by Ron Schoemmell, R.S.
from Houston
An article written for a
prominent trading
newsletter in response to
reader feedback
In trading, I would
recommend trading with the trend. I know it sounds cliché, but I have
found it is the most rewarding (I found this out - like everything
else - the hard way).
Selling tops and buying
bottoms is like being a salmon. You are always swimming upstream
against the trend. You may get a good trade now and then, but a market
will wear you out in the process. I have always found these trades
looked great going back on a chart. In trading real-time from the hard
right side of the chart without the benefit of hindsight make these
trades difficult to not only see, but see through to the profitable
end.
So trade the trend. Enter
on pullbacks, use reversal bars that make pivot lows/highs and close
back in the direction of trend. Move stops quickly. Take reasonable
profits from the markets trading that day. If market is slow and in a
trading range mode, go for less. How do you know what to go for? Your
experience will tell you. There are no hard and fast rules, sometimes
I get out way too soon. Sometimes I stay in too long, but in general I
do OK and get my share.
100% Mechanical Trading is a Myth
I hate to say it, but good
trading is not 100% mechanical. I wish sometimes it was, but that's
what you're there for. I find that good trading will be 80% mechanical
or/so and 20% will give you the flexibility. To use your experience
and feel for the market to enhance your method and make it
comfortable. I'm not saying you can't be 100%mechanical. I believe
your most profitable trading will be a system that allows you some
input on entries and exits.
I use a 3 and 5-minute
chart, side by side and take the first signal. I get in the direction
I want to trade. Sometimes a 3 will get me in and a 5 won't give me
the reversal bar, and vice versa. This way I don't have many moves
pass me by. One of these usually will get me in.
Trading the Eminis is
Simple...Really
I have been told that many
people have called [the Editor] wanting to share my system. So I will,
but I told [the Editor] it's ridiculous. I know these people are
thinking, If I can find out what and how this guy is trading, I'll use
it and I will start making money. I'll be rich. All I need is a good
system. It sounds like this guy has something really hot! If he will
just divulge it.
Well, if you really look at
what I'm doing, it's waiting for a trend to begin and getting in on
pullbacks that usually come into a 38 - 50 - 62% retracement of the
last swing and reverse out of there back in the direction of the
trend. Very simple. This was probably being done before 1900 - you can
do this.
Why are Most People Losing Money?
So why are most people
losing money daily - read on. (By the way, this simple method is the
best way I've ever seen to trade. I just put my own little wrinkle in
it with common sense money-management). I'm not doing anything new or
secret.
My method is very simple
and easy to trade. I hope this gives readers some ideas. However, I
want to make some caveats and warnings for all the wanna-be-traders
who want to trade for a living and/or think they can. I'm no market
wizard. I still trade mostly one and two lots and I don't live in a
$500,000 home or drive a Rolls Royce.
My trading has become very
consistent and profitable and continues to get a little better every
month. My method is my tool. It's an excellent tool and works
extremely well when I use it the way it should be.
It's My Fault, Not the Method
If more money is lost than
normal, if stupid or random trades are taken, it's not my system or
method that has failed, it's me, myself, and I. (Yes I take stupid
trades now and then) I'm human. I just try to keep them at a minimum
and allow for them. My first 8-years of trading results would probably
make you throw-up. Lord knows my wife did!
The point I'm trying to
make is that learning how to trade profitably is very difficult. Once
learned, it becomes simple and fun, like I mentioned in the [first]
article.
I feel sorry for the people
who write to these newsletters or forums. Most of you are missing the
boat (just like I did my first 8-years). I see you squabbling over
data vendors, system vendors, methods, hotlines, new and old systems.
People who made false statements about their product.
You are too concerned with
continuous data or the other kind of data (I forgot what it's called).
Optimization, back-testing, % wins, max drawdowns, broker problems,
new software programs, books, articles, seminars. (Oh, I just
remembered the other data is called perpetual, I think) etc., etc.
All this is crap. It will
not make you money and is a complete waste of time. Believe me, I
know. This stuff is all secondary in nature to success. People need to
work on what's inside them. Your psychological makeup, how you
interact with the market and how you deal with fear, greed, anxiety,
etc.
YOU are Your Best Friend or Worst
Enemy
It's you against you
everyday. Not you against the market. Not you against another trader.
