Trading secret for those unwilling to understand that they can not predict the future

Traders know less about the future than they think they do. And if the trader knows she does not know, she thinks someone else does.

It's why you hang onto every word of woefully inaccurate CNBC pundits. It's why you love and hate Cramer. It's why you follow 3654 members of the Twitterati.

Sadly, it's why you risk too much. It's why you put all of our eggs in one basket. It's why you won't get rid of that losing position. It's why you do not cut your losses. You don't like the idea that you do not know what will happen. 

The one percenter understands. She knows that she does not know. Rather than trying to predict, she reacts. She understand probability. She understands risk.

I am the exception. That is why I have a trading service on Bullsonwallstreet.com. I have a crystal ball.

Okay, so I can not predict the future. However I still make money trading stocks because I know that I do not know.

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The Power of One Winning Trade and Getting Your Mind Right

I am the worst trader in the world!  

I know you have said this to yourself before, or at least something close to it.  I have.  When do I say it?  

It's always after a few losing trades.  Yeah I know.  You all think I'm an emotionless robotic trader.  In my member only Trade Report videos, you have never heard me get pissed off or sound frustrated.  I am ALWAYS positive.  

Here is a deep dark secret.  In the quiet moments, even I question myself during drawdowns (periods of losing trades).  It does not matter if it's a small drawdown sandwiched between two successful winning runs.  It's just how we are programmed as human beings.  Losing hurts more than winning feels good.  Every great coach will agree with that.  We obsess over the losses to the point that winning is nothing more than a relief.

Now here is where winning and losing traders diverge.  While we all feel the same emotions, the trader with a negative, losing mindset will change his game and start trading "stupid".  He will chase stocks that already made a move, take bigger risks with bigger position size than his account can handle and start taking small profits just to get that little win.  

The winning trader, while emotionally frustrated, sticks with the game plan and trading methodology.  Ten losing trades are not going to deter her because she knows she is a good trader and is just on the wrong side of the probabilities.  Soon the odds will change and if they do not, she will reassess her game plan and adapt.

2015 Trading Stats

Of course there are times when you are trading incorrectly and you need to review your trades to make sure it's just probability and not poor judgment.  However, even if you have made poor judgments with setups, you will never commit the trading sins you can easily control.

If you stick with your plan and do not let your emotions get the best of you, you will get that first winning trade.  That trade will kick start a new winning run and over time, if trading correctly, your winning runs will far outnumber your losing runs.  

It's all about getting your head right during the toughest times.  If you do that, and I know you will, you will be a successful trader.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.  

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Winning traders have a secret crystal ball: let me show you how to get yours

A winning swing trader must have that uncanny knack for predicting the future.  Yes, the successful ones have a crystal ball that losing traders can not access.  In this post I will share how to access it and more importantly, use it effectively.

Did I have you going?  No, there is no crystal ball.  We play probabilities, manage risk, manage our trades and prepare relentlessly for every realistic possibility with an enthusiasm unknown to mankind.  

Identifying as many of the possible outcomes as you can, key in on the probable outcomes and come up with a game plan for each of these outcomes. That is our crystal ball.  

Let's use biotech to illustrate this point.

Biotech has been THE sector to trade since    .  Even when it looked like it might crack, it came back with a vengeance.  It has been the market leader.  However, biotech is like a great boxer that shows signs of weakness before getting his bell rung.  He may have a few fights left in him, but we all know he's close to getting knocked out.

Notice that negative volume is picking up to the downside.  Whereas in October the bounce that followed the pullback had stronger volume than the pullback, the last two major pullbacks have been met by weak, feeble bounces.  The trend is slowing.  Biotech is giving us clues that it no longer wants to lead the market.

Now how do we use our crystal ball?  We identify the probable outcomes based on past experience.

1. the current bounce stalls in "dead cat bounce" fashion . We enter on a confirmation candle or early near resistance.
2. the low volume bounce carries farther than expected to highs.  This bounce will likely fail, as did the previous one.  In this scenario we enter on a close below the old high as a breakout-failure setup.
3. volume unexpectedly picks up on the bounce.  In this case we look for a good long entry.

These are the three most likely scenarios.  While we will come up with good probabilities for each scenario, we do not have a crystal ball.

However, once one of the scenarios occurs, we have a game plan in place that will make it appear that we have some sort of mystical crystal ball.  

At the end of the day, we do no have a crystal ball.  We do have something much better: PROFITS!

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.  

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Today's Trades: FCX and MON

I made two speculative trades today, short FCX and long MON.

MON is oversold, but still a few points from support. The higher probability setup is to enter long at $70, which I will do if I get stopped out of this trade.

FCX shows a bearish pattern, but has bounced over the 50 day moving average.

Both trades are low risk, but average probability. Obviously I am using tight stops for these trades.

On Probability, Trading and Current Market

What do I mean by high probability?  In trading, I define a high probability setup as one that gives me a significant edge over an average trade.  For instance, in my back tests, when stochastics hit 90 (extremely overbought) in a bear market, coupled with a few specific trading setups, the success rate of shorting is above 75 percent.  This is a very high probability setup.  Obviously, it doesn't occur often.  When it does, I usually get very aggressive with the trade.  

Adding volume and paying attention to accumulation and distribution patterns can add or subtract to the probability of a pattern setup.  For instance, in the bottoming price pattern, strong accumulation (positive volume pattern) underlying the price pattern increases the probability that the trade will be a winner.

Currently their are no high probability setups.  However, if the market pulls back to support, or ramps higher toward resistance levels and become extremely overbought, well see high probability setups emerge.