Many traders confuse setups with triggers. A setup is an indication that a given market is developing a pattern that could or should lead to action. While there are many patterns in the markets, there are only a handful that are reliable. The sad fact is that most traders follow patterns that are not reliable. Ask yourself the following questions about the methods you are currently using:
@ How often has the pattern or method you are using been correct?
@ Is the pattern completely objective and specific, or does it require you to make a judgment call?
@Does the pattern have specific entry and exit rules?
@ Does the pattern or method give you an idea of risk and/or reward?
If your answer to any one of these is no, then you are either losing money with the pattern or if you are making money with it your luck will not last.
The performance statistics of some commonly used trading tools might interest and disappoint you. For example, the daily reversal signal is one of the most widely followed price patterns and it comes in two formsup and downdefined as follows:
@Daily reversal up. The market drops below the previous daily low and closes above the previous daily close.
@Daily reversal down. The market goes above the previous daily high and closes below the previous daily close.
Never ask what the percentage accuracy of a trading method is. This statistic is meaningless without knowledge of whether the method is profitable! In spite of the poor performance, the accuracy can be impressive and there must be a way to take advantage of the pattern. There is a way, and that way is simple. All we need to do is to add a trigger to the method.
You must rid yourself of common thinking unless you want common results!
To trade profitably you need to use a complete approach. Here are the elements of that approach:
*Specific entry and exit rules.
*100 percent objective follow-through.
*Statistical performance history.
* No interpretation needed.
*Independent of any fundamentals or analysis.
* Capable of being completely computerized and analyzed.
This gives you a complete package that places you way ahead of the vast majority of traders.
@ How often has the pattern or method you are using been correct?
@ Is the pattern completely objective and specific, or does it require you to make a judgment call?
@Does the pattern have specific entry and exit rules?
@ Does the pattern or method give you an idea of risk and/or reward?
If your answer to any one of these is no, then you are either losing money with the pattern or if you are making money with it your luck will not last.
The performance statistics of some commonly used trading tools might interest and disappoint you. For example, the daily reversal signal is one of the most widely followed price patterns and it comes in two formsup and downdefined as follows:
@Daily reversal up. The market drops below the previous daily low and closes above the previous daily close.
@Daily reversal down. The market goes above the previous daily high and closes below the previous daily close.
Never ask what the percentage accuracy of a trading method is. This statistic is meaningless without knowledge of whether the method is profitable! In spite of the poor performance, the accuracy can be impressive and there must be a way to take advantage of the pattern. There is a way, and that way is simple. All we need to do is to add a trigger to the method.
You must rid yourself of common thinking unless you want common results!
To trade profitably you need to use a complete approach. Here are the elements of that approach:
*Specific entry and exit rules.
*100 percent objective follow-through.
*Statistical performance history.
* No interpretation needed.
*Independent of any fundamentals or analysis.
* Capable of being completely computerized and analyzed.
This gives you a complete package that places you way ahead of the vast majority of traders.
Happy Trading
