My (Relative?) Strengths

Reflections on trading strategy:

I'm trying to figure out exactly what gives me the edge I have when it comes to trading. Yes, my screw-ups have hurt me. But my percentage of successful trades is greater than 80%, maybe even 90% (I don't have access to a list of trades I have made, so I can't state the precise figure). If I were more careful about cutting my losses, or even took profits and entered positions gradually (unfortunately not available to me with stocks at the moment), my gains would consistently compound and financial freedom would not be far away.

I know F&G Trader and Trader-X have high success rates. I'm beginning to get to that level as well. I don't use many technical indicators. I use moving averages to help determine resistance and support on larger time frames and to help identify uptrend days. I use RSI in order to assess the likelihood of pullback and upside. I'll use stochastics on the daily and weekly charts, with caution, to determine overall sentiment and whether a rebound or pullback may occur.

What I find most useful, however, is the ability to identify support and resistance levels and to utilize volume and candlestick information (shape and patterns). All of these, for me, prove to be far more successful at generating a profit than any technical indicator I have ever used. Each of these enables me to anticipate direction a little more accurately. If you can determine direction and when the momentum is likely to drop, you have yourself a good trade.

Also, over the last year (the anniversary of my first trade is somewhere around March 23rd--a 2% gain in Apple!, albeit it went on to gain much more) I have learned to get a feel for how the market reacts to certain news and position myself accordingly. Most importantly, I have learned to filter out (i.e. for the most part, turn off) the main stream media. CNBC's advice has not made me a buck, and when I started, contributed to my first loss. So many in the media have a job to sell you a story. If I want to read a story I'll pick up a classic or something recommended to me by someone I respect. When it comes to economics and the market, the last thing I want is a story. For me, this is not "entertainment," in the sense someone would find entertainment betting on horse races (something I never found enjoyable, in it of itself). This is business.

Another useful skill I have striven hard to develop is my detached market perspective. I had a love affair with the solar stocks, and after that, I decided that such emotional attachment carried no financial value. In addition to never purchasing a stock solely because I "like" the company (there needs to be more than that), I have learned to objectively identify entries and exits. Once the emotional states of fear and greed take over, consistent trading begins to wane. Greed tells me to stay in just a little longer, or to get in a little too early. Fear tells me to get out sooner, or not to get in at all. If you can overcome those feelings with successful execution of objective analysis, it makes it harder for the feelings to arise in the future. Get in the habit of detachment. It needs to be with you throughout your participation in the market. Be emotionally connected to your family, to your friends, to yourself. The market, on the other hand, has no feelings. Don't treat it as though it cares one way or the other.