Intraday trading is not about predictions or fulfilling your need to be right. It’s simply about finding spots to trade that offer high probability risk to reward.
Most aspiring traders take this thought and run to the charts. They will search and study until they find a pattern or play that seems to repeat with a predictable outcome. They will scour all the various sources of information available reading about different patterns and plays. They will then add this knowledge into their arsenal and head off to the battle we call trading. Armed with this new found knowledge and a decent game plan they will undoubtedly find some limited success. Sounds simple enough, so then why do so many fail to achieve consistent profitability? Discipline or lack of discipline I know plays a major part in this, but even those that show some discipline and only play these patterns or plays seem to fall short of the goal. What can help turn the corner?
I teach traders that although they see the same repeating pattern or play the conditions on the tape will change the probability of the same predictable outcome. Until they can grasp and exploit that information they will struggle with the sizing and win/loss ratio of their trades. The best traders will use the information on the tape to either exploit or pass on trades that appear to be that same predictable outcome pattern formed on their chart.
Over the next week my blogs and chart.ly videos will try to help you understand this important word… Probability.
Jeff Davis @Shaq48_Trading [email protected]
2 Comments on “And the Probability Is….?”
what if my strategy is based on tape patterns? there are tape patterns that i see happen with great regularity.
Yes this is true, but you still need it to have less correlation to the overall tape. If the market is j having waves of buy programs go off a seller can sit on the offer and not hit the bid to make your short work. If enough demand comes the seller most likely yanks the offer to offer out higher. Reading the prints on the tape can give you the information as to the aggressiveness of what you are seeing. Put yourself in the shoes of the guy working the big order, in a strong tape he doesn’t need to bang the bid to finish the order thus, your risk reward has changed due to the overall condition on the tape. The SMB radar helps find the stocks that have less correlation to the market.