Saturday, July 08, 2006

Why did we create the Highchartpatterns Group?

There are many reasons but all belong to the categories of self-interested and altruistic. Let's start with self-interest. First, the act of writing lends clarity and coherence to one's thoughts as it forces you to think over what you are doing. This is something we have come to realize even more strongly since we started this service. We have consistently strived to trade in an orderly, clear and disciplined manner. Articulating and putting down our rules, printing out charts, and commenting on patterns for the next day has made us into more focussed traders. In a way, parts of it are like an enhanced trading journal (which, by the way, we recommend to all).

We decided to charge just so much as to be motivated to keep doing such a service (if it were for free we are sure we would not feel pressured enough to update it on a daily basis) but not so much that it becomes too expensive for traders who are starting out, or for people who subscribe to multiple services who do not want to add another $150 a month to their bills. $30 a pop sounded just right. Having it so inexpensive also means that trading will always be the main source of income for us, since as soon as you stop trading and become an observer, you lose the trader's edge: that instinct of looking at a stock's price action and seeing it set up even before the pattern has emerged on the daily chart.

As for the altruistic reasons there is only one -- we were helped by others when we started; now it's our turn to give back.

Friday, July 07, 2006

Trust Yourself

One of the most important and difficult things to learn as a trader is simply to trust yourself. By this we do not mean that you should be stubborn when a position goes against you, or heaven forbid, average down, Once you enter a trade then all opinions, feelings, instincts, et cetera, must defer to simple risk management and profit-taking rules. What we mean by "trust yourself" is something that is critical BEFORE you enter a trade.

Last night, we went through the charts of our favorite momentum stocks and saw absolutely nothing we liked, thus we did not post a single stock in our Main list. Now this happens only 1-2 times a month, hence it is not a common occurrence. Today the market hurt a lot of bulls and a lot of bears and most likely it would have resulted in losses for any positions that we would have entered with our particular system. So was it a coincidence? We doubt it, since we have seen it happen too often. When you are doing your preparation work for the next day and nothing jumps out – be it longs or shorts– know that most likely the next day will be a very difficult one.

Let's look at another example: Every day, we have a main list of stocks with specific entry prices that we watch. Sometimes we find ourselves in a situation where none of these stocks on our list are close the triggering but the market suddenly spikes and looks like it’s going to rally 50 points. We get nervous and think – what shall we do – the market is going to rally and we have nothing in our list to trade (we only trade stocks from our list prepared the night before, and shared with our subscribers). More often than not, that initial move is nothing but a bull trap and the market reverses. In our experience, we have found that if a market move is for real, i.e. lasting, then you will already have setups prepared from the night before that will trigger once the market makes a move. Chart patterns are nothing but footprints of the greenbacks, and they will rarely let you down. Trust the set ups, trust yourself, obey your rules of risk management and profit taking, and in the long run everything else will fall into place.