Trading Thoughts and Ideas

By; Kenneth Lee

Disclaimer
As always very few of any of this is a novel
idea of my making, just my interretation of
ideas and facts I have learned over the years and
staring at charts until I was !lind"
If anyone feels I have encroached on any of
their rorietary information lease let me
know and I will edit or remove" This is !eing
made for sharing on u!lic forums not as a
money making endeavor"
#lus also remem!er trading is a lonely
rofession and each erson is resonsi!le for
their own trading decisions" $veryone has their
own ideas of what is a good or !ad trading idea
use this information to !uild your own Ideas"
Thanks Ken Lee
%&'$(A'D
In my time trading I have seen many eole with
issues similar to these that they have found hard to
overcome and most never get ast and finally decide to
give u trading"
I have decided to try and ut some of my own trading
thoughts down on aer " &ne to remind myself on a daily
!ases of what are in my oinion the most cost effective
asects of trading" &r the things that can allow a erson to
move forward in the trading game"
The title 'omancing The )to , Is ro!a!ly !ased on
the most imortant of any one single trading issue that is
a!used to the detriment !y more traders than anything
else" The )to osition"
*oving a sto, adding to a loser to move a entry"
Those things will kee a erson from !ecoming a real
trader every time"
I will also ut some of my ersonal thoughts down of
what I look for as to direction and my ersonal entry
ideas" Again this is just my own thoughts !ased on
information gathered over a decent amount of time from
various sources"
'omancing The )to
The one single asect of trading that will make you or
!reak you is using stos correctly" They will reserve your
trading account e+uity as well as !uild your confidence in
your own trade lans"
The first and foremost thing a sto does is rovide
control for rule num!er;
," Always have enough e+uity to take the ne-t trade"
If you can.t take the ne-t trade you are dead in the
water and will have to wait to save more funds to try
again" #lus it is a devastating !low to the ego to have that
feeling of a total loss " *ost eole can.t take to many hits
on their ersonalities !efore they decide that this isn.t for
them "
Those that kee fighting the good fight can also !uild
a wall of indifference !etween themselves and their
trading " *aking it sorta alright to continually fail, !ut
neither idea is acceta!le" (e are all in this to at the very
least add to our financial situations and !etter our life.s "
#lus your ersonality will start to suffer and then you can
start to !lame out side things on your trading" Blaming
your family and friends or your other jo!" (hich can
lead to self destruction"
)o we must learn to love where we lace our stos and
reali/e they are our guardian angels, That we control to
rotect us from us" I hear so many eole !laming the
market or the charts on why a trade goes !ad , !ut in
reality we have no one to !lame !ut ourselves"
The choice of entry style has less to do with !eing a
successful trader than does knowing where to lace a
realistic sto" I watch a few new!ies trade and analysis
their charts and at times one of the most !asic faults is
the use of a reset sto loss" This is the sto you set on
your latform to automatically !e laced with your entry"
The use of that should !e nothing more than to get
your sto on your chart so you can then adjust it to the
correct location" To correct that issue change it from say
,0 or 12 is to ,02" Then it is so far out of osition you
have no choice !ut to adjust it" #lus within your trading
lan you should have a rice num!er already icked to
where it should go"

3ere in the title #icture we have two demand levels or
one that is now !eing tested for the second time" But we
can clearly see where our sto should !e laced "
The only thought we have in our minds when we take
a trade is the fact we are only taking it !ecause we think
with the given information we have used to lan our
trade that the rice is now going to go !ack u" &ur
choice of sto location should suort that choice"
(e can see that the sto is !elow !oth levels giving us
the !est chance for a move !ack u" But it wasn.t meant to
!e and we got stoed out" But that is good as we (A4T
to !e stoed out if we are wrong !ecause that is why we
ut it there"
There is a lot on that chart a!ove that was saying that
short was the direction that rice was going , But another
one of the major failings in trading is trying to turn rice
when everything is saying otherwise" It doesn.t matter
what you use to enter , A set of lower swing highs , a
suly level that is holding and !een hit lower and lower
just the oosite of one that is going to !reak" &r even
nothing more than a trend line" They all show the same
thing, #rice is going to dro lower"

But in the overall idea of trading it was more
imortant that we laced a sto in the correct lace than
that we !e right in icking the right direction" Because
even if we don.t have the !est record of icking good
entries we will !e a!le to ick some more since we
reserved our e+uity"
)o we now know it doesn.t matter as much as our
entry style" The true key is to know where we should lace
our sto and then try and get the !est entry ossi!le
which would !e the one closes to that sto" That limits our
risk !ecause then rice has to move against us less to hit
our sto that reserves more of our e+uity to trade
another day"
&n the !elow chart which is a 5 hr we can clearly see
where we want to lace our stos the to or !ottom of
each swing high or low" )o once we have these sto
locations icked it is then on us to find the !est entry as
