TraderTalk – 10/27/2011
We were joined by three great guests today that shared some of their insights on trading in the futures markets as well as indicators they use to spot market reversals:
Giles Kolakowski – futuresandforexdaytrading.com
David Elliott – wallstreetteachers.com
Chuck Crow – dtitrader.com
Here is a brief recap of today's recording:
How long did it take to find a trading method that worked consistently for you?
Giles – After a few years, started working and developing a market profile. The big thing the gurus said you have to do is to figure out what the day type is going to be. I have a method now that I use, and its strictly support and resistance. I do not use indicators because they tend to be late.
Chuck – You’re constantly working on finding a consistent method. If you stop working on it, it stops becoming consistent. I agree with Giles 100%. You have to get to a point where you are the consistent part. When I started writing the Pre-Market Planner for DTI, I learned more and more about the market. Write your own recap and follow those turning points. The more you immerse yourself within the market, the more consistent you will be.
David – I started in 1977 and was given trend secrets from back then. His secret was buying stocks that were above the 250 moving average. I went back and started to adapt that to all time periods. I have been trading Futures since they opened the S&P. We have an automatic system now that gives us the market momentum moves and it is consistently profitable everyday. We add new things to it, and have invented a few studies of our own. Keep learning and studying and you’ll keep learning and refining your strategy until its 99.9% pure.
What technique works best for identifying high probability turning points in the market?
David – I call them hockey sticks, they’re technical patterns on a study. The can be mostly short term oscillators. You can use them on a daily, weekly, or monthly chart. They are always predictive, not after the fact.
Chuck – Little things like seeing how the market reacts to the numbers. If you pay attention to the numbers that the market puts out there for you, you can find the support and resistance in the market. You look for the numbers that are repeated over and over again. One of the things you get into is looking at the history, but the history is not the best indicator. Common sense numbers can be seen by just about everybody. Pay attention to where the numbers are and not that the numbers are big, but how big they will be.
Giles – We talk about support and resistance. We look to find support levels and resistance levels in the market. You look left to trade right. You look back and you see areas that stick out to you and we look for when the market is breaking out from an area, and if the market is coming back to that area, that will be support or resistance, depending upon where the market goes back. It is amazing how the market can turn right to that level. Whatever method you do determine to use, you have to be consistent in using that method. The more screen time you have, the better you’re going to be. With no indicators, for us, we can look at multiple markets at once. That will help us the next market. Initially to start out, become comfortable with one market.
If you had to pick one trade idea (can be long or short term), what would it be?
Giles – It’s not so much a trade idea as a personality thing, you have to find a system that you’re comfortable with. It’s going to be very difficult for you to take a certain trade if you’re not comfortable with the size and style of the trade. Keep looking and looking until you find something that you’re comfortable with. The hardest thing is to learn how to exit a trade properly. Establish parameters and come up with a set of rules and follow those rules.
Chuck – One of the things that I like to look at is a market that is coming to the end of a particular time from, what I try and see is how much of a possibility is it for the market to challenge that opening price. That’s one of the things that I try to look.
David – Right now, we’re long term the indexes, and have been for several days. Still looking for higher highs now with pretty significant pull-backs.
Giles – Does the current volatility in the Crude oil and Gold markets affect your trading methodology?
Yes and No. As far as our methodology goes, and as far as predicting where support and resistance goes, its 100% objective when we determine a level. The problem is that with volatility, you might increase the size of your stops. If volatility gets going pretty good, we’ll go to a 15 tick or a 20 tick stop. You have to do somethings to change around what you’re doing. When Gold started going crazy (at $2000/ounce), we started drifting away from trading Gold. If we’re getting close to a key number (a low for the month, etc.) you want to give something like that an opportunity to rebound. That will affect your methodology. You’ll want to give it more of an opportunity to work with an even greater return. Concentrating now on Crude and the indexes and currencies. But we will get back into Gold.
David – As a successful trader, that advice would you give someone currently struggling with technical analysis? First, I wouldn’t be trading with real money before I really understood the system that we have. Also, have discipline. None of the systems we’ve talked about today will work if you don’t have discipline. 99.9% of all failures of systems is not the system, it’s the trader failing to stick to the rule. That’s why there are so many people interested in the psychology of trading, because discipline is so important. News will distract you from your system.
Chuck – Why is the yearly open such an important number to watch? The open of any time frame creates volatile situations within the market place (when you challenge those opens.) I also find that turning off the news and focusing on trading is easier than listening to the news and trading accordingly. Watching the numbers is more effective. If I look at the market right now, and we end up shutting down right where we are, then going into the next trading session, or Monday, or November, we’re about 30 points above the open of the year, but those two numbers will be the biggest numbers you’ve got for the end of the year. It is important to recognize what those numbers mean to you as a trader.
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Disclaimer: Article written for traders and not English majors so please disregard any missing commas.