Thank
you for visiting our site. There are a few important
principles that need to be understood in order for
a trader/investor to make the most from the services
and analyses we offer. [Additional principles and answers
to common questions can be found at FAQ.]
First,
our approach to trading - and what we believe is the
best way to approach trading - is as a
business. Just as building a successful
business demands a disciplined, steady approach, so
too does building a successful trading program.
Looking
for excitement, 'rolling the dice' & trying to
'win the lottery' are NOT healthy approaches to trading
and will usually end in financial ruin (even if there
is some fun and excitement along the way).
Instead,
a trader should take a steady and selective approach
to trading.
This
means:
-
Taking
one's time when choosing and/or waiting on a trade
(but acting with decisiveness & conviction
once a decision has been made).
-
Trying
to build an account one successful trade at
a time and...
-
Being
selective in the choice of trades.
A
successful business usually grows one new product at
a time. And no business tries to offer every product
and take advantage of every deal and cater
to every potential customer's needs or desires.
Instead,
the most successful businesses recognize their own
strengths (and weaknesses) and stay focused on their
target market.
A
business that specializes in the construction of massive
sports stadiums should not worry if the local custom-home
builder is having a better quarter than they are. Construction
demand is cyclical, sports stadiums are a specialty
item and the payoff for one stadium contract can supersede
many quarters - or years - of home building. And, the
more homes in an area, the better the chances for a
new stadium.
They
need to remain focused on their strengths and do their
best to ignore conflicting or contradicting influences...
and the lure of fast-money somewhere else (the proverbial 'greener
grass'). They may experience slow or ‘down' periods,
but this is all part of a developing business... and
a developing trading program.
In
the same way, if you are most comfortable with trading
the markets on a 1-4 week or 2-3 month basis, who cares
if Joe X is scalping 12 ticks out of Bonds 3-4 times
per week from his office overlooking the CBT trading
floor. (And what you don't know is that he might be
losing 30 ticks on the days that don't work out for
him.) One profitable position trade can make up for
missing 30--40 scalping opportunities... and involves
a lot less stress and energy.
There
will be days when you see a 20 tick rally followed
by a 25 tick decline and then a 15 tick rebound in
Bonds... and you swear to yourself that you saw it
coming and could have grabbed at least 10 ticks out
of each of these swings.
If
that is not your trading style - and you have no intention
of making it your style - then it DOES NOT MATTER 'what
could have been'!!!
If
you allow yourself to be distracted or seduced by that 'greener
grass', you will always find yourself a day late
and many dollars short, perpetually chasing the latest
'hot' market. (This principle applies to all aspects
of life.) Remember:
Performance is Best Judged at the Finish Line!
Another
important principle - that goes against common logic
- is that the most successful trading programs often
produce a higher number of losing trades versus winning
trades. It is the size of each trade (large winners
and small losers) - and the combined return - that
matters.
Perhaps
the best parallel to illustrate this is the one sometimes
used when discussing trading: Baseball.
First
and foremost, all the players in the Baseball Hall
of Fame generated 'outs' (losses) 6-7 times out of
every 10 at bats. A career .300 hitter only 'succeeded'
(winning trades) on 3 out of every 10 plate appearances.
It
is what he was able to accomplish with those 3 hits
that makes all the difference in the world.
And,
another key difference is that these hitters were able
to squeeze out that extra 1 hit out of every 20 at
bats. That is all that separates a mediocre, run-of-the-mill
.250 hitter from a hall-of-fame bound .300 hitter...
1 extra hit out of every 20 at bats.
It
is also what separates a successful and profitable
trader from a break-even trader.
So,
even though a trading system may take more losers than
winners, it is critical to make sure you take advantage
of every possible trade AND to get the most out of
every winner. This is why I cringe when I hear someone
carelessly throw around the highly deceptive adage:
"No
one ever went broke taking a winner."
[See Axioms
of Trading in Eric Hadik's
Tech Tip Reference Library for a
detailed explanation on why this adage is so dangerous.]
But,
there is still one more important 'baseball' parallel
to trading...
It
has to do with those 3 times (out of every 10) that
these players did get on base. In most cases, good
hitters do not swing at the first pitch. They watch
several pitches while getting a feel for that particular
pitcher's style of pitching and also the objective
that the pitcher and catcher have for that particular
'at bat'. Ultimately, this batter will probably swing
at less than ½ of the pitches, often as little
as 1-2 out of every 6-8 pitches.