The market is going to do
what it's going to do everyday. Whether your in or not. The only thing
that determines if you make money or not, is how you react to market
action. Only you can give yourself money or lose money trading. Not
the market, not the system, not the data, not the software package you
use, not the hotline, book or seminar you purchased. Just you!
Do you would-be or aspiring
traders finally get it! Most of you are looking in all the wrong
places as the song goes. A perfect example, is in last month's
[issue], by Robert Edwards. He wants to improve his trading and I'm
sure he is trying very hard. But as I read his article, Robert has
missed the boat and will never truly succeed until he works on his
psychological flaws. For example, he continues to let fear and greed
ruin his trading. He's afraid to let a profit run, for fear of giving
back a small profit (greed).
These are serious problems
and deep rooted in his psyche. However, he's not seriously dealing
with it. How do I know? Robert made the statement "I may lose next
year. If I do, it must be, it will be, because a better team beat me.
It will not be because I beat myself." Now Robert, what kind of stupid
statement is that. It shows you take no responsibility for your
losing, some other team or guys beat you!
The Marketing Doesn't Care About
You!
Robert, if you lose next
year, it will be because you traded poorly. You didn't react well to
market action. Nobody or no market is out to get you. They don't even
know or care that you exist.
Your assumptions are not
quite right on what it will take to turn your trading around. You say
you must change your patterns - get some guts - you believe as you
stated "If you trade you will error" and "Trading is like throwing a
knife in the air and catching it in one's hand and getting bloodied
pretty good." That's a real positive view of trading, isn't it! It is
no wonder your having trouble. You truly view trading as a very
negative thing. You really do!
You must work on changing
your views into a positive attitude. Can you be honest to yourself to
do it? You must, if you are to succeed.
I trade 2-5 times a day. If
I felt as you do, I'd probably blow my brains out in a week. I look
forward to each new trade. I can't wait for the next signal. I'm
confident enough to know I'll make money 6 to 7 out of 10 times.
That's the attitude to have - positive with confidence.
I don't mean to pick on
you, but your case is typical (I was there once). I hope you will take
this in a constructive way. It will change you. It will take sometime,
but you can do it. I'm writing this letter for therapy to keep my
concept in the front of my mind, as well as helping others. I speak
from real feelings and experience.
It's All In Your Head
I started writing a short
letter, which has turned into a lengthy dissertation. I hope I have
awaken some of you. It makes me sick to look back at my horrendous
years. I went to all the seminars, bought systems, books, tapes,
software. None of them made me money, because I had some real
psychological issues to resolve that only manifested themselves in
trading. If you have any personality flaws, trading will bring them
out.
Do you really want to trade
for a living and enjoy the kind of lifestyle it affords? One of
freedom and money. Then you better be prepared to deal with your dark
side and confront your psychological weaknesses and be honest with
yourself (painfully so) be willing to change. It is not easy - but can
be done. I have come far enough to turn my trading around - but I work
on it everyday.
Do you have problems with
placing stops and taking a loss? Do you get mad at the broker or the
market when you lose. The market doesn't do what you thought it would
do. Do you get mad at that stupid system you bought? The system went
into its largest drawdown the day you started trading it.
The list of questions goes
on and on and yes I've done all this and more.
Be Honest with Yourself
Resolve to turn your quest
for trading excellence and profits inward - yourself. Learn to expose
all your weaknesses and then work on them. Be very honest with
yourself and humble. Get rid of your ego. You want to be right on a
trade attitude. Risk 2% or less of your equity on any one trade.
Do this and you'll make
money with any system.
You will be in control, not the markets or the
Holy Grail Gizmo's associated with it. I wish everyone the best and
hope you don't have to go through what I did to become a consistent
trader. Cheer up,
because it can be done and it's worth the price when you have success.
Ron Schoemmel
P.S. - I've said my piece -
got it off my back and hopefully helped some. I'm not one for much
interaction and have made myself somewhat of a hermit with trading (It
helps to not talk with traders) to be successful. Too much B.S. gets
in the way. So I will leave you all to ponder my thoughts. I don't
care if people don't believe I'm right, because I know I am. I speak
with experience, conviction and compassion for those on this journey.
I will not be writing again and will now disappear into trading
obscurity to enjoy trading for a living!
P.O.Box 890648 Houston, TX 77289-0648