Monday, July 26, 2010
7/26/2010 Money Management Saves The Day
Good evening traders,
The market played out pretty much as predicted yesterday. First resistance at the 1109.50 Pivot gave us a nice pullback. Then we got a nice divergence off the double bottom at 1104.50 which also happened to be the overnight session high. Funny how those things work out huh...? See if you know these key levels in advance you already have an edge. Let me tell you, I tried trading breakout strategies in the past and then I read somewhere that the big money fades those moves. They were right. I was constantly buying at the high and selling and the low. Now every night I review the charts for possible support and resistance levels and only initiate trades at those levels. You can follow along and make some MONEY too.
On to tomorrow... Price still has to overcome resistance at 1112.50 and I think it will in the next session. I would really love to short the high of 6/22 at 1114.50. Above that is a cluster at 1118ish and another at 1122. Those are areas I will look at for pullbacks. I strongly believe we will see the 1128.00 peak before the intermediate trend reverses. You don't need any fancy mathematics or crazy indicator schemes to figure this stuff out, just look at the charts and draw trend-lines. Its astonishing sometimes how simple it can be.
My trades today include one loser and one winner. As I said last night, I wanted to look for the pivot 1109.50 for the first pullback. I wasn't at my desk when we initially touched it. I thought I could go short and didn't exercise any patience at all with my trade. My money management rules say I should be within one point of the recent high or low before executing a counter trend trade and I wasn't. I got stopped out (not surprised). No big deal though because I got another chance to short and a much better setup the second time around. I tweeted my entry @infected1172. A couple minutes later, the trade went all the way to the bank (again not surprised).
Today's lesson is to stick to the plan and practice sound money management. See, if I only risk one point to make a profit of two points, then I can be wrong 50% of the time and still make $MONEY$! That's simple math right there. You don't need a finance degree from Pitt to get that :)
I know for a fact that I won't be trading tomorrow, but I will be watching the market on my phone and keeping an eye on those key levels. You should too. As always, Good luck