Hi
Hope you had a good week. Here some thing for the weekend.
Today it is about a floor trader. Floor traders do and did work directly in the exchange. The way, they have to work, doe's not really allow, to not take a trade when it appears. So, they sometimes work and worked under great pressure and have/had to make big decisions in seconds.
How to do that ?
By using the most complicated indicators and systems. Surely not and that is why we can learn from this fellow people. And that is why the word KISS always finds back to its meaning : KEEP IT STUPID SIMPLE. But stupid, even then, in a clever way.
We all can trade with simple indicators and the recognition of some pattern and that's what he as a pros doe's. He also knows exactly what he wants from the market. He wants to pocket !!
Check how simple his indicators are. They are a really clever mix. Many think, indicators must be complicate. That is not the true. It doe's not mean, that you have to use the same indicators.
I only give ideas with such interviews from such top traders. What you finally do with this information belongs to you. I only can say : For my trading style it helped and helps still today, to have such information. It gave and still gives me, beside other controlling tools, the possibility to adjust my trading with new ideas if necessary. If not, I have some thing new in my head and who knows, when ever I may can use it.
In other cases, I got and get confirmation, that what I am doing, has the chance to be or not to be successful. That is the way, I use this information's. Now let's go to the guy.
He finally was called : The pocket man.
Are you a pocket man ?
Here it goes :
@pocketman> I started using the word pocekts when I was on the floor a certain time ago.
@pocketman> Back on the floor than, it was more audio and visual volume
@pocketman> originally when I looked for a pocket, it was both a value area where there was volume accumulating
@pocketman> in other words, a small range where there was decent range as well
@pocketman> Here is a simple bar chart graph
@pocketman> pockets looks like consolidations, value areas, rectangular shelves, not necessarily V shapes
@pocketman> other people might call them zones or trading ranges
@pocketman> this is a 400 tick chart of the e minis
@pocketman> (with 3/10 oscialltor and ADXon the bottom)
@pocketman> I will also show you my additional tools I like to frame out a trade.
@pocketman> The V trendlines show how they fit into each other
@pocketman> I like to think of the pockets fitting into each other like gloves
@pocketman> "Ws"
@pocketman> are same thing
@pocketman> retesting areas validates them as support or resistance.
@pocketman> Other indicators can tell us if retest will hold or not
@pocketman> buy or sell divergences into an area of a pocket are choice
@pocketman> Moving averages can show if momentum is shifting
@pocketman> I am using this to demonstrate a strong market where pockets are not getting tested back into
@pocketman> each pocket is substantially higher
@pocketman> when buying into a retest of a pocket, I like to probe with a small amount, and once
@pocketman> the market finds support that is confirmed, THEN I go in and put on the rest of the size
When I am trading the mini indexes ( S&P )
@pocketman [16:40:15]> I like to use all four markets to validate a test of support or resistance ( DJ, S&P 500 big one, Nasdaq and S&P 500 mini )
@pocketman [16:40:34]> If three out of four markets are doing what I think they shuld be doing, I pull the trigger.
I drew rectangular boxes on this charts. For my market direction,
@pocketman [16:44:57]> I use three moving averages.
@pocketman [16:45:07]> I have been using them since the early 90s.
@pocketman [16:45:23]> I use a 30 period simple moving average of the highs, a simple
@pocketman [16:45:35]> moving average of the lows (30 period)
@pocketman [16:45:43]> and a 10 period simple moving average
@pocketman [16:45:55]> I colored the slope of the 10 period
@pocketman [16:46:04]> UP or down to help spot the trend direction
@pocketman [16:46:47]> In general,
@pocketman [16:46:58]> lets start with an upside breakout above the 30 high
@pocketman [16:47:29]> There has to be SOME type of momentum behind a move to drive it above a moving average of the highs !
@pocketman [16:47:49]> I then use the 10 period simple moving average for moemntum diretion and confirmation
@pocketman [16:47:54]> For instance,
@pocketman [16:48:03]> when the 10 is sideways and snaking sideways
@pocketman [16:48:17]> it is saying there is not enough momentum to drive the market much beyond a 30 high or low
lets look at a trade
@pocketman [16:49:52]> how I would have entered
@pocketman [16:49:59]> Look at example in middle of the chart. we are in a downtrend
@pocketman [16:50:18]> and the red shows we have a dwontrend on the 10 simple
@pocketman [16:50:30]> I like to put a SELL STOP
@pocketman [16:50:35]> at the RED band
@pocketman [16:50:56]> the moving average of the lows makes a convenient sell stop
@pocketman [16:51:05]> that you can have RESTING AHEAD OF TIME
@pocketman [16:51:22]> (great if you are newer and not comfortable pulling the trigger as well)
@pocketman [16:51:23]> THEN
@pocketman [16:51:46]> we put a protective BUY stop at the moving average of the highs
@pocketman [16:51:56]> So, the entry and stop are automatically framed out for you.
Now, where to exit
@pocketman [16:52:48]> at the least
@pocketman [16:52:59]> I exit when the moving average turns green again
@pocketman [16:53:00]> or,
@pocketman [16:53:05]> if there are Buy Divergences
@pocketman [16:53:07]> I cover
@pocketman [16:53:18]> Or if there is test into a previous pocket
I also will use a three bar reversal for covering
@pocketman [16:58:40]> This is nothing more then a close above the previous two highs, or a close below the previous two lows
@pocketman [16:59:21]> This is a helpful tool for taking a profit as well as initating.
the different things I use to trade:
@pocketman [17:01:01]> the three moving averages
@pocketman [17:01:04]> chart pockets
@pocketman [17:01:10]> 3/10 oscialltor
@pocketman [17:01:16]> and 3 bar reversals
@pocketman [17:01:43]> there is also basic bar chart pattern recognition.
Have a nice weekend
DanPickUp
