Technical Stuff
Profit by Timing the Trade.
Spikefader (email | website) submitted:
Is "timing the trade" an important concept? Personally, I think it is. But then again I disagree with dollar cost averaging and stopless trading. But forgetting my own opinion on that, exactly when does one strike? When does one pull the trigger? When do you move without hesitation into a position? What does that moment feel like? How does one know the feeling? Excellent questions. It's a mystery to most. It's a passionate challenge to some. It's unimportant to many. It's an intense focus of mine. What is it for you?
There are many paths that lead to "the moment". There are many disciplines that can get you there. There isn't one right answer, yet there are many wrong ones. There are many ways to make money in the market, and timing to make that money is an entirely relative thing; relative to the trading plan you formulate and present to the market. And "The Moment" or perfect timing only really matters where you have either limited risk to a position or where maximum profits are very important to you.
Some people aren’t too concerned about sacrificing 10 or 20 percent on an initial position, where they are intent on add to such losers, intent on establishing a dollar cost average into a position for long-term investment. Timing is less important to them. Such timing methods are poor in my humble opinion. And if you don't formulate and present a plan, then you can hardly declare that you have timing. For without a plan, timing is nothing. Without a plan, it's pure gambling and a plan doesn't matter, for you are prepared to lose the whole lot on that roll of the speculative dice.
What makes timing crucial is the fact that one has a plan and a certain risk tolerance or a desire for maximum profits. With no risk tolerance, or no desire for perfection, you are simply a long-term knuckleheaded buyer that is buying any old time regardless of the risk. But no matter where you are in the hunt for perfection or the learning curve in trading, or the investment mentality, the moment to strike will forever remain the same. It is what it is; it's a point in time that matters to the trade. It's the edge, or part of it, and it's what separates the pros from the newbies.
It remains what it has always been and will always be. It is clever support, it's smart resistance, it's the moment of maximum weakness or maximum strength, it's pause at the end of a stretching rubber band, it's maximum compression for a bounced ball, it's the ebb of the tide, it's the climax, it's the crescendo, the culmination, the highlight, the pinnacle, the peak, the best moment, the trough, the height, the max out, the zenith, the dip, the crest, the pike, the point, the summit, the mountain tip, the gutter, the ditch, the drain, the low, the ridge, the channel, the gully, the line, the rut, the groove, the pothole, termination, the conclusion, the rock bottom price. It's so many things, yet it's the same thing. It's sense at the end of madness, reasonableness in the face of the extreme, it's the bursting of the bubble or the calm before the storm. It's the thing I love to find, and the thing so many think is too hard to find.
It's that moment in time when those who oppose your trade bias are at their most vulnerable, where your risk is perfectly within limits to achieve your reward; it's future profit yet confirmed and undiscovered, it's the moment that exploits the weakness of others and rewards us the most. It's 50% of market forces we can control, and 100% worthy of stalking for.
If there's one true thing about perfect moments to trade it's that those moments don't typically stand still for very long, if at all. They usually come quickly and very often quietly announced; only those listening with intent are able to hear the announcement.
And this picture ( http://img356.imageshack.us/img356/9656/catnmouse8xj.gif )says it all for me. Imagine you are the cat and the trade is the mouse. The mouse, or the trade, in the air and vulnerable for a split second and scurrying away the next.
In that split second of vulnerability you will either execute or you will hesitate. What do you do?
The clever money waits in ambush or can turn and execute on the fly, plan set in stone or made up in a few wise moments, and when the green light is there, and you are ready to jump, ready to fire, ready to commit, countdown is done, and with not a second to spare, you pause, hesitate, re-think or worry, chicken-out, lose focus and doubt, you have failed. Hesitation is failure. Failure is loss. Loss is dishonor. Dishonor is shame. Preparation is everything, but it is nothing without the will and ability to trade the planned trade. Remember, fortune favors the bold, the brave, the innovative and the prepared mind. Identify what a perfect moment is, prepare for it, and react when it comes. Then it's up to the market to deliver the verdict of whether your preparation has been enough, and whether your execution was flawless. Perfection will be delivered or denied. Thus is speculation. Thus is Timing The Trade Prosperous trading!
Author: Spikefader (2006) http://technicaltrades.net
