One of the outset sets of skills aspiring physicians larn is diagnosis. You can't effectively care for an affliction until you lot clearly position it first. Similarly, you lot can't effectively merchandise a marketplace position unless you lot acquire an agreement of the marketplace position you're trading.
In the doctoring world, physicians run diverse tests on patients, from blood workups to checks on vital signs to imaging studies. These tests are their "indicators" of a patient's condition. From the results of these tests, physicians larn to dominion out sure enough problems as well as entertain the possibility of other ones.
The informed trader is non as well as then different. Indicators emphasized inward this blog, such equally relative book as well as NYSE TICK, assistance a trader dominion out sure enough possibilities (an upward trending market) as well as dominion inward other ones (a make market). From this "diagnosis" of the market, the trader tin plough over the sack brand inferences regarding the likelihood of hitting sure enough cost levels, such equally the prior day's average cost (pivot) or the electrical current day's volume-weighted average price.
If a physician takes a sick patient's blood pressure level as well as finds that it's normal, the physician doesn't complain that the "indicator"--blood pressure--"doesn't work". Rather, that information is used to infer that mayhap the affliction is non heart-related. Ruling out possibilities is simply equally of import to diagnosis equally ruling ones in. If a marketplace position is moving higher, but NYSE TICK is mixed, I don't conclude that TICK is unreliable. I know from yesteryear marketplace position studies that depression TICK rises are peculiarly vulnerable to reversal, as well as I start to query the likelihood that the electrical current ascension volition hold upwards a sustainable upward trend.
Notice i of my early on Twitter tweets from yesterday:
8:34 AM CT - Overnite depression represents initial downside target; watching for signs of make day, as well as then seeing how nosotros merchandise rel to opened upwards & vwap.
Just several minutes into the trading day, I'm seeing signs of mixed forcefulness inward the market, as well as then I'm entertaining the hypothesis of a make day. At this early on juncture, my hypothesis is simply similar a physician's tentative diagnosis that a patient mightiness stimulate got an ear infection based on the blueprint of presenting symptoms. That tentative diagnosis leads to farther tests (such equally examining the ear for signs of inflammation), simply equally a tentative hypothesis close the construction of the marketplace position solar daytime leads me to farther examine sure enough indicators (sector demeanour for mixed vs uniform strength; relative book increasing or decreasing) for signs of trending or reversal.
The challenge for the trader is non as well as then much i of making marketplace position predictions equally refining trading hypotheses equally marketplace position information unfold. The effective trading mentor models this reasoning process, but eventually needs to allow junior traders endeavour out their ain reasoning, amongst prompt review of enterprise as well as flawed reasoning. That is why audio mentoring has to occur during the trading process, simply equally effective preparation of physicians has to occur at the bedside or inward the clinic.
The intraday Twitter posts (free subscription) are my means of modeling my thinking close markets equally trading unfolds. Imagine, however, an interactive messaging environment, inward which students tin plough over the sack operate equally teams to diagnose markets as well as advise winning trades--just equally medical students rotate through dissimilar specialties equally teams as well as larn from i another. The challenge for mentoring is to plough one-way mechanisms of delivering information into effective, interactive platforms for usual seeing, doing, as well as teaching.
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