close to them as we can to limit our risk"
I have said this a million times your choice of entry
style should !e what you can )$$" In the !eginning none
of us knew which way rice was going when we looked at
a chart" I have always tried to comare learning to see
entries to driving a car " 6ou can ut it all down on aer
!ut it is nothing comared to !eing out there on the road
doing 70 mh trying to remem!er it all at the same time"
#lus just !ecause we now know where stos should go
we can even eliminate those which we see as !eing
irrelevant or against our trading lan direction"
I ersonally love the swing highs and lows to ick
direction then add )uly and Demand levels into the
e+uation and it serves me well as my rimary way to lan
a trade" I don.t forsake other !asic trading ideas either
such as retraces 8%i!9 long wicks 8#ins9 or atterns
8 descending or ascending triangles , flags9" But with time
you start to come to the reali/ation that most of those are
nothing !ut )uly and Demand levels in a icture form
after the fact" &ther s may call them suort and
resistance, or where !uyers or sellers are entering the
market , !ut the main key is what you can use to get your
entry as close to your sto as ossi!le"
There is no !etter feeling than getting that sot on
entry with little or no draw down " #lus those are the ones
you should always try and hold for a home run as great
rejection right off the entry is a good sign of the !est
choices"
I have looked at a few different trading strategies over
the years !ut they all had the underlining idea of trading
rice action" They all had great merits, !ut some were to
limited in their tyes of entries not enough" &thers had to
many with different rules for each" But overall they did
work"
But I guess the one thing I took away from them all"
(as the fact that the guys romoting them were making
massive gains not off all the +uick intra:day entries they
were showing , !ut from longer term trading ideas that
really re+uired not much e-lanation !ut more
commitment to !elieve in your choices"
#lus they tended to trade using a sto as not only a
way to rotect there initial risk !ut also as a rofit taking
tool as well" )ay looking at that 5 hr chart we get a entry
off one of those levels then each time it !reaks another
swing we move our sto u to !elow the new swing" (e
will continue to make gains until it reverses" If it should !e
a flier we could make a massive gain in just one trade"
$ven those trying to follow trade levels given, found it
hard in the holding art" This is something I have had to
deal with myself and am now just starting to get a !etter
handle on" But it still comes !ack to loving our stos and
using them more as a overall trading tool than just a thing
to desise" As that attitude will not get us far"
)o let us look at using a sto as a over all trading tool"
(e can see in the !elow chart we have almost 12 hrs to
find a entry within that level at the to" )o as we !elieve
that rice is going down" &nce rice moves to our first
counter demand level" These are the laces if rice was to
turn around it would" As each level is !roken we see a new
suly level formed" (hen rice moves away we can then
move our sto down to where it would !e if we were to
short again at one of these new suly levels after a
retrace"
This is one of the hardest arts of !eing a great trader
holding a trade when you or sitting on a large gain" But as
you can see if you held thru those 1 demand level !reaks
the trade was awesome"
)o we can see how massive gains can !e achieved !y
using a sto as a overall trading tool and in the rocess we
will start to view our stos differently" 4ot as roof of our
failure to ick a correct trade entry !ut as the true reason
we are successful at trading"
This doesn.t mean we can.t take rofits when we see a
reason to" But I would suggest );<<$)T, that if we enter
on a fast chart at least look at the ne-t slower chart for a
target, which would !e the oosite level" $-amle you
enter on a =2 min chart then look for a T# level on the
,hr or even !etter the 5hr" *y trading has greatly
imroved !y just moving from a ,0 min chart to a =2 min
as the levels I look for are further aart" )o it goes to
figure that a , hr or 5 hr will rovide greater gains as well"
The !est traders I know do one of two things " &ne
they either enter using a fast chart such as a ,0 min then
hold for 5 hr or even daily level" Their risk is small using
the fast chart as a entry and their gains are huge" 6es they
don.t hit a homer each time " But they also know when to
take the gains in a ranging market"
I was in a skye room with a grou of guys we didn.t
trade the same at all each using different ideas, it was just
to kee comany" But I did see something that gave me
thought for ause" )ome of these guys would take entries
and move their sto to Break $ven very +uickly may!e
after a ,2 or ,0 i move"
I watched one day as a guy got stoed may!e 7 or >
times !ut never lost a cent" *ay!e even made a few is"
But then finally his entry was at the right sot and he just
let it run and made a!out 102 is" The key is that he
wasn.t looking for a small gain he was looking for the
right entry to the right move a large one"
)o in summary enter as a intraday trader or scaler
!ut hold for the levels on the longer charts"
Then there is style two, Those that can scal as well as
trade longer term" It always ama/es me one I see some
that can enter a osition !ased of daily or 5 hr charts with
huge stos of even hundreds , then in the same day trade
fast charts with tight stos of ,0 or 12" !ut their key to
success is that they adjust the trades accordingly" The ??
