. I really, really have a clarity about what I am
trying to do in my own work after I show it in such detail. I can much more
easily see if I am deviating from my plan when I have talked about it and done
more chartwork than I can even imagine, all in a short, intense period of time.
In this way, the mentoring makes me think, keeping me from getting too
complacent, and really helps get me refocused. That's a key benefit for
me.
Now, on to the main answer to the question of why I mentor. Most
people ask this to see if my answer makes sense to them in their evaluation
process to decide if they think I'm 'the real deal'. My use of time and what I
do with my skills must make sense, or it could be a red flag. I've had this
discussion in here many times, and I even did what I think is a great
commentary on how I differ from 'the rest', and hence I won't repeat any of
that now, but it is still always a big challenge for someone to finish the
evaluation process and make the commitment to laying out some cash. So, I
thought I'd once again explain my main motivation for mentoring.
I've been at
this for about eight and a half years now, way more than full time. I probably
average fifty to sixty hours per week at the screen, and sometimes a lot more.
I've done this the entire time I've been interested in the market. I now have
well over 20,000 'screen hours'. All of this is essentially alone, in my home
office. My better half, until recently, worked away from the home. She was
gone, and I was there, by myself.
I have been out of the city, in a rural area,
the entire time. The drive was long, and when I made it, I did my errands and
rushed back, worried about the lost time. As the years have rolled on, this has
gotten to be a bit tough on me. Since I have no time, I rarely get together
with anyone. Not only that, even if I got together, say went out for a couples
dinner or whatever, talking trading isn't going to fly. I have no colleagues
sitting here by myself in obscurity. Sure, I could join the forum and chat room
community, but there is a problem with that.
I have found that few really
understood what I was doing. That's not to say that I feel I am at a level
others can't comprehend, only that I have developed my material, and unless I
laid it all out and worked with someone on it, they would not understand what I
am discussing at all. Others may be at a similar level in their work, but the
unique nature of what I have done was leaving me with literally no one who
could understand what I was talking about. So, I decided to create my own
colleagues.
Now I mentor only the most serious people who are willing to work
hard and like my methodology, and I take them up to a much higher level. They
do it to pursue their own trading goals and their 'Trading Plan' development,
and I do it so I can associate with them and have a small crew of people who
may be able to understand the higher levels and nuances of my work. People who
have went on to become true colleagues and have contributed things to me that I
have found useful. If I didn't mentor none of this would have been possible.
Instead of having fantastic, high-level discussions and chartwork exchanges,
I'd be here by myself, perhaps getting a bit batty in the process.
The
mentorships have provided me with a way to contribute to others and to get
something very valuable in return for me. And that's why I do it, plain
and simple. The core group of people are just too important to me to give up.
In fact, lately several students have asked if I would create a chat room just
for the 'handful', and I am thinking about giving that a try (not a paid
service, just a room for all of us to meet and post). Imagine bringing that
group together!
Lastly, the people I meet through the mentorship have provided me
with almost endless opportunities to get involved, if I wanted, with various
projects or things they are doing, such as funds. I have had offers to manage
money that simply would not have happened if the people didn't know me and work
with me on the level they have. Although, as you all know, I have passed all
offers to manage money so far, preferring to stay on my own path of being a
small, independent trader (and with the recent lifestyle change, hopefully a
lot less stressed of a person with a lot more free time), I again have another
offer that is very impressive. I sometimes wonder if I simply would never
'cross over' and manage other's money, or if I just haven't gotten an offer
that is just too much to pass up. It seems like I am entering that zone where
an offer too good to pass up is now perhaps in my lap. We'll see...
With all that said, and hopefully
enjoyed by the reader, let's get to today's work. There is so much to show it's
just out of control. The commodities are just playing incredibly. There is more
than I could even begin to touch on in here. I'll do my best, and pick out a
few little pieces of the action, with the emphasis on that which may teach
something useful about the methodology.
Let's follow up on crude, which is still in
management mode. I'll show the November contract, on a 240-minute all sessions
chart.
The D point from the trigger pattern is shown
in the upper left. I put this set on my chart, and while mentoring I showed
this to my student, and told him to watch as the area by the arrow was hit. It
was hit shortly after that, and crude dropped off that, threw a little fake in,
and dropped like a rock. To where? Right to the lower parallel (at the second
arrow), where it started to bounce.
It rolled off the division line area (not
shown), and set a new low for the move. Take a look at the structure of this
move to the first arrow on a lower timeframe. It was an ABCD with an ABCD in
the BC leg. Do the Fib work. Just amazing. It was fun for me to show this one
to my student before the fact and then see it play out so textbook.
