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bobcollett

The Retail Edge

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Having spent 6 years Day Trading and made some lunch money, but seldom enough to buy feed for the race horses, I have arrived at a crossroad. Unless you have worked and trained at a financial institution, you will only make lunch money.

There is to much random noise in the daily moves.

Today price goes up and tomorrow price go down and the retail trader must try and time these movements,using all sorts of methods and indicators.

 

The ONLY TRUE EDGE the retail trader has is THE LONG TERM TREND .

So to make the big bucks I must find markets that are trending, enter a trade , live through the drawdowns, with BIG stops , and find an Exit point.

 

How do I do this?

 

All suggestions welcome

regards

bobc

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hi

 

 

the retail edge is....

 

 

retailers dont have to be in the markets all the time !

 

while institutions have to be in the markets all the time ..

 

 

thats the biggest edge...

 

retailers dont have to satisfy customers.. they work for themselfes...

 

and what better market conditions could a daytrader have then a directional market.. wheter it be up or down..?

 

even consolidation ... if it plays out all day ?

 

who cares about direction ? . if ur only conceren should be how to position yourself on any specific market condition ?

 

.....

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Hi Bob,

 

I dont mean to urinate on your fire, but if you're going for a long term trend with big stops, you'll only make lunch money too - assuming you will be trading with the same amount of margin.

 

Focus on your strengths: If you're making lunch money, you're making money. Thats a great start. Now you just need leverage. You say there is too much noise day trading. That means you're probably holding out too long. Take your trade and cover at the first sign of trouble. Or, cover 1/2 or 2/3 at the first sign of trouble.

 

Leran to build size. I imagine you've already discovered this 2% risk is for suckers when it comes to day trading. You've got to trade size to get anywhere. You've got to scale back your size when you lose your mojo.

 

When you know how to utilise your margin properly, you suddenly realise you only need to make a handful of ticks a day to make some serious coin.

 

I cant express this strongly enough - if you're making small money consistently, you are just a few small steps away from taking down big numbers. Dont be scared.....

 

If you do go down the long term trend route, then I guess its fundamental analysis for you, as these trends tend to play out on macro factors. Different skill sets.

 

Perhaps try looking at futures spreads or options instead - if you really have had it with day trading?

 

Good luck....

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Hi Bob,

 

I dont mean to urinate on your fire, but if you're going for a long term trend with big stops, you'll only make lunch money too - assuming you will be trading with the same amount of margin.

 

Focus on your strengths: If you're making lunch money, you're making money. Thats a great start. Now you just need leverage. You say there is too much noise day trading. That means you're probably holding out too long. Take your trade and cover at the first sign of trouble. Or, cover 1/2 or 2/3 at the first sign of trouble.

 

Leran to build size. I imagine you've already discovered this 2% risk is for suckers when it comes to day trading. You've got to trade size to get anywhere. You've got to scale back your size when you lose your mojo.

 

When you know how to utilise your margin properly, you suddenly realise you only need to make a handful of ticks a day to make some serious coin.

 

I cant express this strongly enough - if you're making small money consistently, you are just a few small steps away from taking down big numbers. Dont be scared.....

 

If you do go down the long term trend route, then I guess its fundamental analysis for you, as these trends tend to play out on macro factors. Different skill sets.

 

Perhaps try looking at futures spreads or options instead - if you really have had it with day trading?

 

Good luck....

 

Hi Dude

Amazing

I knew you would post and I also knew it would make sense.

Thank you

regards

bobc

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bob - "The ONLY TRUE EDGE the retail trader has is THE LONG TERM TREND .

So to make the big bucks I must find markets that are trending, enter a trade , live through the drawdowns, with BIG stops , and find an Exit point."

 

It seems from your conclusion that - you make money from the trends, and from running some positions with the trend, and the issue is how big a drawdown you have to sit through.

 

Alternatively as Pyrme mentions - the other edge you have is the ability to sit out. IMHO This cannot be emphasised enough. If there is nothing happening you dont need to do anything....and if you have a running winning position, then again its unlikely you need to do too much.

