hey TJ, What are some other secrets, since you started out numbering...1) PS, Do you have a extra copy of the 'Trader'. Thanks, Chris
Here is how i use STOPS while daytrading ES. all STOPS are placed as a precaution, not as protection. 99% of my STOPS LOSS points are never hit because once a trade is filled and the STOP LOSS placed, then the rest is up to the mkt and how it acts. If i do not like the action after getting filled, i get the heck out. If the action unfolding looks favorable and i am taking some heat i will stay in the fight. Other times i bail fast. this can not be printed because it depends on ones personality and experience. The main point is that i seldom stay around and let the mkt nail me. no sense beating yourself up when your intuition says "BAIL".
I'll tell you later what to do when there is a surprise rate cut. It is secret #7. & I don't have any extra copies...
#2) Sometimes, a winning trade is a trade NOT made. 99% of the monkeys approach trading though they are taking a multiple choice exam. They go on filling in the circles hoping to be right. But, it is different... Since each dollar lost takes 2 dollars to make that back. Thus, it is a mutiple choice exams where you get +1 point for every right answer, but you get -2 pts for every wrong answer. If you see it like that, you would approach your trading differently. Only of my colleagues, whom I think is the best trader aside from me, well.. he made $500 million pretax trading profits/fees for the last 3 years. He didn't have one single month where he lost money. You cannot afford to have a DRAWDOWN. You cannot take LOSING trades hoping that they go your way. You have to be precise in your research, excecution and in trade selection that the virtual certainty of you losing significant amount of money to cause a ~DRAWDOWN~ is nil.
if you lost 50% of your equity you need to make back 100% of your equity to come back where you started.
the only time risk comes close to nil, is when there is runaway emotion at work. Runaway emotion leads to runaway price slippage in one direction. multiple support and resistance levels are broken. usually news related like nonfarm payrolls fridays. Piles of cash sitting on the floor arent that frequent domestically these days. Lot more bubbles globally. Bubbles are a summation of runaway emotion and price action on a longer timeframe. Leads to price acceleration. its rare when risk does approach zero, and you can make decent sized bets when it does, it will accelerate your money accumulation.