Trader Talk 3/22/2012
Efrem Hoffman – www.nakedswantrading.com
Jim McQuarrie – www.strategicdaytrading.com
Chuck Crow – www.dtitrader.com
Tell us a little about your trading strategy and how long it took you to find a consistent method?
Jim – I’ve been doing this for about 18 years and my start came from the options market. I made a whole lot of money to start with and I thought I knew it all, which was the worst thing that could have happened to me. I eventually wound up in futures trading. My techniques and trading are very simple. My philosophy is if you make it to complicated you’re not going to follow it or trade it. You’re going to lose focus and lose trades. Keep it simple and easy to trade. I like entries on trend line breaks, head and shoulders patterns and break outs. That’s pretty much it. Nothing more difficult than that.
Chuck – The trading strategy I use is very similar to what we teach at DTI. It’s a common sense approach to the market. There are certain numbers and times that I’ll put together and look at the fundamental nature of the market. Like the sell off that we’re seeing now in the SP futures, at the end of the day, we’re trading 6 days away from the end of the first quarter, so doesn’t it make sense that there will be some profit taking at the end of this very profitable quarter. If its too complex, its not going to work out. These are chaotic markets, and what we’re looking at is kind of controlled chaos. The market is far from consistent, and that’s about as consistent as it gets. Its all about putting the approach together, but understanding that markets change and markets develop. Use common sense to trade.
What were some of the most painful experience you have gone through in your search?
Jim- A couple of blown out accounts and a $40,000 loss in one day. A lot of that had to do with the fact that I didn’t know what I was doing. I didn’t have a good mentor, and the rules that I was following, I really wasn’t following at all. Its very important that this is not easy work. You have to treat it as a business, do your homework and spend a lot of time behind the charts.
Chuck – I got lucky in that I had a pretty good mentor, who showed me the ropes a little bit. I don’t have any huge blown up accounts, but despite everything I know about the market, I can be wrong. As traders, we have to have confidence, but you also have to have humility. The first major lesson you can learn is that the market is far more arrogant than you. We all get that lesson taught to us, but the question is how do you react to it? This is where having humility comes in. You’ve got to be confident in the ability to trade, but humble enough to know that you are just one trader and the market doesn’t care how many traders are out there.
What is the main indicator you use when looking to enter and exit the market?
Chuck – The market that I’m always using is the E-mini SP. The volume that flows through that market on a daily basis is what you want to watch. The NYSE tick is a great indicator; you can get a sense of how it flows. Its like the RPM indicator on your car. You can watch it to see the momentum of the market. I’m never going to put everything on one indicator, you certainly need more than one point of view to understand what you’re looking at.
Jim – Everything that I need is on the charts in the bars themselves. I read the price bars and the price action, and we enter on simple price action. Everything I do is based on those bars. Very simple techniques.
Efrem – The main indicator I use is, I overlay on a price chart, forward looking lines on what zero momentum would look like. That gives me an idea of when a lot of buying power or selling power enters the market. Then I compare that to previous areas. I look at the global market picture. If you look at the commodities and futures, and see how one market impacts another. You can line up three or four assets that will affect stocks. Looking at the commodity markets, it looks that agriculture products are about to take off.
Jim: As a seasoned trading veteran with 18 years of experience, what advice would you give a new trader struggling in today’s markets?
I would say, get a mentor. Do some research on that mentor, go to the forums and find out from other traders. You’re going to pay for your education one way or another, so you should make it a mentor. The other is to put your ego away. The market doesn’t care what you think, so you have to put the ego away and let the market tell you what its going to do.
Efrem: How do you balance quantitative research with your personal emotions or bias in the market?
Most of the time if I look at something intuitive, or just what I think, I’ll be wrong, but when I look at the complete picture and different sectors of the market, I’ll be mostly right. If I just looked at equities to trade equities, I’m not going to have a good idea of what the market is doing. I would tell people to take a look at the global markets and how they work together.
Chuck: What are two major areas of support that you feel the market needs to hold to continue its bullish run?
I think until we get to the first of April, there’s still a lot about the market that’s undecided. It wouldn’t shock me to see the market pull back, but I think the 1350 level is a very big one. The market currently is up about 112 pts. It opened at 1275, so if you take those points and cut them in half, you’ll get a good indication of where the market will go. As long as we’re above 1274/1275, it’s a positive year. 12 of the 13 weeks that we’ve been trading this year have been positive. If the market is going to pull back , this is the time to do it, but go back to the opens of the months. The bigger question to me is what’s the number that the market can’t get above, and the answer is that there’s not one.
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