Now, other than a 'bonus' chart at
the end, let's spend out time on rates. That 10-year is just remarkable, and it
loves my methodology. I'll use the 10-year index, starting with the
monthly 'context' view we have used before.
The TNX.X is still rolling right off the area
I pointed out way back. The play, for me, would be in the ZN, the electronic
version of the 10-year. You can do this work on the index here, or use
continuous contract data on the 10-year itself. I can't get the continuous for
in here, so I use the index. They are nearly mirrors of each other.
The key thing here is the lines
that can be put on the weekly right now, going back even further that this
shows. There are some incredible areas coming together, and the work is
critical. There is a big 'three drives' look to the weekly, and some incredible
implications if the areas act as magnets, as they frequently do, and if the
major layout is 'blown out'. The clues are all over, and the work is very
obvious, so I suggest you do it. This thing is just so important to
everything.
Let's drop down to the daily, and get into the detail of today's
'lesson'.
Here was the index last week. The arrow shows
my last short signal, and I mentioned I was in management mode here. Many daily
uptrending areas have been taken out in this move, guided by that monthly
'context' pattern and layout. Now look at what I saw last weekend. Do you see
it? It should jump off the chart at you.
I'll zoom in, and label what I am
looking at.
The index forms an ABCD pattern, with an ABCD
in the BC leg, set to continue this downtrend. Is this worth noting? Are you
kidding, this is what I wait around for. I'd say patiently, but sometimes it
takes awhile for something to come together, so sometimes I'm impatiently
waiting. But the key is to wait until things come together.
I'll add some
Fibs on the ABCD, and on the ABCD in that BC leg.
Boy, are those tight groupings. A key .447
retracement for the D point, it's all there like I want to see. Is that it? Is
that all I want? No, what about lines. Any lines coming into this area?
Remember the title to my last book: Kane Trading on: Median Line and
Fibonacci Synergy.
I'll add two sets into the chart, and show the
outcome.
Both median lines from the two sets hit dead
on the area, and price (index value?) went right to it, reversed, and dropped
like a rock. When did I have all this work on my chart? As soon as the lower
'd' point was completed. Much of it I had quite a bit earlier, like the bigger,
key set. Then I wait and see what happens, and if I get an entry trigger, with
price action that I like. I don't mean to sound flip or overly simplistic, but
once I have the techniques down, it is not hard to find the areas I want to
work with.
Now, I could use this as an add-on spot, or to open a
new trade if my previous trade wasn't still open. And if it was still open, I
could use this, also, as a way to read the price action. I may let this set up,
and see what is done with such a noteworthy area. A logical stop would then be
above the area, not at it, or just below it. I commonly use setups as
information tools for current plays.
Let's finish with a bonus chart on the
Russell mini.
I pointed out to my student that I felt the
break of this range in the MR would be a defining moment for the market for
awhile. When I do an international mentorship I do this for four days in a row,
so I am forced to give up some market time. It is my only exception for giving
up time, as I know how far people travel for this (this gentlemen was on the
plane for 16 hours one way!). I start those days at 10 AM, or just after, so,
given I am on the west coast, I can do my usual market activity for the first
half of the two non-weekend days, and then head over.
I watched
this set up on the 3-minute chart in the morning well before I had to leave.
The arrow shows just the most simplified framework of what I was watching. This
one was truly a piece of artwork. Multiple patterns, lines, Fibs, just the
whole shebang. All set up right on the range bottom (set up to take it out, a
topic unto itself in my work). It was more than I could have asked for. They
hit it, and it dropped in the neighborhood of ten points right off my setup
without giving one single scaling signal. In fact, each rest was a pattern
itself. It was just glorious. Then it reversed hard (do some work and see if
you can see why it may have reversed there) and made it all back. Then a gap up
deep into the range, and right over the top. And then? Back down. Oh, this
range is important all right.
I hope this was helpful. I have been getting
incredible feedback on the commentary lately, and I truly appreciate it. I feel
I have barely touched on even a fraction of what is going on. Look over the
British pound, which has been just going from setup to setup to setup. Do the
work on wheat if you haven't been, as it is also doing the bounce from one area
to another. Gold gave clues so obvious they jumped off the screen at me and
smacked me in the face. Do the lines, and look at the patterns. Wow. I updated
the same chart from last week's chart of the week, cleaning it up a bit. Watch
that closely. Look at a continuous for some interesting 'context'. There is so
much commodity action to supplement the stock market it's unreal to me. I've
never seen so much there. I am having a blast, I'll tell you.
The next
commentary will be next weekend's edition, posted by Sunday evening, October 1,
2006.
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