 

What is a better result - trading every day to make $1000 per day or waiting for a trade that comes along that has a high probability that if it occurs will make you multiples of that with still pretty small risk. Then you can follow the Dudes advice and have a bigger go at it with still small risk. (Even though i think he is still advocating trading more often with small stops, larger leverage when what ever pattern you find you can get to work consistently - a great idea.) DbP waits for support/resistance - once you nail how the markets move you can have a pretty big go at things for very low risk....and yet how often do you need to wait for support, and when you do i bet you are thinking "i will go early, i dont want to miss it" or once on you think "that was easy i will just take this off now and trade that swing again"

 

One conclusion i have come to over the years is that over trading is a massive issue....and day trading because you cannot run positions over night will force you to do that.

 

while there are times that the markets all seem easy and the day trading makes a lot of money and you cant put a foot wrong - it is usually when the markets let it happen - but not every day. As they say no system works all the time, but it just needs to work enough so that when it does you can make plenty of money by being only slightly selective, and then using some leverage.

 

(At present an example is the EURUSD - intraday I think it has been choppy crap, and not suited to me - i made some money, lost it, lost it, made it recently ---- i know its crap as its in the middle of a range on its daily charts, grinding up, small ranges, large gaps - i hate this for me - net result down a couple $k- there is nothing really happening - and unfortunately i have no longer term position on it at the moment. I am constantly tempted to trade like the siren mermaid calling out.....but i have to wait.....and watch and wait --- thats my edge for the way i trade.....)

 

point is - you dont need to live through big draw downs, you just need to wait until the drawdowns are likely to be so small when you are wrong that the entry is worth taking.

(Whats that great saying by someone in the market wizards books - just wait until the market gives you an opportunity and then walk over to the corner and pick it up)

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gm bob,

 

Well, you will receive all sorts of good advice on this topic and it remains for you to decide what you are going to do with it.

 

FWIW and IMHO,

 

Trend trading and intraday trading are different animals all together.

In the long term, price is being pushed somewhere and the resolve and commitment of the Trend Traders is tested along the way creating pullbacks and recoveries until eventually the trend runs out of steam and dies.

 

Day trading is all about, in fact it is only about finding and exploiting imbalances.

 

Yes there are times when the intraday moves in harmony with the long term trend, but this must not be allowed to cloud the issue, and that is .. The Intraday Trader should be hunting and exploiting imbalances.

 

Taking the ES as an example, there are a number of trade-able imbalances every day.

If the day is trending then the number of occurrences are usually less and the number of tics in each trade is greater.

If the day is going nowhere, the number of trades is greater and the number of ticks per trade is less ... both of these days are excellent for trading.

The risk upon entry of a Day Trader is minimal because either the trade runs almost immediately or The Trader scratches the trade, usually for a tick or two of profit or occasionally a tick or two of loss.

 

If you are garnering the impression that The Intraday Trader is stacking the odds greatly in his/her favour then you are correct.

 

Once The Trader is booking a solid performance each day and the number of scratch trades are not too great and the total ticks from scratch trades is zero or better, then The Trader will begin to increase size.

1 to 2 lots is 100% ... 2 to 3 lots is 50% ... 10 to 11 lots is 10% increase... and so on

 

On the other hand, The Trend Trader is employing his/her FA/TA skills to climb onboard a long term trade in the correct direction.

His/her ability to manage the trade is less than The Intraday Trader and he/she needs deep pockets to increase size significantly once pullbacks, overnights and weekends are factored in .... never the less, a good profitable trade will net thousands of dollars on a set and forget basis.

 

Each imbalance that is encountered is a pullback / trend reversal potential to a Trend Trader ... whereas these imbalances are potentially profitable trades to The Intraday Trader.

 

So, in my book, Trend Traders and Intraday Traders are two completely different creatures

and it is entirely over to you to decide who you are when you trade ... this is most important.

 

goodluck

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hi bob,

 

If you are contemplating re-launching yourself as an Intraday Trader, there are three thoughts I would like to pass on.

 

... you need to give careful thought to your screen setup ... ie type and size of bars .. amount of info on the screen and particularly is it original info or does it mimic something else

... your rules for imbalance need to be cut and dried as the good trades happen quickly...this is a good sign because it means that you are thinking like the group of people who have the capacity to move markets.

