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Not sure this ever made it the first time. :)
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Message-ID: <33BA8EB2.4BE@xxxxxxxxxxxxxxxxxxx>
Date: Wed, 02 Jul 1997 10:24:59 -0700
From: "Rick J. Ratchford" <ricrat@xxxxxxxxxxxxxxxxxxx>
Reply-To: ricrat@xxxxxxxxxxxxxxxxxxx
Organization: FutureSoft Publishing
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To: TTCLIST <ttc-list@xxxxxxxxxxxxxxxxxxx>
CC: Realtraders <realtraders@xxxxxxxxxxxxxx>
Subject: Bend With the Flow
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Bend With the Flow
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by Rick J. Ratchford
Picture yourself as a branch on a tree. The wind is blowing with the
fury of a stampede of cattle. You are being blown back to the limits of
your flexibility. Will you snap, or will you bend with the flow?
What kind of a branch are you?
Are you rigid or are you flexible? If you are rigid, you will snap under
the pressure of the wind. However, if you are flexible, you will
continue to give way to the wind thus not allowing it to break you.
What kind of a trader are you?
When the market is not going as planned, do you stubbornly refuse to
acknowledge it or are you flexible enough to realize that you are wrong?
The rigid trader is one who refuses to acknowledge that the trade has
gone sour, and that it is time for a simple retreat or reversal. The
result of this 'rigidness' or stubborness is that the market will
eventually 'break' this one, destroying the account and possibly the
trader beyond repair. The flexible trader, will let the market move him
in and out. This type of trader will be able to bend back after a hard
move against him, thus around another day.
A flexible trader bends with the flow. This type of trader not only
allows the market to pull him in or take him out, but this type of
trader is flexible enough to know that his original understanding of the
power of the market (wind) is going the other way and bends with it in
that direction, completely going with the market.
A good example of this is when using the TIME and PRICE squaring
methodology that I enjoy using. Say that based on PRICE and TIME, you
discern that T-Bonds will make a bottom today and start up. So, prepared
for the inevitable, you fade into this trade and go long near the low.
Now let's say that it does indeed go up the next day. Good, you're
analysis looks good so far. However, you notice that on the next day of
making a higher high, it touches known resistance and then closes near
the low of its daily range.
Now, here is where the kind of trader you are comes in. Are you rigid in
that you will not consider the possibility that this trade may be
turning sour, or are you flexible enough to accept this possibility? If
the trade does turn south and breaks below your PRICE and TIME low, will
you just hang in there 'hoping' that it will go back in the direction
you originally thought it would, or will you exit the trade once it
violated your low, even being 'flexible' enough to reverse your position
the other way if it closes below that PRICE/TIME low? What you do will
determine whether you are rigid or flexible.
Usually, whenever the market closes below known support, it usually
signals more times than not a continuation in that direction of the
trend. If you are flexible as a trader and 'bend with the flow', you can
usually turn what would have been a lossing trade into a winning one. Of
course there are several factors you must take into consideration, such
as direction of the main trend and so-forth, but all aside this kind of
action is telling you that the 'wind' wishes to blow the other way. If
we are to keep from 'breaking', we need to 'bend with the flow' of the
wind, the market.
The error of the 'rigid' trader is that he refuses to accept error on
his part. "How can I possibly be wrong when I had both TIME and PRICE
squared?". Easy. Here is a good example using the T Bonds illustration
above.
Note how I mentioned that the next day after the PRICE and TIME low the
market made a high that touched resistance? Isn't this ALSO considered
PRICE and TIME? Who says that the TIME part of your equation was not one
day off? Why couldn't this actually be a TIME and PRICE high instead? It
most certainly can be, and in this case it was! No man can forecast to
the DAY each and every time. Even the best in the business with TIME may
be off a day from time to time. They are human, and the flexible trader
realizes that he is human as well! Therefore, realizing the possibility
of entering too early and the wrong direction, the flexible trader takes
whatever steps is necessary to bend with the flow, and to allow the
market to direct him.
So then, what kind of trader are you? Are you flexible as the branch
that bends with the wind, or are you rigid like the branch that tries to
fight the power of the wind and ends up breaking in half?
Which one would you rather be?
cheers!
:)
rick
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