The Trading Game

When I was asked to write an article for Stock Futures & Options, my original thought was to cover some of the more useful technical analysis topics that are so crucial to charting the markets. But as I considered the bigger picture, I felt it should have less to do with technical analysis and more to do with some concepts that merely tie into the technical aspects. Though I will explore various types of stocks that people love to trade, various time frames that can be used, some methodologies and a few charts, I felt it was important to make an equal balance between personal trading behaviors and the technical side of the market in this article.

We all attempt to play the trading game “correctly,” either from buying breakouts, pullbacks or shorting the rallies, fading the gaps, or using our stochastic or MACD indicators and moving averages. That’s all fine and good, but the real question we need to ask ourselves is, do we play the RIGHT game? Does the style we use in our trading really fit our particular profile or personality?

I recently had a pretty frank conversation with one of my close trader friends, Mary, and her “game” is what this article is built around. Mary is quite an intelligent person, but she was really having difficulties making a profit in the markets, buying every gap down, shorting gap ups, taking swing trades, buying bull flags and shorting bear flags, counter trend trading and, also, trading breakouts. She traded anything and everything that she could find, but wasn’t having much “luck.” She explained to me her criteria for trading, specific trade ideas, why she pulled the trigger to enter, how she placed her stop losses and profit targets, and it all seemed logical to a point. So, how could she lose doing the right thing? Everything sounded right and, yet, it turned out to be wrong in her case. Was she over trading or not trading enough or…?

Of course, there are many others like Mary who want to become good traders and have a rewarding career in this field. And, like her, they do not have a set game plan, a clearly defined roadmap of what’s right for them and what will help them on their journey toward being a successful trader.

Initially, I thought that perhaps there were some very obvious trading errors that I could identify for Mary. I asked myself if it might be possible that Mary was trading NYSE stocks on a 60-minute chart when she should be using a 5-minute chart, and on and on. Each question I asked her led to a series of new questions and, finally (as you’ll see), I began to understand what made her tick, what her profile was and what the “right game” for her was.

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