Trade The Journey

Trade The Journey

Trade Profitable Beliefs!

It’s 6:15 am, and my palms are a bit sweaty.

At 6:30 am the Markets open, and it’s off to the races.

It’s 6:30 am and the opening bell rings.

 

There I sit, staring at the movement of the price bars on the screen. This is my second introduction to the opening action of the market.

Everything is moving so fast. Even more, unsettling is knowing that traders of all creeds, knowledge, and skills are hoping to leave the day with a profit.

They say that most of the decisive movements in a stock occur within 15 to 30 minutes of the opening and closing. The professional’s trade before the close of the market. The novices may enter in the morning or when the stock is in range during the day.

My goal was to find a stock that had substantial price movement and good liquidity. At this point, I’m focused on gaining experience in implementing a strategy which includes entries and profitable exits.

I chose Target to trade because I like shopping at Target and have work experience in the retail market. I don’t like trading in an industry I am unfamiliar with. With no experience in the industry, that means I’d have to learn to spot trends in the market from research instead of experience.

 

If Target creates a new marketing plan, who’d be a better judge of its potential profitability?

 

A trader who learned of Target through annual reports or market reports?

or

A trader who has witnessed how marketing plans have affected shoppers first hand?

How will the employees respond to the changes they may have to make because of the new marketing plan?

 

Employees can rot a business from within if you’ve employed the wrong people.

Of course, this is just my personal opinion.

One common trait I’ve noticed that the Master Traders possess is their ability to be sure about being unsure. That’s a difficult mindset to acquire and keep.

 

Here are the actions I took:

  • First, I entered some parameters for the stock screener to identify potential trading opportunities.
  • When trading, I select a stock that has movement so that I have a high probability of a profitable exit being filled.
  • Target seemed to be trading with a range. So I decided to trade Target stock.
  • Keep in mind that I did not include fundamental analysis in my decision to trade Target.
  • This selection was based on price movement and volume only. The goal of this trading exercise was to work on my exits.
  • I placed limit orders when entering and hard stops when exiting. Surpinsgly, I was able to predict at least two profitable moves out of the five entries.
  • Target was trading in a range throughout the day, so selecting an exit was even more difficult. Most of the action occurred at the close of the day.

 

Improvements:

Be there when the market opens. How can you formulate a bias on the trend of the day if you missed the opening move?

Complete the nightly research needed for the day ahead. What are you basing the movement on the day of?

Proper Entries and Exits is a strategy within itself. I should have thought about my exits more selectively. To be honest, I probably could have matched my profitablity in two trades instead of five. A whole class should be taught on placing entry and exit orders.

 

Surprises:

Level 2 adds a unique element to your decisions when trading. I believe you could trade the market by studying the movement of the bid/ask action of Level 2. The law of supply and demand control the operation of Level 2.

On the charts, I’d see a profitable position, but I’d often exit at a loss. I believe this occurred because I wasn’t placing the right orders on the exits and did not factor in the commission of the trade.

The hardest aspect of trading is the exits. Trying to get out of a volatile market can aggravate a monk’s patience.

Reading about the markets, strategies, price action, etc. – can help you create a trading hypothesis. However, the only way a theory can be proven is through testing.

 

My primary focus for the upcoming week is to work on my exits. Exits are often overlooked in favor of entries, but this is a recipe for disaster.

My other focus will be on learning more about backtesting.

 

A slow realization has been my recognition of what trading is and what it is not. Its a shame that most of the books on investment and trading marketed to the average person is nothing but fluff.

But this is a part of the journey in self-discovery. True/Hidden knowledge is bestowed upon the pupil through dedicated effort. A shift in perspective can create an increase in your profitability.

 

Listening to the Master Traders lets me know that trading/investing is art and a science.

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