Trading Mindset

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Crude was trading within a well defined range at support. I didn’t know which way it would break, but my bias was long today. After such a nice move down over the last several sessions, my thinking was that traders would want to cover and lock in gains going into the weekend. However, the first trade I took was a short trade. I was experimenting with the pimp moving averages (PMAs). Shortly after my entry, price started to fall. Volume came in heavy at support, and quickly formed a hammer. I don’t take a single candlestick in isolation, but when a hammer forms at support with heavy volume that’s not isolation. That’s 3X confirmation in my book. I patiently waited, and the same thing happened again. So far I have two minor losses, because I was trading out of boredom. I decided to wait for crude to test support again, and if volume came in I would enter on a bullish bar. Instead of waiting for that, I jumped in a long position on a possible swing low (with no potential for profit either). It didn’t take long for me to exit, because that trade was not based on any rationale at all. So finally volume came in at support, and I went long. I had my stop set. Remember, I had identified support on both the 5′ and 60′ charts. When I stopped out that time, I reversed my trade. Normally, I don’t reverse trades, because it leads to overtrading. However, this was one of the two setups that I had identified as part of my original plan. Play the direction of the break - especially if the week’s lows were taken out with momentum.

I would like to say that I stayed in that trade with the help of my trusty pimp moving averages (PMAs), but that’s not the case. I took three different short positions that were all profitable. My day ended up positive, but not for lack of trying.

I’m not going to get in the habit of posting every trade, or give a play by play of each session. The reason for this post is to illustrate what it is I’m stalking in the market. Today should have been easy money, similar to Tuesday.

Another reason is to point out how trading out of boredom not only affects your bottom line immediately, but it can possibly affect trades later on in the session. I was having a much harder time letting my winners run, because I was trying to get money back.

Part of my trading plan does require me to take small losses when the market is not acting right after I establish my position. An equally important part is to let my winners run. After today I can see that the 3rd ingredient is to take trades that fit the plan. Anyway, here is how the day should have turned out. As you can see, the 5′ and 60′ charts were both confirming a strong trade.

On a positive note, I did leave early since crude was trading near gap support. I didn’t force anything at the end.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com