If you know yourself and your enemy, you will not fear battle.
If you know yourself but not your enemy, you will lose a battle for every one that you win; and if you do not know yourself and do not know your enemy, you will never see victory.- Sun Tzu, The Art of War.
We have to think about the title of this article from a pure psychological perspective. Trading is a battle and if we look at the markets in a war like formation then this psychological way of thinking should become apparent to one's mindset.
Our army would consist of our capital balance, our tools to trade, our knowledge, our charts and the rest of the needed components.
Then we would have our battle with the chosen market in which our position is taken. Factors such as timing, volatility, size of the market, stake size will either kill you or let you win. In reference to the quote above one could either win this battle or lose this battle.
Trading is not all about knowing the markets; it's also about knowing yourself. You cannot win from the markets if you only know your market or only know yourself as you'll simply be winning and losing with no sense of consistency. In order to win war against the markets you must have full recognition of yourself and of the markets you are trading.
Would you sky dive without the right equipment? If you haven't got the right equipment it is almost certain that you'll die and in the same way if you haven't got the right needs in trading chances are your account will die.
Trying to trade with low capital is a risk all together. Likewise trading with lots of capital and not knowing how to trade with it is also another risk in itself. Trading with the wrong tools is another risk, trading with highs stakes is another recipe for disaster and trading without knowledge is also a killer. So as you can appreciate it is an absolute necessity to make sure the overall formula to trading is correct as this forms the framework for your battle. Learning the skills, experience and devotion of time are all a requirement.
The list simply goes on; however in a nutshell don't try to trade the markets if you don't know the markets you're trading. If you don't know yourself it's wise to look away from the markets and stick with what you do know. If you're looking to go through a process of learning by using capital within the markets without knowing the markets and without knowing yourself then be prepared for an expensive journey. To become a doctor, you invest in your education, you obtain experience and you become good at what you do over time. Every career needs time to develop and with it once you know your profession you simply become good at it. Trading is no different; it is one of the hardest professions as the ingredients, the psychological aspects of one's nature, the knowledge and the experience all needs to be balanced in unison to make it work. However once you know this profession it can be an absolute doddle.
This is how www.tradingmarketsignals.com dealt with the first trading week of August...
The first week of August has been unwrapped for us all but has it provided you with enough clarity to insure the fact that markets will continue to move in their recent trending directions?
Stock markets closed higher whilst the dollar continued its decline but no moves took place that carried major significance. The range of movement was fairly tight.
Is it important to be aware of the market's overall direction?
From a traders perspective it is important to understand the overall direction for any market that one wishes to exploit. However the overall direction on one timeframe will differ from another timeframe. This is purely based on what the trading objective is for the trader.
Are you trading intraday moves? Short term swing moves? Or position moves?
Below is a four hour chart for the Dow Jones:
Its shows the action for the first week of August and with it you can acknowledge that the week was a difficult one to understand. Firstly the range was only 200 odd Dow Jones points. Furthermore the majority of the week was spent in a 100 point range! So what could one take from the market?
At tradingmarketsignals.com we did the following with our TMS System in our New Live Trading Room:
The high is represented by the yellow line. The pivot line was virtually at 10650 and our TMS system gave a short signal at 10645 the red line. The green line shows how the Dow was being held during the week by the green line. The TMS system exited the short signal at 10575 represented by the blue line for a gain of 70 points!
Once again in a rising market the TMS system represented gains by issuing sell signals.
The story with Crude Oil was no different:
Once again the chart above shows the action for the first week of August with each candle representing four hours worth of moves. The yellow line shows the highs for Crude Oil in which clear resistance was made. The red line is where the TMS system provided a sell signal at $8145.
On Friday the TMS system provided the exit at $8040 for a gain of 105 points!
Once again the system represented gains from issuing sell signals in a rising market!
In fact in our Live trading Room at TMS the system did the same with the Euro signals as well.
All in all the first week of August was a difficult one as markets moved in tight fashion. However in our Live Trading Room our TMS system gained a total of 293 points! That is immense considering the action provided from the markets.
So there you have it, trading against the overall trend is possible and can be highly rewarding if you know Where, Why & When to trigger your mouse! We are hibernating over the weekend so we're ready for next week's market action! Make sure you are ready as well!
Dow Jones expectations for the second week of August
The market has a strong chance of simply heading to 11,000 just as we have called on many occasions previously when the market was sitting 700-1000 points lower. However at this point in time, in the last few weeks, we have stated time and time again that the risk reward ratio dynamics have now changed. Buying now for a possible anticipation of 11,000 is not the same as buying was when the market was lower.
For now though TMS just wants to see the close on Friday and this is because we would like to see where the market closes in relation to the weekly chart.
Dow Jones Weekly Chart
The resistance for the Dow Jones sat at 10600. The market is now 100 odd points higher so does this mean that the upside probe to 11,000 is valid? Not at all and this is because if you look at the weekly action the market needs to close above 10740 for real validation.
Highs above this and a weekly close below the level would still leave the market with upside convincing to do whilst at the same time the market can still keep it's possible downside objectives alive.
With the market being 300 points away from 10700, we will find out soon enough if the market will give us 11000 again. Either way, we're not speculating if the market will go on to hit the yellow or green market lines until the market delivers a close above 10740. Once again the risk reward dynamics have changed and yes TMS was behind the last 1000 points upside but we're not bothered about the next possible 300 points or so as the market will be facing some significant testing points in the coming weeks.
When TMS talked upside others were talking about a crash and now that we've got the upside the crash talk has simply gone silent. From a contrarian perspective TMS would like to start talking about crashes soon! J
It will no doubt be a defining week for this range bound year but we'll be following the short term moves with our TMS system signals throughout the week when and if the opportunities arise in our live trading room.
To obtain analysis of this kind with TMS system signals that produce REAL market moves, it would probably be wise to look at the link for membership below in which you can join the TMS private member community.
At TMS we have just opened our live trading room where the signals are not just for the position style suitors but also for the intraday and short term traders! In the last few months we were issuing short term and intraday signals and with the success we have demonstrated it was apparent that TMS needed a live trading room!
This is a chance to come on board and obtain our TMS system signals for Dow Jones, GBP.USD, EUR.USD, FTSE100 & Crude Oil:
Membership offer ends after the U.S. market closes on the 31st August 2010: http://tradingmarketsignals.com/#/tms-annual-membership-offer/4542738012
