Life relates to trading and trading relates to life. Constantly revealing, unfolding before us as we trade and live, so I write about how my life relates to trading and how I trade the markets. Along the way I share my opinions on anything that evokes my passion or tickles my funny bone trying not to forget that enjoying life is the best part of living.
Charts? Reading charts? Everyone knows how to read a chart don't they? It's simple, just look at the price, time and candles or lines or dots or whatever. Add to that Stochastics, Moving Averages, Volume, and about a 100-1000 different combinations of strategies and what most people end up with is confusion. Of course with enough time devoted, we can all become master chart readers, but what is probably more important to bring into focus is just how much of it is really necessary for you.
In order to find out which tools work the best for you, you must devote time. Some traders are more technical than others and some use many indicators, signals, bells and whistles to trust a pattern. Some just like all that "stuff" and more importantly some like to play with all the possibilities. Where it becomes a problem is when the playing with the tools is more fun than learning to use them properly in order to enhance trading ability.
Using technical tools can also confuse someone new to TA; especially when trying to use too many at once and not giving each one a chance to be examined on it's own. It takes time to get to know each one's abilities and limits and how each indicator fits your style. Some may enhance some may distract or even mislead your view of the charts.
The best way to start, in my opinion, is with what I call "Naked Charts". In other words, learn to read the sticks first, recognize patterns, repetitions, and rhythms in the way they line up from week to week, day to day, hour by hour, minute by minute. The longer you spend with candles the easier it becomes to dress them up with trend-lines and other indicators to assist your trades and you'll be better able to decipher which ones suit your needs the best.
At this time, there is turmoil everywhere around the world. At home in the USA there is no exception Debt, Deficit, & Inflation worries, Bank failures, Tax worries with no cooperation from leadership so far, we are not looking very secure despite the gropings of the TSA. Coupled with International manipulations via IMF, UN, NATO and overseas failures of Greece, Ireland and possibly Spain and Portugal, and advice from Germany and France, it gets more precarious. Add to it war threats from No.Korea and Iran with continued problems in Afghanistan, Pakistan, Iraq and Israel, we have certainly enough on our plate. So, why add a turkey?
Perhaps one of the most challenging for those who trade regularly and especially daily, are the holidays. Getting ready to the different time frames intra day and then day frames around the the holidays will assist traders, but the biggest effect in trading is the reduced volume causing more volatile prices and spreads.
Most money managers and professional traders will take vacation or holiday this time of the year and what's more, many will liquidate days prior to departure or hold until the beginning of the year. Those of you who follow me and are members know that I've talked about the positioning that actually begins in October for both tax reasons and for rotating in/out of positions in order to get ready for the end as well as the beginning of the year. For many who have not adjusted their portfolios, by this time, it can be more difficult as the year wears to the end.
What we need to add to this problem this year is the fact that we have no idea what this lame-duck Congress will do. The coming year will depend largely on the budget and taxation that they will pass and publicize and pass under the radar. So positioning becomes even more difficult and perhaps short term traders will hold back from trading positions that they may need to close early next year.
For traders entry and exits can be more difficult as less shares are available and the spreads get wider so the requisite number may not be available for the trades. Today, Monday, was the first day that this pattern actually emerged. Notice that no matter what the news, or time of day, the traders popped and dropped more often, also notice on the minute chart, the volume evidence of trades. Many looked on the 5 minute chart what normally would show on the 1 minute. All evidence of lack of trading interest causing lack of momentum.
Those receiving great news may look like they are trading better than usual, but those lacking news become dead or whipped. Also, especially at the beginning of this type of activity, traders are more likely to sell off rather than accumulate. Which may change at the beginning of December prior to the Christmas holiday as many may position into next year as witnessed the last few years of the DJIA . Look at the lows in November and accumulation in December.
Of course, nothing is perfectly scripted, and although so far, it looks to be shaping up in much the same way, be sure to allow for differences due to news and financial woes both here and abroad.
In a nutshell, rather than being more relaxed trading becomes more intense due to the volatility, so if you are new, you may wish to take a lesson from those around longer. Take a vacation and have a Happy Holidays around family and loved ones. To those who simply can't stop or get away, try paper trading or at the very least, reduce your size, expect the unexpected and place fewer trades.
