Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading_13

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Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading_13 best advice I have ever been given. This highly successful chart trader said, “Trade to the far right of the chart page.” In other words, the best decisions in chart trading are those that are delayed …delayed …delayed …delayed! Do not anticipate what a chart might become. Make a chart prove itself. Do not lead a breakout. Do not determine what a chart will do; instead, make the chart do it. Whether a trade will be a profit or loss should not be a chartist’s concern. Rather, waiting for a chart’s “appointed time” should be the focus of a chart trader. Sage advice, indeed! I’ve created a list of best practices based on my recenttrading performance, but I suspect it would apply to manyother chart traders out there, whether they’re just startingout, struggling with bad performance, or just looking forways to improve an already successful trading operation. Practices that I—and other chartists—could focus on inthe future are: Look at the weekly chart of a specific market no more than once each week. Look at the daily chart of each market no more than once each day. Do not pay any attention to intraday charts unless it is to set money management protective stops on entry orders that were executed. Predetermine orders prior to the late afternoon opening. Use good-til-canceled (GTC) open orders wherever feasible. Avoid resting orders in thinly traded overnight electronic trading sessions, such as the grains, meats, or fibers. Do not modify the protective stop level on trades based on major breakout signals more than once each week. D o not chase a missed signal. There will be trading opportunities next week, next month, and next year. Chasing signals can lead to other serious breaches of trading practices. Have limited exposure to intraday market volatility. Be more aggressive in taking profits on trades other than major breakout signals. Enter profit-taking orders in advance. Once a profit is taken in a market, avoid that market for several days. Never take a losing trade home over a weekend. If a trade is a loser on a Friday, get out. Do not become too attached to trading a given market or obsess over missed opportunities. There is always another day and another chart pattern in a different market. Do not pay attention to what other traders/analysts are saying or doing. Work your own program. Trade to the right-hand side of the chart (see the sidebar earlier in this chapter). Maintain and review a one-year daily continuation chart for all markets traded. Any pattern considered for trading should be among the five best examples of classical charting principles during the past year. Avoid all patterns of less than six to eight weeks in duration. I eagerly look forward to many years of trading based onthe experiences and lessons I gained preparing and writingthis book. While this book required far greater time anddevotion than I would have ever anticipated, I believe I willbe a better trader in the future as a result. I hope that you—the reader—gained even a smallproportion of education from reading this book that I gainedfrom writing it. Chapter 14 The Best Dressed ListThis chapter presents the Best Dressed List for the periodJanuary 2009 through April 2010. The Best Dressed Listrepresents the best examples of classical chartingprinciples. The criteria for inclusion on the Factor BestDressed List include the following: “No question about it” classical chart pattern on the weekly chart of at least 10 to 14 weeks in duration. Corresponding and supporting chart structure on the daily charts for the same market. A decisive breakout of the pattern boundary or ice line with little or no pattern reentry. A sustained trend to the price target implied by the classical chart configurations. Whether the Factor Trading Plan participated in whole orin part of the trends represented by the Best Dressed Listis not a conscious criterion. However, the Factor TradingPlan and its long-term profitability are predicated on acertain level of actual participation in the trendsrepresented by the Best Dressed markets. Markets included in the Best Dressed List for the periodJanuary 2009 through April 2010 are shown in Table 14.1.TABLE 14. ...