(1) The 3 Directions of L&S, R3 and Switch Blade are separate methods. This means
that once you decide upon ONE of the three Directions, you ignore the others for your trade
decisions.
(2) L&S and R3 are based on a comparison of buyers and sellers TODAY on the close, versus
10-15 days ago, and 3 days. There's more to the formulas than that, but in essence, the
question is: compared to the price 3 days ago, is the market up or down? Or is it Neutral
(no signal)? One way of thinking about this, is to take a string and connect the price from 3
days ago to today's close. This is simplistic, but a good visual exercise.
(3) On the other hand, Switch Blade uses EXHAUSTION to know the Direction. We need 2 conditions
to have exhaustion: (a) an ORA below PDSL , and (b) buyers showing up, ie a trade ABOVE
ORBH + 3 ticks. This exhaustion of sellers, must be followed by buyers above ORBH.
(4) Since the 3 Directions are based on different Methods, there will be times they are giving the
same direction, and there will times they are not.
{ Right now, before continuing to read below, re-read (1).}
(5) Once you have decided which of the 3 Direction methods, that you will use, it's useful
to briefly look at the others for information purposes only. It is also useful to know where the market is
in relation to Reports, YOR, Yearly Pivots, YP 20's, Kizeme, etc. For example,
CPI may be 2 days from now, and you decide to not take a trade the night before
CPI. But you recognize that today, trading was confined between the two ATTK lines,
with PDSC right down the middle. I'd look at that, and determine that none of the
market movers are trading, so I might pass on an overnight trade, and just use an edge trade
tomorrow.
(6) One danger of over- analyzing the relationship between the 3 Directions, and (5), is that you
may decrease the number of trades you take so severely, convincing yourself that this is safe. I would
argue that it is more dangerous, than safe. I'll give an example from another type of trade: PDSC. Since
2002, the PDSC trade has averaged about 46.5% wins, but there's one day of the week that
has averaged 80%. So, why not just limit yourself to that one day, and forget the rest?
Because if you did, you would decrease the overall performance of PDSC by 85%, and
you'd barely be able to increase your position size during the past years.
(7) If someone has ACTUALLY done each of the 3 Directions in the Lessons, they would
quickly realize that they work in different situations... and, there are situations that
they each, over a period of time, have a series of losses. If you go back and look at
the negative PnL periods of time on a daily chart, my sense is that YOR, YP, and YP20 were probably
involved. For example, trading during late December slows down, and goes to the big edges, rather than direction oriented because:
(a) the big traders are finished for the year
(b) the big traders are looking for toys to buy: Bentley's, boats etc
(c) the YOR will bring volatility, so just wait until the fireworks start.
(8) During these periods when the biggest traders are not even there, the young traders and Public are off work and trying to squeeze nickels. They want to trade so bad, because they've seen all this movement in the past few months. They get punched in the face because there's
no big traders trading, and when they are, it's from the Big Edge back to the middle.
(9) During the periods of negative PnL's, you might ask, "What does work?" Well, trading
on Mis/Direction always works, trading from the Edge works, and using the purest form of the ACTION Method works at these edges. Anytime that I recognize
that what I am doing is not working, I assume that my trade was made "down the middle",
and, I wait for an Edge to develop, then use the pure form of the ACTION Method.
(10) There is a real danger in getting too cautious: once the volatility starts, you'll wait until everything is in sync, which is rare, and miss the early Mis/Direction.
(11) Some people have split the Two Day Trading Method, into two separate trades, for their
own time convenience. Once they split it in two, they are only taking an Overnight Trade
or the Edge trade. Actually, most of these people are just taking the ONT, and ignoring
the edge trade. Two Day Trading is designed as ONE unit of a WHOLE, so that if the market is having
lots of overnight movement, you capture it, or if it's all during the day, you capture it. You
cannot predict which one will work until you press the trade button.
(12) People who don't have the time to do both parts of Two Day Trading should:
(a) use their free time to master the trade in the Practice Software. Part of
mastery is figuring out how to trade through difficult times. Having more"guts" is
not really the answer, rather it's number (8).
(b) Do the PDSC trade, and build your account overtime, increasing contracts. Yes, you'll go through 7-8 losses, but you'll have streaks of wins, too.
(c) or, call me and we'll figure out how someone can learn the SIMPLE methods,
based on a their own specific financial situation. These take less time and are
more profitable than all the rest combined.
(13) The key to Two Day Trading is not which of the 3 Direction entries that you take, rather
it's the EXIT. The Public spends 95% of their time over-analyzing the direction, whereas, the PIT
recognizes that the EXIT is the most important thing, simply because ANYTHING CAN HAPPEN after a trade begins. The exits limit your loss, and captures the big gains.
(14) There's an old saying in boxing, "everyone has a plan, until they're punched in the face."
Once someone gets punched in the face, then, they start over-analyzing, and trying to
take these so-called SYNC trades to be "safe.". Bologna. Instead, do what a seasoned
boxer does: get away from the sucker punches "down the middle" by stepping to the side,
and WAIT, then, start your full force attack from the side.
(15) One of the greatest things that someone can do, is to get punched in the face, and go
immediately back to the Practice Software, and learn what to do in similar situations.
Taking time off to become over-skilled is the hallmark of the greatest traders. The best trader I know is taking the entire month of January off, simply to PRACTICE. When he starts again, I
pity anyone within the flash of his blade. He will be vicious, ruthless,and thirsty for blood.
