6 June, 2012
Copy the tiger when stalking and capturing a "pounce-ready" trade.
Tigers know the prey they covet is elusive: they show great patience and care when stalking the target.
I came across this description of the tiger’s technique:
"When hunting, this cat…may take twenty minutes to creep over ground which would be covered in under one minute at a normal walk…the tiger will sometimes pause…move closer and so lessen that critical attack distance…before finally raising its body and charging.
"…they wait until a victim comes close and spring up…This ambush method of hunting uses less energy and has a greater chance of success."
You must "ambush" high confidence trades. Long-time professional trader and teacher Dick Diamond says patience is vital before the ambush.
I talked to Diamond about his famous 80/20 trade, which he means literally — he says it has at least an 80 percent chance of success. It’s the only trade set-up Diamond will take.
Q: Could you tell me about the 80/20 trade?
Diamond: The 80/20 trade is based on indicators that create a specific trading set-up. A trader must act on this set-up immediately. You must wait, and then pounce like a cat when the opportunity presents itself. Then you set stops. In shorter time frames, like trading from a five minute chart, the 80/20 set up may come along a few times a day. If you’re trading a longer time frame, like off of a 120 minute or 240 minute chart, the 80/20 will come along less frequently, but when it does, the opportunity will be bigger. The 80/20 trade can be especially rewarding for position traders. Sometimes the indicators reveal what I call 90/10 or even 95/5 trades.
Q: What emotional factors do students need to work on the most?
Diamond: Traders must be calm and confident. You can’t be a Nervous Nellie and succeed at trading. Calmness comes from learning the proper trading techniques.
Q: What’s different about trading today vs. when you started out in the 1960s?
Diamond: When I started trading, execution took up to five minutes — now it takes less than a second. Time is money, so computers provide a great advantage to today’s trader compared to pre-computer days. At the same time, while computers allow the trader to see multiple indicators on the screen, one must avoid indicator overload. One must learn to narrow down the number of indicators.
Get instant access to our FREE report from Veteran Trader Dick Diamond
In this 12-page report, you will learn practical tips and tricks from veteran trader Dick Diamond.
He and his assistant, Roberto Hernandez, share many of their time-tested techniques with you, with excerpts from interviews and course materials designed to accelerate your trading progress.
Download your FREE 12-page report today >>
This article was syndicated by Elliott Wave International and was originally published under the headline The 80/20 Trade: "Pounce Like a Cat". EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
These dramatic fluctuations appear to be impulsive; and we know that impulse does not flow from cold reason. Even so, the Efficient Market Hypothesis would have us believe that investors are constantly applying reason and logic to reach some objective market pricing, via the latest news or measure of stock market valuation...
Elliott Wave International (EWI) has released a free 10-page trading eBook: How You Can Find High-Probability Trading Opportunities Using Moving Averages, bySenior AnalystJeffrey Kennedy...
Some people like to get outside on the weekends, maybe playing tennis or working in the yard. Some people like to visit their friends or cook a big meal or go out to see a movie...
Elliott waves often correct in terms of Fibonacci ratios. The following article, adapted from the eBook How You Can Use Fibonacci to Improve Your Trading, explains what you can expect when a market begins a corrective phase...
Patterns are everywhere. We see them in the ebb and flow of the tide, the petals of a flower, or the shape of a seashell. If we look closely, we can see patterns in almost everything around us...
|7||Fort Financial Services||70%|