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Good Morning All; For this series of four letters, I am going giving you some exact steps that will help you tremendously if you have the technical knowledge, but cannot seem to turn the corner on making good profits. There are going to be four things that you can do that I feel will 'dramatically change your trading career'. The results will be immediate, every week. It should be stated again, that if you do not have the technical expertise, you are not at the level that these comments will help. If you don't know how to look at a chart, no amount of refining will help you. Where do you get this expertise? There is no better place than Pristine's Trading the Pristine Method Seminars. Talk to your counselors about the end of the year deal that will be gone, not to be repeated, after the holidays. After a long time of working with many traders, one discovers that there are certain truths that cannot be denied. There are four things that are done so consistently wrong by new, and even fairly experienced traders, that each of these mistakes results in bad trades 90% of the time for most traders. If traders would simply follow these four rules, they would eliminate most of their losing trades. The fourth rule does not really fall into this "90%" category, but is perhaps the most important. Four Things That Will Change Your Trading Career: Part Two of Four Here is the second rule, and the subject of this lesson. Traders should ONLY take trades that exactly fit the parameters outlined in their trading plan. It sounds simple, but again the facts behind this are staggering. Of the four 'secrets', this one is the easiest to describe, and really requires no technical expertise, just discipline. However, it is arguably the one that costs most traders the most money. Having a trading plan is simply the most important step to trading. It is the only concept that has a 100% correlation with success. 100% of successful traders use trading plans. 100% of traders who do not have plans fail. What more needs to be said? Unfortunately, there is still great aversion to having a trading plan. Here is the pattern that usually happens. First, traders simply leave a seminar or training course and sit in front of the market with the intention of 'developing' a plan over the first few days. The trials and tribulations of trading, combined with the huge dislike for the 'work' of writing a plan keeps 80% of the traders from ever beginning to write one. Of those that begin to write one, 80% never finish, or they do finish a plan that is so poor and vague it cannot be used. Of those that do finish a reasonable plan, as bizarre as it sound, 80% of those never use it. Of those that use it, 80% never follow up properly to see if they are truly following them, or if they are effective. Where are you in this process? No. Stop. Really; go back and answer that honestly. WHERE are you in this process? The purpose of this article is picking the one most important concept to follow up on to eliminate losers. When traders are asked to go back and review their records, it is found that when they go back and pick out the trades that were not really in their plan, an amazing 80-90% of trades taken outside the plan fail. 80-90%. Does that get your interest? Don't believe it? Check for yourself. While it would be interesting to see your results (feel free to send them to email@example.com), experience tells me that few will send them, because few will REALLY do it. Stop and take these lessons seriously. These four 'secrets' will change you career, if you are not doing well now, and if you actually do what they say. Here is what you should be doing to check this. The results below are typical of what you might see. The worst category will be the strategy that is 'no strategy', and you will likely be worse than this example. Closing Comments The point of this lesson is simple. The glory of this does not come from a chart; it comes from the discipline to follow a plan, and more importantly, the discipline to check to see if you are following that plan. By following up in this one area, you may be able to stop the majority of your losing trades. So you ask, "But I don't have a trading plan, or I don't have strategies outlined in my plan, what do I do?" The answer is simple, develop a detailed trading plan that has one or two specific strategies, and follow them. In the next issue of this letter we will look at the third 'secret' that will change your trading. Paul Lange Vice President of Services Pristine Capital Holdings, Inc.
raders (PTT) are taught about the proper mindset for technical trading. Also is the analysis and charts of multiple time frames at that time as a PTT would do it. It setup a bias to follow for the coming days and weeks. If you were a reader at that time it guided you well. Pristine Traded Traders (PTT) view the interaction between buyers and sellers through recognizable price patterns that signal who is in control or who is taking control. This starts with an individual candlestick, then another and another. This Bar-by-Bar analysis as I have named it continues until a pattern forms that provides a clear message for the PTT. I developed Bar-by-Bar analysis years ago as a way to say objective once in a trade and to also stay focused when not in one. This analysis once taught keeps the PTT in the moment, not stuck in the past analysis or projecting the future, which of course can never be known. Technical Traders look at past chart patterns to predict the direction of future ones that have not yet developed. Of course, the future patterns cannot be known and a problem starts when traders imagine future patterns in their mind and what they think will form (as they see it), if the trade is profitable. If the imagined pattern does not develop traders can become conflicted. No one knows how the next bar or bars will form. The trade can go in the direction thought, but prices can do that in unimagined ways. Pristine Tip: Projecting the future beyond the current pattern's message limits possibilities. This is where rationalization starts about the present and all sorts of problems begin for traders. The worst of those problems is not adhering to a stop-loss. Why take a stop-loss when this was not part of the future pattern imagined? This trader is in disbelief of what is, cannot except the moment and is looking for any reason for the trade to be working, even though it is not. Another trader imagines being stopped out and quickly closes a trade for a small gain or loss, but the current pattern has not signaled that there is anything wrong with this trade. In both examples, the traders were not focus on the present. Price patterns can develop in endless ways and once you are in a trade there is no point imagining what isn't there. PTTs have tools like Bar-by-Bar analysis to keep them in alignment with what is. Traders must have confidence in a method used and a trading plan to use that method. Where patterns form in relation to prior support, resistance, what is the prevailing trend, the length of retracements, analysis of multiple time frames being aligned or not, whether relative strength or