Today's Quote: “There is no pleasure in life equal to that of the conquest of a vicious habit." Anon.

Here is a scenario that happens quite often. A new trader has discovered the world of trading, and is sold on the technical approach. The trader is looking at charts and trying to find the footprints of money. Things are starting to make sense. This trader has read many books on technical analysis, and has maybe even taken our Trade for Life™ Seminar. They feel very confident and are now starting to venture out into real charts, real world, not just the class-room and history lessons from a text book. The charts are always perfect in the text book, right?

It is not uncommon for things to go pretty good at first. Then the ironic part is, traders often tend to slip shortly after early successes. There are many reasons this can happen. One of the more common reasons is that traders quickly change how they look at charts.

Good traders are taught to look through charts until a specific learned pattern is found. This is what traders start out doing. Then they quickly switch to studying a specific chart, and trying to force a pattern that is not there. Read the above sentence again, it is the key. Look at it this way. What if a friend showed you a chart of stock xyz and asked if you thought that stock was going up or down tomorrow, and if it should be bought or sold short? Most new traders would feel compelled to find an answer to show off their new found skills. A good trader will answer the same way 90% of the time. The answer will be “I don’t know…” Not very impressive: but accurate. Only if the stock showed a known pattern would he have a real opinion about the stock. It is true that many ‘comments’ could be made. It is in a down-trend, if it goes over this, it is likely to do that… The real question is, are you trying to trade these ‘forced’ patterns, or are you waiting for the ‘pile of money’ to show up?