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 November
5, 2006 Commentary (weekend edition)-
I'm 'back'
from attending to my personal matters, although, as it turns out, I'm far from
done in that arena. I suspect I'll be putting in a lot more hours for a
long time to come. Hopefully, I'll be able to keep up in here from this point
forward, but we'll just have to see as time goes on. I will be shipping out all
the orders on Monday that came in during this hiatus. If you were one of the
'I'll wait to order until he is shipping again' people, you can now go
ahead.
Today's commentary will be a bit abbreviated, with only two charts,
and a bit more talk than chartwork. It's the best that I can do, under the
circumstances. If you knew what I have been through the last few weeks I
suspect you'd be shocked I am even doing one at all. Probably next weekend will
be a bit more 'normal', as far as this column.
Let's go back to Jim's chart of the
week from two weekends ago.
Here's where I left off with the LH. A
primary 'adjusted' median line set, multiple patterns, a set on the
'correction', and a super tight grouping of key numbers. The LH had just
started to see the spot when I posted this chart. Of course I had been watching
this for some time, since I watch most of the commodities at all times. This
chart here just shows the basics, and if you are a full set buyer or mentor
student you likely see a lot more here than I have highlighted. Nonetheless,
there is plenty shown here to get the idea and do some work.
Let's see
where we are now.
I'm actually doing this column Monday
morning, so there is a bit of Monday's data in there. As you can see, the LH
pretty much exploded off the area, making a spectacular move. I hope you
followed this as it unfolded, and did some work. This was another great
example, posted in advance (or as close to in advance as I can get with a once
a week chart and the circumstances I have been faced with lately), of the
methodology at work. Examples like this are very useful, in my opinion, to see
what I am looking for, and for you to practice as things develop. As I've said
before, I could try to choose more examples like this for the chart of the
week, but I like to mix it up with ones I suspect may do something
'interesting', too.
Let me say, though, that I'm not making any claims here
about how much you can make trading in general, trading my methodology, or
anything of the sort. Trading isn't for everyone, and some people, perhaps most
people, will not be long-term successful, just as most that attempt to become
professional athletes don't succeed. My goal in here is to present my work to
those that want to see my ideas, in hopes that it may make some contribution to
the reader's knowledge base, perhaps giving some ideas for him or her to work
with, and nothing more.
When I show a chart like what we have just seen, and I
sound like I'm 'bragging', I'm not. Not even close. I'm showing my enthusiasm
with regards to how my methodology seems to point out areas for me to focus on.
It's exciting to me to watch a spot and then get a big reaction just about dead
off the area. I'm not making any claims that net overall this means 'sure
money'. A successful 'Trading Plan', like any business plan, has a slew of
components, and as I have said in here many times, I only focus perhaps 10%-20%
on the potential trade area (PTA) i.e. 'the setup'.
I just want
it to be clear (like it isn't already, especially for those who follow me
closely) I am not saying that because I frequently point out some areas in
advance in the chart of the week, and the areas get strong reactions, that that
therefore implies in any way the setups are a money machine. The charts are for
educational purposes only, to show some concepts and ideas, and then hopefully
watch them as they unfold and develop, some in the manner that I was watching
for, and some, many times with clues to that effect, in a manner different than
what I was watching for.
Overall, I'm just saying we are exploring ideas here,
and that's it. I am in no way giving out 'picks', or recommending or claiming
anything. Why do I harp on this so much? I want to keep the focus on education,
and the sharing of ideas, and not, in any way, on a misconception about what I
am doing with this website and project. Whenever I am 'away' for a bit, and get
to thinking, I usually come back with thoughts and ideas, and I like to get
'refocused'.
I'll discuss a few other ideas and thoughts I have had, and then
we'll call it quits for today. One thing I have been thinking about a lot
lately is 'exposure'. Most would call it 'risk exposure'. It seems to be human
nature, in my opinion, to ignore risk exposure. It drives most people crazy
when I mention how someone is exposed to this or that risk, from health, to
safety, to whatever area. They say I'm too negative, and that I focus on the
bad things that could happen. I see these same people drive without a working
spare tire, or without a safety belt, saying to focus on a negative thing like
a flat tire or a car accident is 'bad karma', and may even bring on such an
event.
