July 13 2010 Overlay and Trades

The powerful trend up continues.

My premise today was for an upward bias with a warning that shorts would be tough. It is interesting that my only trade today was a short.

This lead me to start thinking about what it is that I am looking to trade. I have a good read that is correct a vast amount of the time. However, I am still able to put together a series of losing trade sequences.

I came to an interesting conclusion:

Most traders, including myself, spend a majority of their time focusing on where to trade. For example, a specific price or S/R zone.

I am beginning to see that it is much more important relative to achieving a positive outcome to focus on when to trade. By when, I mean timing the entry and timing the exit, not anything to do with time of day.

I by at an extremely good price and the price can move up to achieve a 4 point excursion. However, if I do not properly time the exit, the price could come back and retest my entry. Leading to a break even or a loss.

Likewise, if I exit immediately after I achieve a few ticks profit all the time, I will never be able to overcome my much larger losing trades even with a high winning percentage.

It is the timing of the entry and exit (the management) the drives success or failure.

I could take this a step further and say that on days like today and most other days, the best setups (for timing) are not going to happen in the direction I would like them to.

Otherwise, the market would not be efficient and these obvious setups would be exploited. The more probable occurrence I see intra day is that the opposite of what looks like is going to happen tends to happen.

This is a game of convictions constantly getting tested under pressure of loss with fake outs and illusions.

So today, even though I had an overwhelming long bias and warned about not taking shorts, the only setup I saw that was indeed trade-able was indeed a short. This is what I was able to exploit even though it was opposite my bias.

Any long I would have attempted other then buying the 4:00 AM inside support zone would have been a discretionary entry that was all feel with no defined risk. A trader can win by doing this but it is not my plan right now.

It is important for me to start thinking more about what I can exploit and when to do it as opposed to only where to execute.