When
the player does decide to swing at a pitch, he tries
to do it decisively and with conviction. (There are
those times when he 'checks' his swing or takes a very
'defensive' swing when the initial 'look' of the pitch
has fooled him. This, too, has its parallel in trading
but is the exception and
not the rule.)
Each
market is similar in that reversals and signals (potential
trades) are like pitches.
They
are influenced by cycles ('when' the signals are being
generated), just as pitches are often governed by 'when'
the pitch is being delivered. Is this pitched being
delivered:
-
With
2 outs or no outs?
-
Before
a dangerous home-run hitter or at the bottom of
the batting order?
-
During
a period when the game is tied or when one team
is 10 runs ahead of the other?
-
When
the pitcher is fresh - in the 2nd or 3rd inning
- or when his speed and accuracy are beginning
to falter in the 7th or 8th innings?
The
same is true with potential trades ('pitches'). Are
they developing:
-
As
a new trend is just developing or after a long
trend is showing signs of exhaustion?
-
In
the beginning of a new cycle or at the culmination
of an existing one?
-
With
or against the underlying weekly or monthly trend?
(In many cases, new daily trade signals are generated
before the underlying weekly trend has completely
reversed. This ushers in a couple different rules
for confirmation.)
This
helps determine some initial expectations,
as well as perceived risk and potential reward. Although,
just as in baseball, don't get so 'married' to one
expectation that you fail to recognize when things
have changed. Once a signal is taken and a trade is
entered (swinging at a pitch), additional expectations
can be built.
And,
if the ball is in play when the hitter reaches first
base - or a trade is still intact once the first
objective is reached - other decisions need to
be made (Try for second base or hold up on first? Tighten
up trailing stops or take profits?).
I
could take this analogy farther but I hope I have conveyed
my point (and, believe it or not, I am not particularly
obsessed with baseball so I don't want to lose you
in this illustration)...
Successful Trading is a Steady & Selective Process that Requires
Patience, Decisiveness and Persistence.
If
you are able to grasp and internalize this concept,
you will be in a much better position to benefit from
what we offer to our readers.
Some
other points about our website...
-
This
website is not intended to be an up to the
minute advisory service. Our
subscribers rely on our publications for advanced
and exclusive analysis. Out of deference to
them, we have no plans on posting our current
analysis since it would provide unnecessary
competition - for liquidity and fills in the
marketplace - for our loyal subscribers.
We are very grateful for our subscribers and are committed to be just as
loyal to them as they are to us. The website is intended to give you very
recent examples, but not up to the minute or up to the day analysis.
-
This
website is not intended to provide a basic or elementary education to beginning investors
or traders. Though we will try
and make all our information as plain and simple
as possible, and continually try to incorporate
basic information when appropriate (see Glossary,
etc.) the majority of our work is geared toward
intermediate and/or advanced traders. If you
are not sure how futures trading works or whether
you should even be involved in the markets,
please assess this with an appropriate professional
before attempting to use our analysis and/or
diving into the markets. Trading - and particularly
futures trading - is not for everyone.
-
This
information is primarily focused on the technical
and cyclical approach to trading. This
does not ignore certain merits of fundamental
research (i.e. analysis of interest rates,
Fed moves, weather patterns, supply/demand
statistics, etc.) but does convey what we believe
is the most effective approach to trading the
markets - with specific and recognizable risk
points and/or price objectives.
Fundamental
research and analysis provide the 'what' but
are rarely able to pinpoint the 'when' for
entering positions (and a change in fundamentals is
often not apparent until about 1/3 of the way into
a new trend).
So, from a trading standpoint, it is often useless information.
Technical analysis - though far from perfect - gives
a much clearer approach to trading the markets, providing
both the 'when' for entering
and exiting trades as well as specific parameters
for risk and exiting (losing or profitable trades).
Please
see our FAQ section
for additional assistance in determining how to best
use our information and benefit from this website.
I
sincerely thank you for visiting this site and I genuinely
hope that it is educational and beneficial to your
trading... and to your understanding of the markets.
I welcome any and all constructive comments although
I cannot personally respond to most of them. If they
do warrant a response, someone will be sure to get
back to you as soon as possible.
And,
I would be remiss if I did not reiterate:
Futures Trading Does Involve Substantial Risk!
I
wish you the best in all your market endeavors.
Gratefully,
Eric
Eric
S. Hadik - President
INSIIDE Track Trading |
