This question could be the key to trading success
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Transcript of This question could be the key to trading success
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www.netpicks.com
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I want to go back to something Marty Schwartz said that actually occured
this past week for me.
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It is something that I struggled with when I started trading, not so much now and when the opportunity to
jump was there this week, I continued to exercise something that can keep you on the winning side of a career.
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I exercised patience on a setup and in the end, didn't take the trade.
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One thing many traders forget is that a setup is not a trade. A setup is when variables come into play that give a
potential trade.
Setup = Potential Trade.
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Marty says: "before you put on a position, ask yourself if you really want
to have that position."
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Asking yourself that helps to show the difference between a good setup and
the itch simply to trade.
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Here is what unfolded for me in a swing trade on the AUDUSD.
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The weekly chart will show a big picture down trend and a bounce off
the lows of .8660.
Since Feb 2014 though, price has been travelling sideways.
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However you define a trend, I like to keep it objective and will generally use
an indicator for that purpose. I will keep in mind the bigger picture when
taking a trade although it rarely influences my trade unless I am
trading the weekly trend.
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The trend for me was up on the Daily chart and I will use that trend for a
four hour chart setup.
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There were two areas on the four hour chart that I was interested in an
opportunity if price fell into those zones.
The first area was 9015 and the second area was lower at 8940
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On this chart, you can see an area that I have
blocked off with two lines. Price came into the
9015 area and I was looking for a trend
resumption to the upside. My trigger was the
breach of a higher high.
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Price sat in the area for 40 hours in total.
That said, 16 hours after I placed the
order, I cancelled it.
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I asked myself "do I really want to be in this position?". The answer was no
and I cancelled the trade. The bull/bear battle was taking too long at
this zone and I much prefer taking trades from zones where there is a big
imbalance of bulls and bears.
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That question allowed me to focus on something other than the trade
execution and I could see unfavorable conditions. It was a good question
because......
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Price broke back down and landed in my second area of interest. I dropped down to the 30 minute chart, saw an area that would indicate a
resumption of the up move and placed my order. Two
hours later, I was in the trade....a position I wanted.
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Being selective and patient waiting for a prime setup conditions saved a
losing trade and allowed for some decent profits on the triggered trade. I
usually split swing positions into two parts.
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In this case, the first was scaled out for 75 and the
other half was trail stopped for 30. Swing
trading does not require monitoring every blip of a trade and at times, your
exits are not as concise as you would like.
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As well, conditions in the AUDUSD are a little ugly and we need a resolution
in direction.
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Patience and asking yourself if the potential position you want is
something you really want to be in.
That can't be overstated.
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