Trading Philosophy
Attitude
adjustments required for trading with the Market Detective
Indicator:
I
suspect that most of us are not the disciplined traders
we think we are. We tend to wait too long for the market
to do what we decided it is supposed to do. If
it goes in a direction opposite to our forecast, our wounded
egos make us even more obstinate, and we lose big money
while we wait for the market to correct itself. This is
the very attitude that is responsible for practically
all the fortunes lost by investors. What we all need
during these stressful market moments is a detached, unemotional,
private consultant (like Mr. Spock from Star Trek) prompting
us to be logical and to do the right thing. Seeing an
explicit, mechanically computed trading signal at every
candlestick on a chart is like having that private consultant
right by your side advising you to take immediate action.
I recommend trusting this private consultant. Ignore your emotions, ego, and abstract
thoughts, and you will make money.
Taking
the mechanical market timing signals will preserve your
capital and maximize your profits:
The
Market Detective technical analysis study was specifically
designed for trading volatile stocks with a clear
history of significant price moves on an end-of-day basis.
It goes without saying that you should avoid trading all
flat-line or low volume stocks, while the volatile stocks
must be tracked daily with the same responsible attention
that you give to your day job. To do otherwise is to be
an undisciplined gambler, and you shouldn't even get in
the game if that's the case. As a logical consequence
of this serious daily attention, you have to be psychologically
prepared to exit or reverse a trade you enter into today
on the very next day. The entry day is always the most
critical and stressful day, because about 10% of the time
you will get a second consecutive 'R' reversal signal
on the next candlestick. You have to be prepared for this
condition, as it will require you to immediately exit
with a loss - a very difficult task for any human. However,
this immediate and occasional loss will be a good thing,
because it will condition you to never get caught
flat-footed in a market that rapidly swings against you.
With the low commissions offered by the internet brokerages,
there’s no excuse for holding a losing position
for longer than one day. Most of the fortunes lost have
been lost because of the wait and pray game played
by so many long term traders and investors. The only good
aspect of this type of trading is the praying part, which
brings you closer to God. In fact, the only times you
will experience losses using the Market Detective market
timing signals is in tight congestion areas, or when you
get two or three opposing reversal signals across adjacent
bars. But, these losses will always be small compared
to the capital gains you will experience in between non-consecutive
reversal signals. After all, it is an irrefutable law
of trading that you must take small losses to
preserve your capital. The mechanical market timing signals
provided by the Market Detective technical analysis study
ensures that your losses will be small and very few, and
that your gains will be large and numerous. This innovative
study, should you decide to exploit its profit power,
will eliminate the ifs, ands, or buts of timing the markets.
Rather than second guessing the unmarked bars, candlesticks,
or curves on your chart, just take the single character
signals literally. If you get two consecutive opposing
‘R’ signals, take each in turn, and be at
peace with the small loss. The much larger gain will be
forthcoming shortly. If you get three consecutive opposing
‘R’ signals take each in turn again. By the
way, three such signals in a row are as rare in volatile
stocks as a no-hit baseball game. But don’t take
my word for it. After all, I do have a conflict of interest,
in that I want to sell my charting software. Simply test
my Market Detective technical analysis study on all the
volatile stocks in your portfolio, concentrating especially
on your past losing trades. I think you will discover,
as I did, that only a crystal ball could provide you with
more profitable trading signals.
End-of-Day
versus Real Time Trading Philosophy:
An
earlier version of the Market Detective charting software
handled and charted real time data from 1998 through 2002.
It was interfaced to the version 2.0 Universal Market Data
Server developed by Market Stream of Boca Raton, FL. This
real time server was probably the most powerful server technology
available in the 1998 to 2002 time frame. The Chicago Mercantile
Exchange, to name one famous institution, was and still
is employing a version of this server for a significant
portion of its data handling duties. Since 2002 this server
was upgraded and targeted only to institutional traders,
making it impractical for sale and support to the independent
trader market. This undesirable development adversely affected
Market Detective's competitiveness and sales potential,
although as a standard End-of-Day technical analysis program
MD was still very useful. Stock data could be obtained for
free from Yahoo and Quote.com using the HQuote Pro software
(www.hquotes.com.).
Candlesticks, and other standard studies could still be
applied for end-of-day technical analysis and trading. In
fact, I personally discovered that, while end-of-day charting
is not a popular selling point with the masses, end-of-day
charting software is dollar for dollar the most effective
trading method that independent traders could use. Real
time systems are an extreme expense to both the end user
and the software developer. Several man years of programming
energy and cost go into the development of bug free data
server and charting programs. This cost must then be paid
for by the average user, who, statistics show, is much less
successful as an intraday trader than as an end-of-day trader.
Yet most everyone wants real time charting to make those
trading decisions mid-day instead of after the close. Ironically,
trading intraday may be the downfall of many a trader who
would otherwise make money in an end-of-day decision making
scenario. See the My Best Methodology page for my analysis of the pitfalls of real time trading versus end of day trading.
If
you have not been successful as a real time trader, then
consider the simpler alternative of end-of-day trading.
The software requires only a low one time purchase fee,
and data collection is either free or a fraction of the
cost of real time data. You have but to view several end-of-day
charts of volatile stocks or futures to appreciate the profit
potential of the Market Detective tecnical analysis study
versus the profits provided by the most famous real time
charting software. At Market Detective's low, low price,
it's worth purchasing by current real time traders just
for the second opinion.
Philosophical
Summary:
Making
the correct trading decisions is really not about being
a prodigy genius type who can out guess and out smart the
markets using superior brain power alone. Forecasting blunders
have also been made by every major market guru that ever
moved his lips. To think that you, the independent trader,
will succeed on their every recommended stock trade just
by subscribing to their newsletters and their intermediate
or long term predictions is pure folly. No one really knows
where the market will be a half year from now, even though
it is a fun sport to debate the issue. Anyone visiting this
website should be interested in making money weekly by trading
the short term market movements on an End of Day basis.
The correct trading decision is almost always the one that
is based on a mechanical signal that overrules your human
emotions and stubborn belief system. After all, a proven-to-be
accurate, mechanical signal is, in effect, the market telling
you where it is going. Any other method is ego-based and
arrogant and indicates that you are telling the market where
to go. That's the perfect setup for an eventual humiliating
defeat. Having an educated opinion on the longer term direction
of a market is normal human behaviour, just don't bet your
mortgage money on it.
For a real life private lesson in what not
to do when trading volatile stocks, please see my True
Confessions page. I give an in depth discussion of some
of my painful trading mistakes, prior to the development
of my Market Detective market timing indicator. I display
candlestick charts of the stocks I have traded to exhibit
the superiority of my explicit Market Detective signals
over my own personal judgment, and I would bet, over that
of most other stock traders.
