How To Trade What You See

How To Trade What You See

“Trade what’s happening, not what you think is gonna happen.” – Doug Gregory 

In trading there is only one time frame you can trade on: the present moment. You can’t time travel to the past or future to enter a trade so everyone is stuck trading in the present moment. 

Your decisions in this present moment can be made in three ways:

  1. You can enter based on backtested signals. 
  2. You can enter based on the current market price action. 
  3. You can trade based on your opinion or prediction of what will happen in the future. 

Even with backtested price action signals the action to enter has to be made in the present moment. No matter how much someone believes in their own prediction the future doesn’t exist yet and the trade has to be made in the present moment before the probabilities play out. 

Here are ten ways to trade what you see right now:

  • Is the market in an uptrend or downtrend in your time frame? Is the market making higher highs or lower lows? What side of the moving average for your time frame is price on? Is price above or below your moving average?
  • Do you currently see any price action signals that fit your trading system? Either they are there or not, the more you have to look for a signal the greater the odds nothing is there. 
  • If you are in a trade and you see your stop loss is hit, it is time to get out. It is not time to rethink your trade, follow your eyes not your emotions, get out even if you don’t want to so you can see a small loss now and not open the possibility of seeing a bigger loss later. 
  • When you see one of your trades become a winner, look for the logical place to lock in those profits. Where was your profit target on entry? Where can you put a trailing stop to exit when the trend bends?
  • If you see volatility expand and trading ranges grow adjust your position sizing to lower your risk. 
  • When you see the majority of people seem to bullish or bearish you are getting closer to a top or bottom. 
  • When you see the market is becoming overbought it is time to look to exit long positions, when you see the market is becoming oversold it is time to look to buy the dip.  
  • Look at what your trading plan is telling you to do, not your emotions. 
  • Backtest historical price action to see what entries and exits created good risk/reward ratios in the past. Trade those set ups when you see them on chart in the present moment. 
  • Look at the risk on your trade when you enter based on your position size and stop loss. See the risk of if you are wrong first and accept it before you go looking for the reward if you’re right. 

“Frankly, I don’t see markets; I see risks, rewards, and money” – Larry Hite

How To Trade What You See

Chart Courtesy of TrendSpider.