risked is the same !ased on the sto osition distance" But
it is a rare trader that can kee their mind straight to ull
that off"
)o where does that !ring us" To the fact that to risk
less we should look for the major levels to take trades !ut
if we can look for entries on the faster charts " I ersonally
like the =2 min chart for my entries " It is smooth enough
without loads of noise" 4oise is just the u and down
movement of orders !eing filled " The longer term the
chart is the more the chart smooths out not leaving
confusing atterns to have to digest"
)o we have two charts" The first is showing the 5 hr
level and sto location" 6es it could go higher and test the
to !ut the long red candles that droed from it makes it
very good to me"
Then we have a =2 min chart looking for the !est
entry we can find as close to that 5 hr sto as ossi!le" (e
can see 1 ossi!le entries one )unday night then the other
*onday morning" I have marked the oening rice on the
chart I will use this as a trading level as we can see right
!elow it how rice droed away" I don.t hold a lot of
ower to )unday night levels staying within their
arameters as they are formed during low volume times
and we can get a drift in or out of a level that will sna
!ack in when larger orders start to enter the market"
But of course the !est entry was the highest , closest to
the 5hr sto" 'ight after )unday oen for most @ m
eastern ;")" , a test of the %riday high suly level, These,
I call flis where rice flis over from one direction to the
other" Think of a swimmer aroaching the wall he twist
around getting in to osition then he ushes off towards
the finish line" The large move down is when he uses his
legs to ush off getting away from the wall"
)o we can see how using the faster chart we have
entered a trade risking less of our e+uity, !ut this doesn.t
mean we have to limit or ersective of our ossi!le gains"
)o let us look at how differently the take rofits would
look on the different charts" %irst we will look at the 5hr"
(e can see the clear difference that removing some of
the noise can rovide" This the =2 min chart"
)o what does this tell us" 4um!er one is that we
shouldn.t get tunnel vision, Aust !ecause you may watch a
faster chart for !etter entries or more entries" To not use
all your charts as a comlete guide is a !it fool hardy" (e
after all are in this to make money" And we can leave a lot
on the ta!le !y not watching them all"
)o in summary we can clearly see how using a sto
limit as a different tye of tool can change our ersective
on it and make it more a friend than a foe" There is a so
much sychology a!out why we have self destructive
!ehavior !ut we all see it all the time ersonally " The girls
that kee dating the mean men" &r the drug users" The
eole that can.t control their anger or emotional wrecks"
&ver eaters the list is huge " But they are all !ased on the
same ideas" (e !uild electrical connections in our !ody
that 3AB$ to !e filled " )o it is hard to change these !ad
ha!its, !ut the good news is they can !e changed "
But the key is forcing ourselves do do things that are
uncomforta!le !ecause they are going against the
connections we have created" Aust as when you +uit
smoking it gets easier and easier each day until finally you
!reak that cycle" )ure you still may have a desire to smoke
!ut now you can control it"
In most cases with our trading the difference !etween
screwing u and doing well is a millisecond of time so all
we need is a !it of control to think the right thought at the
right time" That is where a lan comes into it"
If you have thought out your trades ahead of time you
have already lanted the seed to do the right thing" Almost
all my '$ALL6 !ad trades come from shooting from the
hi not thinking things out and just juming in" A lot of
times I can find myself doing what I call trading against
myself" This is where I took a trade against my own !ias
for a air the !eing the alha male I can.t admit I am a
moron and get out" There is no lace in trading for ego
when it comes !etween you and your trades" The
comuter or charts could care less a!out us and our
ignorant !ehavior"
The sooner a erson comes to gri with this fact the
faster they will move into the realm of ro trader" The
difference I see !etween rofessionals in any field and
amateurs isn that a!ility to do the right thing at the right
time" $ven a great athlete knows when to take a loss for
the team " &r a lawyer knows when to take a settlement or
does he stick it out and loss more !y fighting a losing
!attle, or a contractor in a uside down jo!, might !e
!etter to ay any enalties and !ail out"
But what I am saying there isn.t a rofession I know
of that doesn.t !enefit from acceting a loss from time to
time and the rofessional is the eole that can see an
reali/e that"
In trading we have the !est chance to !ecome rich
than any other tye of endeavor !ecause it is one of the
few things that all our risk is ufront" But if we are just to
hard headed to use the !est tool we have we deserve to
just struggle and slowly drive ourselves insane" 3ow many
eole in any !usiness would love to have all their risk
ufront and locked in knowing they would never lose
more than they setu"
I don.t remem!er who it is !ut someone has that
attached to their avatar , C Insanity is doing the same
thing e-ecting a different outcomeD
)o learn to em!race your sto and see it for what it is
your guardian angel ut there !y you to rotect yourself
from yourself"
Then make the commitment to change your own !ad
ha!its and think your entries thru !efore you lea" But
mainly think a!out your sto or your risk er trade" That
is the only thing really imortant"
A rofit target is a good thing !ut you can trade very
successfully with out one , !ut not a sto" )ome of my !est
trades haened !ecause I had a comuter or internet
issue and I couldn.t close a trade and when I got !ack u
and running I had made more than if I had closed"
I am going to go ahead and convert this to a df and
try to add to it later "
Eheers Ken Lee