It is funny that coolweb mentions Buffett in here because he is the one person whose philosophy my day trading is based on. I just adapted it to a more intraday perspective. Buffett would say something like this: concentrate on PRICES. It doesn't matter how many people are buying or selling but if you think there is VALUE in it, you have to jump head first before the crowd (VOLUME) recognizes it. But, I know mr. web is going to disagree with me.
Ripley, You are right, I am going to disagree because you trade futures, but thats fine since we all are trying to improve in the knowledge GAME. Theres no values in an "index" , theres no percieved value compared to a stock. You can call a 2003 clk 350 selling for $15k a value deal But you can not call a car dealership selling 50 cars for an average of $14k a value deal. You can't put a value on an index, You can only put a percieved value on individual objects..
Eventhough this has nothing to do with what we are really talking about, An INDEX is but a diversified portfolio of stocks. You can analyze an INDEX just as a single stock because the components are the same: depreciation expense, EPS, amortization, Earnings growth, PE ratios etc etc.. And when you are talking about Dow, you just have to multiply that by 30 times a single company.
But you are so RIGHT. It all comes down to VALUE and how PRICE reacts to at those value levels based on how the crowd acts. VALUE, PRICE, VOLUME everything are so interrelated....and everything should be taken into as a component when you are trying to build a "TIMELESS" method of pulling money out of the market, weather it be long term or very short term.
So you are saying you track EPS/ deprication expenses while you daytrade YM futures? If not, then you have no use mentioning value. I track value when trading stocks, but it has no bearing on how I enter/trade into a position. Value is a long term idealogy. It keeps you on the right "course", right "highway" , right "path" to success. If you want to drive to california from new york, you drive on i-80, if you drove on I-252, you'll never reach your destination. Its not for short term exploitations.
The key to trading is consistency, which applies to both the system and the trader. While consistency does not necessarily ensure profitability trading cannot be accurately carried out without it. Although there is always a degree of randomness in markets due to the psychodynamics of the human mind as well as systemic and non-systemic risk, precision trading must limit this effect. The need for consistency is highest when a trader is making his first trade of the day, the market is unaware of your position. At this point, high profit trades can be more accurately made. When putting on a trade all time frames must align or be in confluence in an extremely tight manner. Traders should squeeze the mouse button straight down with the ball of their finger, to avoid jerking the mouse sideways. A trader identifies trades by their appearance and behavior. Such characteristics may include patterns on indicators, price or gut feeling. If possible, traders should take trades in descending order of risk/reward as best as is known at the time. Similarly, a trader must have the ability to estimate any major factors can alter the success of his trade i.e. time of day, fib zones, momentum, price action, etc. Mistakes in estimation compound over time and can decrease profitability or even cause a loss. A trader must know how market conditions can affect the price moving to the target. Once a trade has been made, market traders on the opposite side of his position will attempt to either cover their positions or locate the trader, and shake him from the trade. The range to target should be estimated as precisely as conditions permit and correct range estimation becomes absolutely critical for longer trades. For instance, a trade may easily reach its first target but staying on for longer targets requires exact estimations to be made otherwise the target will be missed. Good psychological preparation, combined with discipline, is what makes traders survive long term. The traderâs indicator, price patterns etc. can be fooled, so it is imperative that a trader understands how it may be fooled and ways to circumvent those attempts.
<h2> Spectacular post, </h2> Be sure to read the part where it says... " descending order of risk/reward"