No! I am not going to tell you that you need to have a special psychological approach or that you must follow a rigid system through the good and the bad times through success or failure.
These things are all good and fine, but, when it all comes down to the task of making money, you need only have one question in mind: WHERE IS THE MONEY FLOW HEADING?
If the direction is clear, you go with it; if it is unclear, you stay on the fence.
It is not easy to explain the importance of "money flow" to a novice who has come into this business as an outsider.
The average system trader would not even have a clue when opportunity stares him or her in the face. As I have been known to say before: System trading is for the bunnies. Markets go up and down in small ranges daily, providing unlimited opportunity to profit.
Do you want to be a bunny or a profitable trader?
You may think I am over the top, but, in the past, I have encountered all types of trading approaches, as well as people who believed in them, and, yet, the odds were never different, no matter the type of system, no matter the trader trading that system.
The truth is that 90 percent of people who enter the market consistently lose.
Why do you think that is?
There are many reasons for failure, but the main one is that these traders choose to stay in a market position when they have no clue whatsoever what the market is likely to do next.
Yet, the truth is that there are reliable ways to know what the market is likely to do next. They are not rocket science -- as others would have you believe.
If you are prepared to wait for the opportunities and take them when they present themselves, you are going to become more profitable.
Now, the big problem with this is that you first have to understand the market, its habits and the successful players who are involved in it daily.
If you are not prepared to learn the ropes and watch the market for the opportunities, you are doomed to failure.
You can listen to all the pearls you like from those who push the systems, but the market does not accommodate their ideas consistently. That is why they will always tell you, for example, that you have to give the market "room".
Well, I don't believe in giving the market room. My choice of trade is either right or wrong immediately. If it is right, I might give it some room, but, if it is wrong, I have no other choice but to get out immediately.
If you've ever been to the races, you understand that the race only lasts a short time. That is what happens with the daily price movement of the market. The market has four to six races per day. The better races are when it is going with the "money flow" as opposed to the profit takers.
The race only lasts for as long as one side is completely off balance. So, knowing when one side is going to be pushed off balance is the way to success.
Those of us who realize this have the opportunity to pocket the bunnies' money, walk away and come back another day.
Do you think this is fair? I do. If the next guy is not as smart as I am when it comes to risking his cash in the market, that is his responsibility, not mine.
This is just some food for thought right now.
But, I will also leave you with something you can use. It concerns a set-up that happens maybe once or twice a month in the larger picture. I have named it the KAMAHL -- after a famous singer who sang the "Sounds of Goodbye".
The words go like this, "I can hear the knocking coming down the hall. It has the sounds of goodbye."
The Kamahl set-up is a market going sideways for an hour or so after trying to advance. The longs will be getting nervous and will move their stops up to protect their capital.
The best of these types of set-ups are when you get a breakout to the upside in a bullish move that fails to advance. Give the bulls an hour or two of this activity, and they are "cannon fodder" for the "smart money".
If the market low is holding on some level that the bulls believe is technical support, it makes it even better.
If you want to be around for the long term, you had better learn to trade opportunities. There are many other types of set-ups, but no time to explain all of them in this article.
Right now, all I want to do is give you a chance to remain in this business.
*Reprinted (and modified) with permission from Bryce Gilmore (www.wavetrader2004.com)
