Business
Roberto "Let's Try to Make Work Difficult" Booker Show Notes: What's the fastest way to solve a problem? Could it be ... not doing anything about the problem? What's the problem with stops? There are two types of traders. One type of trader uses a stop. The other does not. Usually, these two types of traders hate each other. Haha. Right? They argue. They fight. They seek followers to their particular brand of trading religion. I want to talk about a few ways to make each side correct. 1) If you don't want to use a stop-loss, then reduce your trade size. You will immediately find happiness and peace of mind. You will immediately start winning. You will immediately forget what it is like to be frustrated that you picked the right direction but you got stopped out before you could make any money. 2) If you want to use a stop-loss, then increase your trade size, and extend your profit target, and protect your profits. And scale into the trade, or scale out of the trade. One way to immediately improve your trading (if you use stops) is to slightly increase your profit target. 3) If you don't want to do either of these two things, consider a time stop. I've been playing around with this idea for years. Here's one way to look at it. For example, I'm looking at the open order book at Oanda, the forex broker. I'm looking at this cool graph that shows me where all the orders are. You can actually see in real time, where price is now, and where people took their trades. And guess what? Price is moving up, and most people are short the EUR/USD. That means that as price is moving upward, traders are increasingly staying in sell positions. Maybe those trades will work out. But probably not. Most people will bail on those short positions before they turn profitable. What can we do? We could build a system that waits until a lot lot lot of traders are short, while price is moving up, and then we can short it, too, after they've all done that. And then we could hold for 24 hours. Or we could wait for the first sign that traders are accumulating sell positions while price is rising - when sell trades outnumber buy trades - and then we can trade against the crowd, and hold those trades for 24 hours.