weakness has been shown, volume analysis and current market internals all are considered. The more of these that are aligned together, the greater the odds of a successful trade. Knowing how to interpret it all, in a systematic way is what makes up the Pristine Method® Seminars. Following it the analysis and charts from 2009. SPY has risen over the last five weeks and is coming into the prior area where sellers aggressively took advantage of any attempt to move higher. The PTT knows that sellers were aggressive in this area because of the three bar combination to the left of current prices. The Topping Tail (TT) signaled distribution on the attempt to move higher. Realize that TT was a large green candle before it was a TT and was preceded by a Bottoming Tail (BT) bar. Also, that BT was the third down candle. After that much selling and a BT, the following candle would typically be a green one. But it ended with a TT, a bearish sign. The next candle was a green candle and we can see that candle opened below the prior TT candle's low or gapped lower. This green candle closed near its high and near the high of the TT candle. Buyers were stepping up and took control this week or so they thought. What happened next clearly put a nail in the heart of the bulls. The third candle was a potent reversal down that retraced almost to the low of the prior green candle. The concept of a Green Bar Ignored (GBI) tells the PTT that sellers took the field back in a big way and bulls are weak. It's not any GBI though. This combination of candles was bearish and as we know led to a sharp selloff and the March 6th low. With the current move from the low now near the area of the prior selling, it suggests new selling in this area. However, the retracement from the low was nearly 100% of the prior decline and at this point we don't actually know that the move higher is over. Retracements of this amount are not typical in a bear market and signal strength. The trend in the weekly time frame is still down and while we should see an increase in selling soon, the length of the retracement suggests the beginning of a bottoming process. The PTT will monitor the candles that form in this area and the volume associated with them in the coming week and weeks to determine how aggressive sellers are and reaction to that selling by bulls. Let's move to the daily time frame. The trend is up in the daily time frame, but a Major Resistance (MR) area is lurking just above. On Friday, prices gapped significantly higher from a Bullish Changing of the Guard (+COG) and it was quite impressive that SPY did not retrace back into that gap. Not only did it not retrace into the gap, SPY closed near the high of the day going into a long weekend. This tells us that traders are confident holding positions over the weekend and expect higher prices this week. To recap, the weekly trend is down and current prices are coming into an area where sellers were aggressive before. At this point, the PTT trading from the daily time frame will start tightening stops and should prices rally or gap higher into the above area of MR they will start selling longs. Shorts positions cannot be put on since the daily time frame is up and a bearish pattern has not formed. Last week's low (green line) is Major Support (MS) in this time frame. A move below it will signal a change in trend and the PTT will then look for shorting setups. The last few weeks have been unusually filled with larger morning gaps and choppy intra-day price action. If you look back at a 60-Min chart of SPY from the middle of February to the middle of March (not shown) you will see fewer gaps and fluid price movements with narrower average range bars. This means that there was much more confidence amongst traders then when SPY was declining into the beginning of March and then after the turn higher into mid March. Even though prices have moved up overall, after March 18th a higher level of uncertainty crept into the market. The PTTs trained eye is aware to reduce position size to and/or be a bit more selective with plays when the broader market is displaying this type of nervous price pattern. Gaps, many overlapping bars and unusually wide ranges communicate uncertainty amongst traders. If you have felt a bit uncertain for longer moments than usual intra-day consider it normal at this time. Now this relates to SPY, which of course is a broad market index and SPY affects many stocks. However, there will always be stocks that are "in-play" and will move in a fluid way. The concept of Relative Strength, Weakness and Sector analysis is the key to finding those opportunities. The PTT has many analysis tools. Now, Friday's intra-day price action showed a change to a higher level of certainty. Should it continue this week with a several day advance into or just over the MS shown, odds are high that it would setup a correction. Pristine Tip: Downtrends and up trends end with price patterns displaying certainty or confidence in the existing trend. In other words, the majority believes in the trend at the end and several bar runs (consecutive) precede corrective price action. I've marked support levels to be aware of on the 60-Min. chart, the first being Friday's low. Below it, prices have the void created by the gap up Friday morning that can be fallen into. The second green line would close the gap and should provide short-term support. The last green line is at Wednesday's low and MS on the daily time frame. Below it, the daily trend will no longer be up, the 60-Min. will be down and the weekly is already down and will have formed a -COG. Bears will have control and the PTT will aggressively scan for shorting opportunities. What actually happens will unfold in the coming weeks. It is possible that SPY will not break daily MS and it will continue to trend higher and form a new higher low. We'll see, but what I have explained here is how the PTT will follow what unfolds in a systematic way in multiple time frames. Should the daily trend not break then a short-term bullish bias will be maintained. If prices can overcome the MR area above on the weekly time frame, then that downtrend will be broken. The cycles or ebbs and flows from one time frame to another are ongoing and the PTT's job is to monitor and update them as they unfold to adjust his or her bias accordingly. Intra-day PPTs will follow the same analysis, but with smaller time frames. This does not mean the higher are totally ignored, but what happens over several minutes is more meaningful in those lower time frames to the intra-day trader. Intra-day PTTs can and do make money trading long in a 2-or 5-Min. uptrend when the daily trade is down and vice versa. We now know that the low in 2009 was "the low" and the near 100% retracement I wrote about then did signal the end of the bear market at the time. SPY has doubled since that time. The analysis as it was explained then is done in the same way today. Market environments change, but we don't change our method of analysis. This method is the same regardless of what we trade. PRISTINE - A Trading Style, Often Imitated, But NEVER Matched! All the best, Greg Capra President & CEO Pristine Capital Holdings, Inc.