 

... this all requires focus and concentration which means time away from the screen is very important ... therefore you need a crude alarm setup that will pull you back to the screen when price is entering a setup zone ... it doesn't matter about the number of false alarms within reason, just consider the amount of time that you are being released from the screen so your mind can default back to neutral before the next alarm.

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hi

 

 

the retail edge is....

 

 

retailers dont have to be in the markets all the time !

 

while institutions have to be in the markets all the time ..

 

 

thats the biggest edge...

 

retailers dont have to satisfy customers.. they work for themselfes...

 

and what better market conditions could a daytrader have then a directional market.. wheter it be up or down..?

 

even consolidation ... if it plays out all day ?

 

who cares about direction ? . if ur only conceren should be how to position yourself on any specific market condition ?

 

.....

 

Hi Pryme Tyme

I was a bit skeptical about your replies,especially the long term and short charts that look the same.This does not happen often. But you give me some food for thought

"Retailers dont have to trade every day"

Find a LT and ST chart that look the same and trade the ST .

Now the EXIT strategy?.

regards

bobc

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BobC,

Re: “How do I do this?”

Trend trading Requisites:

Capitalization.

Clear rules ->… and 'excessive' clarity about whether you are Pure Trend Trading or Trend ‘Following’ Trading, etc.

 

If you are choosing Pure Trend Trading, then your trading analysis days are over. You are in the instrument selection business now. You will need to internally reframe how you process ‘obvious’ correlations between instruments. Most basically, day traders are ‘trapped’ in typically high (positive) correlation instruments. Trend traders are not. They seek the quasi correlated instruments then learn to minimize consideration of those correlations even further… only scratching the surface…

(Acceleration and) Momentum / ‘action’ in the technical, day to day sense has to become meaningless in your perceptions and study of a market. It has to become noise…

Plan on being in perennial moderate drawdown, occasional serious drawdown, then (too) short periods of geometric profits… rinse and repeat.

In Pure Trend Trading, outliers are the edge – period.

 

If you are choosing Trend ‘Following’ Trading, most likely you will end up doing extrapolations of the same things you are doing now… just on a longer time frame. … ostensibly longer elapsed time between ‘decisions’…. I’m on Ntrade now betting ‘good luck with that’ … while simultaneously sincerely wishing you good luck :roll eyes:. Just by changing time frames / crowds, you may find it to be a total breeze to all of a sudden be able to “just wait until the market gives you an opportunity and then walk over to the corner and pick it up”… if so you are an exception. (And you are an exception, btw – but in that niche ??? )

 

With no apologies, the rest of this reply does not attend to your “How do I do this?”question.

Have you considered adding new approaches instead of exclusively switching? Have you considered consciously, deliberately setting aside your short term framework for 30 – 60 minutes a day (at first) and gradually building the mindset it takes to be a good trend trader?

 

If it is “true to your nature” to switch to trend trading, then I encourage you to go for it… but if it is “true to your nature”, then why haven’t you been doing it for your whole trading career? (and btw my friend, that is not just a smart ass question). Essentially, will 'it' really become noise ignored? Will you really drop the no longer necessary, now limiting, now contaminating, modes and skills you have developed?

 

fwiw… this is from definitely a non trend trader who has been working on that ‘weakness’ for a long time now…

even though ‘disciplined’ trend /seasonal trading actually kept me in business in the early days, it goes against my nature. The only trend trades I have ever 'enjoyed' / wholeheartedly committed to are my long term physical PM trades… give me an index chart anyday.

 

Sorry this is brief … not much posting time today... 12.21.12 coming up and all...:rofl:

 

zdo

 

PS THE LONG TERM TREND is not the ONLY TRUE EDGE the retail trader has.

Edited by zdo

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BobC,

Re: “How do I do this?”

Trend trading Requisites:

Capitalization.

Clear rules ->… and 'excessive' clarity about whether you are Pure Trend Trading or Trend ‘Following’ Trading, etc.

