Thursday, October 11, 2007

Have Vision

As we have written in the past, our preferred time-frame is the 3 minute chart. We like using the 3 minute time-frame because we feel that it’s easier to spot volume spikes and base and break patterns than in longer time-frames. However, what is sometimes quite difficult, even after you have traded for years, is to see beyond the next tick, and having such a fast time-frame can sometimes make one too focussed on the immediate future. This is the reason we like having the 10day / 30 minute chart and a 3 month daily chart synched with the main 3 minute chart. Therefore, every time we switch the 3 minute chart to another stock, all charts change over. Nothing beats the 3 min chart for entry, but having the daily chart beside you reminds you of the bigger picture.

Sometimes, for specific reasons, you believe a stock will go in a certain direction. However, you can find no decent entry point (i.e. there is no base or any familiar pattern). What do you do? Have vision. Find a spot, enter fewer shares (due to wider stop), set a reasonable stop, and just leave the trade alone. More often than not, these are the most successful, most satisfying trades of them all. First, it’s a very good feeling having a plan and seeing it through. And second, it keeps you from overtrading.

One of the most important stages of the evolution of the trader is from the gung-ho newbie who just shoots and blasts away constantly during the day, and the more contemplative experienced trader who sits on the trade and lets the trade unfold towards the target.

Go beyond the next tick.