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Philosophy

PHILOSOPHY

There are many different ways of trading and so many different assets to trade, I agree with what the instructors at OTA tell you. You need to find your own style, personally, I have split my trading between medium term using almost exclusively options so that is positions 4-8 weeks and day trading where I will both scalp, day trade and often swing trade, focused almost exclusively on futures. I close most positions by the end of the day, this give me a nice mixture of trend following and short-term moves. The main reason to use futures is that they trade nearly 24 hours a day so always something to do, they also cover all the main equity classes, currency and gold, oil commodities etc. so you can always find a market with momentum to trade.  Also, if you are swing trading futures you can always manage your risk as the market are always open as I will go into more detail what has work for me later.

I have looked at many different ways to try to make money trading but here is my conclusion, at the end of the day it’s all about price, as a small trader there is only one thing you know for sure, that is the chart of the asset showing everything that you need to know in for the asset, the price action in the chart gives the best picture that you will get. It is therefore critical to be able to read the price chart and price action of an asset that you are going to trade. There are many ways to do this but the most common are chinese candlesticks, there are other things that can help, many indicators (which lag the actual price action), moving averages and tools that people will sell you but my conclusion is that at the end of the day it is all about price action and reading a chart, a good plan and discipline.

Secondly and this is important, I cannot tell you how much angst and pain I have gone through to totally believe this, once you accept price is all you need to know, then you need to understand and accept supply and demand, too much supply and a price will fall, higher demand and a price will rise.  You need to be able to identify and where there is price imbalance and where supply and demand are out of balance on a chart, when you can do that you will be able to trade profitably.

The other key philosophical points I would like to make are as follows:

You MUST manage risk and keep discipline or your trading account will not last long, you must learn to have stops in every trade and NEVER move them, I will explain why later.

Let the market tell you what to do, you cannot fight it, it is like a wild animal but you can learn to live with it and follow it and respond to it.

Have and stick to a well written, well-developed trading plan.

Finally Trade The Trend.