 

If you are choosing Pure Trend Trading, then your trading analysis days are over. You are in the instrument selection business now. You will need to internally reframe how you process ‘obvious’ correlations between instruments. Most basically, day traders are ‘trapped’ in typically high (positive) correlation instruments. Trend traders are not. They seek the quasi correlated instruments then learn to minimize consideration of those correlations even further… only scratching the surface…

(Acceleration and) Momentum / ‘action’ in the technical, day to day sense has to become meaningless in your perceptions and study of a market. It has to become noise…

Plan on being in perennial moderate drawdown, occasional serious drawdown, then (too) short periods of geometric profits… rinse and repeat.

In Pure Trend Trading, outliers are the edge – period.

 

If you are choosing Trend ‘Following’ Trading, most likely you will end up doing extrapolations of the same things you are doing now… just on a longer time frame. … ostensibly longer elapsed time between ‘decisions’…. I’m on Ntrade now betting ‘good luck with that’ … while simultaneously sincerely wishing you good luck :roll eyes:. Just by changing time frames / crowds, you may find it to be a total breeze to all of a sudden be able to “just wait until the market gives you an opportunity and then walk over to the corner and pick it up”… if so you are an exception. (And you are an exception, btw – but in that niche ??? )

 

With no apologies, the rest of this reply does not attend to your “How do I do this?”question.

Have you considered adding new approaches instead of exclusively switching? Have you considered consciously, deliberately setting aside your short term framework for 30 – 60 minutes a day (at first) and gradually building the mindset it takes to be a good trend trader?

 

If it is “true to your nature” to switch to trend trading, then I encourage you to go for it… but if it is “true to your nature”, then why haven’t you been doing it for your whole trading career? (and btw my friend, that is not just a smart ass question). Essentially, will 'it' really become noise ignored? Will you really drop the no longer necessary, now limiting, now contaminating, modes and skills you have developed?

 

fwiw… this is from definitely a non trend trader who has been working on that ‘weakness’ for a long time now…

even though ‘disciplined’ trend /seasonal trading actually kept me in business in the early days, it goes against my nature. The only trend trades I have ever 'enjoyed' / wholeheartedly committed to are my long term physical PM trades… give me an index chart anyday.

 

Sorry this is brief … not much posting time today... 12.21.12 coming up and all...:rofl:

 

zdo

 

PS THE LONG TERM TREND is not the ONLY TRUE EDGE the retail trader has.

 

Dear zdo

Thats pretty good

Even though it was a bit brief.:)

And a great question "Why havent you been doing it for the past 42 years"

I will come back to that

thanks

kind regards

bobc

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Hi Pryme Tyme

I was a bit skeptical about your replies,especially the long term and short charts that look the same.This does not happen often.

 

Well For me i dont care wich TF iam looking at.. as i simply follow price ...

and the price doesent care about Time Frames and i can truly say

that the price behaviour is the same on all TFs .. ie the mechanics behind moves etc..

 

But you give me some food for thought

"Retailers dont have to trade every day"

 

 

Find a LT and ST chart that look the same and trade the ST .

Now the EXIT strategy?.

 

u dont have to find a LT and ST that look the same , u just have to follow price

and enter on your secified entry and Risk model.. wich includes the exit strategy

ie. where the SL and where the TP is set .. and how u manage an open position..

these factors should be outlined before u enter a position..

 

just in case i would manage a long position taken on an M1 chart wich trades @ resistance on a Daily TF , differently then a short position taken on M1 at the same level..

as the higher TF tarders may have deeper pockets and wider SLs.. and therfore could use Intraday tarders as their liquidity providers.. and in such case the longterm tarders may outnumber the intraday traders .. due to the fact that intraday traders have a smaller risk window.. ie small stops.. etc... (puking)

 

i will have different risk profiles for each position taking into account the bigger picture ie. if the LongTerm trend is Up .. the riskprofile for intraday shorts is set to *risky* and therefore manage the position tight..

 

 

tooo short .........

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Day trading is all about, in fact it is only about finding and exploiting imbalances.

 

Taking the ES as an example, there are a number of trade-able imbalances every day.

 

Hi John,

 

First off, just want to say I have been lurking on this site for some time after being turned off by the behaviour on ET. After seeing some of the quality postings on this site from yourself and others I have decided to sign up (btw, really enjoyed your posts on the Is Discipline Enough to Succeed thread, really good stuff).

