I don’t follow the general market too much anymore, I find it just confuses me and has a tendency to influence my trading. However, I did take a look at a chart of the SPY the other day and the next thing I knew I was drawing trendlines on it – some habits die hard.
It is pretty hard to not notice the really nice triangle the SPY is making which is a bullish continuation pattern that usually forms during an uptrend. Or, on the other hand, it could be making a “W” which suggests a breakdown. It’s all in the eyes of the beholder.
Aren’t you glad you don’t have to think about this anymore? Aren’t you glad your trading isn’t dependent on coming up with the correct answer to which way the SPY will break? Aren’t you glad you have your algorithms to guide you through any kind of market? To tell you the truth though, I am hoping with everything I have in my hope chest that it breaks down. QiT does so well when the volatility increases.
It just feels right to leave the technical analysis behind and enter, what Mark Douglas calls, the Mechanical Stage to consistently profitable trading. So let’s explore this mechanical stage a little further.
4 Traits you will develop in the Mechanical Stage
The first stage of becoming a consistently profitable trader is the mechanical stage. In this stage you will develop the following 4 traits:
1. Build the self-trust necessary to operate in an unlimited environment.
2. Learn to flawlessly execute a trading system.
3. Train your mind to think in probabilities (the five fundamental truths.
4. Create a strong, unshakeable belief in your consistency as a trader.
The mechanical stage is designed to build trading skills (trust, confidence, and thinking in probabilities) that will virtually compel you to create consistent results.
You will be a consistent winner because:
1. You objectively identify your edge when you find a mechanical system in which you have 100% faith.
2. You completely accept the risk when you accept the Max Drawdown, your system will recover from its drawdowns, and your system has an instrument that will protect you from a drawdown that does not recover.
3. You act on your edges when you take the signals the system gives you without reservation or hesitation.
4. You continually monitor your susceptibility to making errors.
5. You understand the absolute necessity of these principles for consistent success and, therefore, never violate them.
These beliefs are the five principles of consistency. To integrate these principles into your mental system at a functional level requires that you purposely create a series of experiences that are consistent with them.
AND IN CONCLUSION
You know you’ve gone to the wrong stockbroker when you ask him to buy 1,000 shares in IBM and he asks you how to spell it.
Plan Your Trade and Trade your Plan