I'd like to share a few quick thoughts about trading and maybe we can get a discussion thread going here. I've noticed lots of folks out there (especially those with a bearish view) are very frustrated right now. Everyone has there own style of trading and biases. Recently, I emailed the author of a book on technical trading with a few questions about the book. I was surprised to find that his reply began with a question: "Hi, Alex! What type of trader are you?"
That question kind of stumped me at first. I mean, I never really thought about it too much. The more I thought about it, the more I realized how little attention I have given to gauging my strengths and weaknesses.
I used to think I was a pretty good counter-trend trader....untill I started keeping a trading log. Let me put it this way, Counter-Trend Trading is EXTREMELY DIFFICULT! I'm not talking about "pullback" trading where you are looking to trade in the direction of the major trend after a brief correction, I'm talking about trading the correction part of it, hoping it will trap the pullback traders and continue in the opposite (my) direction. Sure, I've made some great counter trend trades and made good money, but I've lost a lot more, and many of those trades had just as favorable odds starting out as the winners. It's mentally and physically exhausting to counter trend trade.
Many traders (including myself) have been trying to forecast a counter trend move during this incredible bull run. It's like playing "chicken" on the tracks with an express train isn't it? During more moderately trending markets it's like walking Up the Down Escallator; can be fun, but its lots of work and you're pretty tired when you get to the top. This is not the market environment to practice that type of trading, but many traders do.
Looking back at my trading log, I found the most success I had in counter-trend trading has always been in consolidating or range bound markets, even those that have an upward or downward bias to them.
I have had more success with extremely short term counter trend trading, intraday, using five minute charts and a few indicators, but that too is tiring.
I notice many traders right now are bearish. I suppose the best traders can have a bias one way or another about the market but trade with the prevailing trend regardless of there own views.
So, what type of trader are you? What tools do you use to keep yourself aligned with the market, no matter what your personal bias is?