 

In reference to your last couple posts on this thread, curious what you mean specifically when you refer to imbalances and how does one go about identifying these imbalances?

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Hi John,

 

First off, just want to say I have been lurking on this site for some time after being turned off by the behaviour on ET. After seeing some of the quality postings on this site from yourself and others I have decided to sign up (btw, really enjoyed your posts on the Is Discipline Enough to Succeed thread, really good stuff).

 

In reference to your last couple posts on this thread, curious what you mean specifically when you refer to imbalances and how does one go about identifying these imbalances?

 

well my two cents...

 

first off what is balance ?

 

if there is a, lets say total balance then price doesent move .. ie. if there is enough buying against selling .. then price doesent move at all.. or trades in a narrow range..

 

trades are going off only at bid and ask....

 

now an imbalance occures when either supply or demand is increasing or outnumbering one or the other.. and if the imbalance has full effect price moves X ticks.. till it finds balance again.. ie. a fair value...

 

How to spot imbalance ?

 

simple answer only after the fact!

 

but some clues can be made before the imablance and and in wich favour (side) it may occure..

 

but that depends.. are u looking at charts or the DOM (depth of market)

 

keep in mind Imbalances can come and evolve in many shapes...

 

for charts.. a some clues of an imbalance in favour of the bulls (demand) might be

Higher highs/lows, Strong Rallies(buying pressure) , weak reactions, path of least resistance

ie. effort vs. result = not much defence of the bears .. reactions at resistance might get weaker the more we test the res.. ie.. we bounce off less and less... .. not much trading to the downside.. etc... or u might see that supply gets absorbed at res.. etc..

how to spot an absorbtion.. well if price sits at resistance.. wher it has been previously rejected hard and with good momentum.. and now tardes at the level without or with less frequent reactions.. and we make a steady progress thru res... ie higher highs/lows.. and closing of the bars.. then thats your clues... ;)

 

also we have to talk about fair (balance) and unfair (imbalance) prices...

 

where an unfair price gets rejected .. as for example the selling pressure is not existant while .. demand at the current level is high.. or at least higher then what the bears have to offer..

 

but then again .. all these moves can only be seen after the fact.. thats why we take risk! after enough clues have been seen..!

 

but like john said.. intraday traders should put as many odds in their favour as possible.. and even then.. its not 100% safe... thats where the risk management comes in place ;)

 

hope this helped...

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Trend Following Wizards - Red October | Au.Tra.Sy blog - Automated trading System

State of Trend Following in November | Au.Tra.Sy blog - Automated trading System

...typical months in waiting-for-outliers-land...:missy:

 

bobc (twins),

now that Henry is going out, there’s plenty of space in this space for you ;)

 

 

 

“Do not pray for an easy life. Pray for the strength to endure a difficult one.”

Bruce Lee.

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here is another retail edge so to speak :)

 

 

Trading Size Huh?

 

 

yea , retailers dont have to worry about liquidity (providers) (takers) as its quite

a differnt ball game if u trade 5 or 10 contracts or 1000 contracts .. , right ?

 

institutionals do have to take that fact into consideration when opening (accumulating) or

offsetting (distribution) a position! ...

 

as they dont want to bid up there own buying .. retailers dont have to worry about that

 

guess what?! ..

 

 

institionals more often then not fade breakouts . ie trade against it..

 

why ?

 

they need the liquidity to offset or open a position ..

 

how ?

 

well... lets say we breakout of resistance we have some Stop Loss orders from bears

there.. wich get triggered .. we have some bulls who have some limit orders up there and

some long market orders coming in all at once... ie scared plus fresh new money coming

in at the same time... jackpot for instutionals who offset a position in this demand..

 

nice.. move..

 

u see thy have to execute and tarde in a whole different way then average joe...

 

they do play games aswell.. to get what they want.. and they are carefull aswell..