Now comes the idea of risk exposure. Say you drive without a spare
tire. No big deal, you get a flat tire, you call the auto club on your cell
phone, end of story. But what if you are now driving along an isolated stretch
in the desert, and there is no cell phone service there? Your risk exposure
just jumped up quite a bit. What if it's hot, in the middle of the summer, and
you are driving during the day? Another jump in risk exposure. And what if you
are transporting a precious, perishable commodity? Another big jump in risk
exposure. Most people don't perceive this. Most people don't seem to want to
think much, or assess risk.
As I have been dealing with the issues I have been
lately I am really starting to think much more about risk assessment in life.
Look at the numbers for how many people slip in the shower, or any number of
what seem to me to be preventable things. I'm not saying focus on the negative,
I'm saying study the realistic risks, and address them, within reason. Don't
ignore them and become a statistic. We are surrounded by risks, and it has to
be someone who gets 'bitten'. Trust me, it's not always 'the other
guy'.
Now, is Jim just giving some good life tips here? Well, yes, but
that's not the main point. As I have had the time to think about risk
assessment in life lately, I have started to see how I take this same viewpoint
in my trading approach. I am always looking for how I am exposed. Where's my
risk? What could happen? If you've read Kane Trading on: Trade Management
you already have seen some of my discussion on exposure. I'm just realizing how
'cautious' of an approach I have already, and how I am trying now, more than
ever, to develop this area. Perhaps this is my next big area to work on in my
own plan. Long-term, successful trading as a career is about a lot more than
just the setup, believe me on this one.
So, from this I want everyone to take this
idea of studying where you are exposed, and why. See what can be done about it,
if anything. Understand the consequences if this or that scenario plays out.
Think 'overall' and not just one trade. Think long-term player, and not just
one trade at a time. Hopefully, I will be able to get into some details on this
in future commentaries, especially if I get some good comments on this
topic.
I'll wrap up with one more idea. As I was driving in a very busy
freeway situation recently I started to realize I was thinking in terms of
'outs'. Okay, this guy is riding up my butt here, I got a truck right in front
of me boxing me in, I got this other guy with a trailer over there, and so on.
Now, if this or that happens, what do I do? This is just good defensive
driving. I realized I was looking for 'outs'. I have the shoulder, I have the
space between this and that car, whatever I could see at the time. When I had
few 'outs' I got very nervous. The more 'outs' the better. It hit me that was a
lot like poker. And, I quickly saw, a lot like my trading.
As I watch a
play I am in unfold, I am watching for certain behaviors, certain 'price
action', as I have explained in here many times. As things develop, I redefine
what will trigger me out. For each unfolding scenario I am studying my 'outs'.
I always know where my 'outs' are. Now, this may be hard to grasp, because you
might be thinking 'Outs, I have one out at all times, and that's it, I close
the trade. I'm out.' If you are at that point in your thinking then you aren't
yet seeing what I see. I have all these outs which are technically based, and
the triggers happen here or there depending on the unfolding action. As I have
said before, a dynamic management approach.
The point is,
I think in terms of these various outs, and the sense they make to me. I'm
using the clues to point to spots where I want to take action, just like the
clues that help trigger me into a trade. It's technically based, but it is
about spots, at that given time, that I can use as outs. Try to think about
this, and look at various charts as they unfold and see if you can get the gist
of what I am saying here. Again, this might be a potential future topic if I
get any positive feedback on it. I'm trying to show some of my ideas and
thoughts, and go beyond the obvious setup material. Hopefully, this has
provided some food for thought for the readers, and we can do something with it
down the line.
I will leave it at that, and next weekend I should be back in the
saddle with the commentary, if nothing goes wrong. Given my life lately I'm not
sure you can count on that one, but definitely check back on the weekend and
see if I am back up to speed. Until then, enjoy this outrageous market.
The next
commentary will be next weekend's edition, posted by Sunday evening, November
12, 2006.
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