Thank you to all those that wished my Dad well for his prostate cancer treatment in Melbourne.

His operation went well and hopefully he is on his way to a great recovery.

I am back on the Sunny Coast and have spent the last week testing signal generating software that we have been working on.

Programming is expected to be completed with a working version next week.  Just in time for the Brisbane ATAA meeting.

Getting some good entries and setups. 

As a sneak preview here are some entries that have signaled lately with the beta version.

Dax signals.jpg (91.10 kb)

6E signal.jpg (96.64 kb)

Back from holidays and a little slow to get into the blog writing.

A trade setup tonight on the Euro which has some unique characteristics.

Long term viewers of the blog and those that have done Alexander's Pride Trading course know of it as a pump fake trade.

The trade does enough to give longs hope with price making a higher high but the major trend is down.

This price action nails the retail bottom pickers looking for reversals.

As buyers fail to push price up any further sellers take the batten forcing long traders to cover and setting up a down move with the trend.

This trade needs to be traded in the right context to get high win percentages consistently.  As do all trade setups.

In partnership with Alexander we have been developing an analytical system for traders.

I have been using a beta version successfully in live trading and the execution of this euro trade tonight is an example trading 3 contracts.

I am aiming to have a fully functional version ready for my ATAA presentation in Brisbane providing any bugs are sorted with our engineers in the US.

Nothing better than putting my head on the chopping block in front of a crowd.  Should be fun.

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Trading against a trend move is an addiction that just keeps taking.

 From all that I've seen in trading the one thing that nails even the best of traders is getting caught trading against a trend move.

The strong emotional desire to get a trade back to break even is usually the catalyst that drives destructive behavior.

Two things tend to occur, the trader holds a structurally deteriorating position as reality and belief in the traders mind diverge.

The other destructive behavior which tends to result in catastrophic loses is the adding of positions as price moves against the position.

This is an attempt to create a lower break even price.

At times the strategy works but creates the environment for the trader to suffer massive losses down the road.

We get wealth transfer as the chips are pushed away from the inexperienced to the experienced.

For these strong trends there has to be an unexpected move that catches out the majority.

Often on the SPI200 a strong down trend happens after the US markets have closed strongly.

Today is a great example as the SPI trended down not allowing longs to get a break even opportunity.

As the longs closed thier positions they where in effect selling, adding to the downside momentum.

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With trading we need to be prepared for different scenarios that can occur balanced with the reality of the moment.

This is an interview with James (Jim) Chanos a very successful fund manager who specialises in finding shorting opportunities.

Two notable shorts were Enron and the latest financial crisis.

http://www.businessinsider.com/jim-chanos-china-is-overheating-and-overindulging-2010-2

Please remember that even though he may well be right with China, trading is about the here and now not forecasting the future.

It is more about being prepared so we can act if the technicals line up to take advantage of any new situation.

The streets are littered with traders who got the call right eventually but lost all their money before the event occurred.

An example could be Robert Pretcher Conquer the crash - YOU CAN SURVIVE THE DEFLATIONARY DEPRESSION written in 2002.

We could of missed some great bull runs and even worse lost by trading short at inappropriate times.

On a personal note I had a bit of an adventure in 2001 by moving away from technicals and listening to the talking heads on CNBC and other news services.

I had increased my account from around $40,000 to $120,000 within weeks. The NAB homeside problems and 911 disaster bolstered my account quickly.

Back then it was a bit of money and I was picturing millions just waiting for me around the corner.

I also had an ego so big that I struggled to fit through doorways bragging to my mates at the pub. They listened if it was my shout.

Although I had some luck in the events that occurred it was the chart setups that had put me in the right positions.

After 911, I became hooked on the news services trotting out expert after expert predicting what the future held - and it was all doom.

We had some anthrax attacks and the next suicide attack was around the corner.

So I watched the market bounce up and then loaded up some shorts.

The market bounced higher and I dropped $20,000 as I covered.

No problem, still up a hundred and just a bit early. Better flick the TV back on.

I loaded up a bigger amount on the next leg and guess what? Lost again.

I did this until I not only lost my profits but until I wiped my whole account.

I learned that a belief can be so strong that it can blind you from reality.

After, I looked at the charts with reality hitting me over the head like a baseball bat.

How could I have been so F***ing stupid?

I didn't have much choices with no capital left.

I remember sitting across from my wife going though my options.

1. Go back to the printing game. 2. Do some bar work.

#. Grovel to my wife for some capital to start again.

The last option worked and it was amazing the clarity I had when hitting the market from that point.

I added around $20,000 a month to my account for the next year although I think I lost my hair as well (so many traders seem to be bald)

Almost 10 years later and I still hit the markets most days. I still am fighting the trading demons but seem to be winning more battles than I lose.