 

u know if the chief tarder says to its trading floor .. we need to buy X contracts of

instrument Y on an average price of Z.. for whaterver reason.. the traders know what to do

.. to accumulate the position.. the execute there orders .. in such a way .. to satisfy the

chief.. and take into consideration .. the merket mechanics. and there participants... and

maybe bank some profits .. for themselfes along the way.. ;) (execution tarders)

 

 

 

example.. (one of manny)

 

we trade at support some the bid side shows size (market looks strong) *****

 

and all of a sudden the bids get pulled and the offer side gets bigger and we see the

remainig bids get hit .. we break down (the market looks weak)

 

 

SL of weak bulls get hit ,bull scalpers puke, weak bears jump abborad.. the increased

supply .. is enough to fill teh allready placed bid orders at the lows (institution) while at

the same time downwards a execution trader placed some contracts of its own pocket

along the way.. wich got filled at the begining of this action.... and all of a sudden as

selling pressure reduces and the insituion got there contracts they wanted.. they buy the

remaing offers at the lows,, while at the same time the execution trader placed its offers

on the way up.. .. and now we see size coming in on the bid aswell.. ie .. strenght is

returning..

 

now the weak bears puke the way up..back above support an fill the orders of the

execution trader.. wich banked a profit .. ;) .. and then nothing happens.. for quite some

time... As Both partys are happy .. the institution as they got waht they wanted on good

prices .. and the execution trader who made a quick bonus ... ;) just doing his job..

 

***** at this stage the execution tarder may put some offers from his pocket in

wich got hit by weak bulls due to the current strong looking market..

while the weak bears, SLs, fill his Bids below support for some extra cash

 

those crooks :2c::cool:

 

do retailers have to worry about size ? liquidity ? .. not really ;)

 

cheers

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The ONLY TRUE EDGE the retail trader has is THE LONG TERM TREND

 

Most systematic trend followers lost money in 2012 and we are talking about some serious professionals. How do you expect to win doing TF?

 

Intraday is dead because of bots and TF is dead because of volatility. The answer is swing trading. Someone else mentioned it. There are some good blogs to follow and learn from. Here is a short list from the many:

 

Quantifiable Edges This guy quantifies everything, literally.

 

Michael Arold Read about the axiom of small edge.

 

Price Action Lab Blog | Quantifying Market Price Action He also quantifies everything but in addition uses portfolio backtesting to analyze potential edges.Very dynamic method.

 

Quantitative Trading Ernie Chan often posts some good edges and he is very generous about that. A little harder to follow and you will have to search the blog.

 

If you decide to keep on trading, these are good for a new start.

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I agree somewhat with equtrader. There is a place between daytrading and trend following that for me offers and edge. I trade off of weekly and daily charts looking for opportunities to enter on changes in demand/supply. I generally hold anywhere from a day to 3 months. I guess that makes me a swing trader. The trading principals are the same as daytraders ie; locating support/resistance areas, stop/loss, price action/money mgmt etc. The main difference is the timeframe (D&W chart) I work from.

 

Since I've been lurking on TL, I've seen very few posts specifically about swing trading. Are there no swing traders out there following TL?

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I agree somewhat with equtrader. There is a place between daytrading and trend following that for me offers and edge. I trade off of weekly and daily charts looking for opportunities to enter on changes in demand/supply. I generally hold anywhere from a day to 3 months. I guess that makes me a swing trader. The trading principals are the same as daytraders ie; locating support/resistance areas, stop/loss, price action/money mgmt etc. The main difference is the timeframe (D&W chart) I work from.

 

Since I've been lurking on TL, I've seen very few posts specifically about swing trading. Are there no swing traders out there following TL?

 

Yes, but for some reason it's not considered as glamourous as the cut and thrust of trying to "scalp" the es etc, so the swing traders don't generate much air-time.

 

If you haven't found it already, take a look at the thread 'Optiontimer's Project'.

 

BlueHorseshoe

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now captain Bob much more money can be made at trading the intraday and interday trends that longterm. please see 1st chap of hursts book ...magic of stock market...... for detailed explanation of why. however, it doesn´t hurt to trade both.

 

throw brooks books in garbage and buy his online course. much much better explanation of his methodolgy and it is a viable system for intraday trading. you can find it at his website.

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captain Bob where is Mitsubishi? I'm angling for another good knockout fight since the milk sops on the gun control thread are getting me stirred up. mit is being way too quiet.

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