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Ask Barry: “Chat Rooms and Break Out Trading.”

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Here’s another question from the “Ask Barry” service.

This is a service where anyone can ask me a question about the market, technical analysis, trading, money management, etc.

You can use the form in the right column of this blog (scroll down a bit to find it). I personally respond to all questions by sending you an email, and some questions get posted in this blog.

Today’s question:

“I’ve traded for a few years actively and have not done well. I’ve joined a number or chatrooms that post great results but haven’t seen them during my time. I have noticed a change in intraday market setups the breakout and breakdowns are not easy to spot and when they do many times they reverse. Do you have any advice? Thank you.”

I’m with you brother. I’ve been in many, many chat rooms over the years and have yet to find one that I could follow with consistent profitability.

However, I did find a TREMENDOUS value in chat rooms. I learned that the best chat rooms to learn from are those that are free and that allow the users (not the moderators) to chat a lot.

These rooms are worth their weight in gold.

Here’s why:

I would just sit and listen (or watch their typing) and then compare what they were saying to how the charts looked. When you do this you are getting into the head of the loser, and that’s very valuable.

Not to be insulting, but the truth is that 95% of the users of those chat rooms are very poor traders and are definitely “losers” in their trading.

If you can listen to those people and, through repetition, learn how they read charts, it will help you to trade against them.

Also you want to watch out when you find yourself agreeing with them. That’s a great revelation for you because you can uncover your own “loser” thinking that way.

This may sound kind of silly, but I’m totally serious. I personally used this for 2 years as an exercise to improve my own trading and it really worked. When I watch a chart now I can almost “hear” what the losing traders are thinking at various points on the chart!

Regarding breakout trading … I’ve never been a big fan of it. One of my mentors taught me his method of breakout/down trading and it never felt right to me. So I completely abandoned 95% of what he taught me simply because it never made real sense to me and it didn’t fit my personal style and risk tolerance.

In my opinion, by the time a market breaks a level, you are late to the party. Most of the pros I know get in before levels are broken … and that’s certainly what I do.

Having said that, I have developed my own type of “breakout” trade that uses the expansion/contraction cycle along with cycles. But I only take it when I have at least 4-5 different energies aligned and even then I only risk 1-2 bars (which is all I risk on any trade).

I explain this trade in my later courses … sorry, but it’s too much to explain in a single letter like this.

Happy Trades,

Barry

Top Dog Hits Wall Street!

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Greetings Traders!

Just a quick note to let you know that I’m going to be in the Big Apple next week (July 2 – 6).

While I’m there I’m going to have a few extra hours to spare, so if you live in the area and would like some help with your trading …

I’m offering a few private sessions in the great NYC to any traders who would like to get together with me. These are designed to be one-on-one sessions (though I’ll meet with small groups as well) during which we can cover anything you’d like:

  • Go over some of your trades.
  • Talk about trading discipline and psychology.
  • Review your trade diary or help you get started with one.
  • Analyze any of the current markets.
  • Learn something new!

It’s wide open – anything you want – as long as it’s something I feel I can really help you with.

There is a cost, but it will be very minimal.

If interested, just send me an email at: barry@topdogtrading.com

Be sure to include your name, phone number and the best time to reach you. I’ll call you, we’ll talk about what you want to discuss, and then set a time and place to meet in the city that never sleeps.

Happy Trading,

Barry Burns
Top Dog Trading

The Russell Has Left the Building …

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For you day traders who like to trade the Russell 2000 futures contract (like I do), there was an important announcement today.

ICE (IntercontinentalExchange, Inc) announced today that it signed an exclusive agreement with Russell Investment Group to offer futures and options on futures on the company’s U.S. equity indexes.

ICE is the leading electronic energy marketplace and soft commodity exchange.

The Russell futures products currently trade on 2 other exchanges, and many day traders use the Russell futures for trading on the CME.

The transition from the other exchanges to the ICE will be completed no later than the end of August 2007.

The Russell futures and options on futures products will then be traded exclusively on the NYBOT (New York Board of Trade) which is ICE’s U.S. regulated futures exchange.

Read the full article from the ICE web site.

Read the Q&A pdf. document from the NYBOT.

Ask Barry: “How Should I Trade Crude Oil?

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Here’s another question from the “Ask Barry” service.

If you don’t already know, this is a service where anyone can ask me a question about the market, technical analysis, trading, money management, etc.

You can use the form in the right column of this blog (scroll down a bit to find it). I personally answer all questions.

Today’s question:

“How do you trade a volatile market like Crude Oil?”

Crude OilGood question. But tough to answer for 2 reasons:

  1. This question is too broad for such a vehicle such as “Ask Barry.” At the risk of sounding too promotional, I have a specific methodology I use for trading everything, and that would include Crude Oil. So to fully answer the question I’d have to teach you my whole method, which takes 6 videos in my Foundations Course #1.
  2. You didn’t mention the time frame you want to trade it – swing trading or day trading.

So I’ll use this opportunity to bring up another very important point. You talk about Crude Oil being a “volatile” market. I’d be curious to understand why you identify it as such.

Perhaps you’re day trading it.

Crude Oil may have a “reputation” for being volatile, but be vary leery of reputations in the market! Markets change, and just when everyone agrees that any given market has a certain characteristic … it changes.

Therefore never accept a label for any market based on what you hear experts saying on TV, or teachers telling you (including me) or you read in a paper, newsletter or magazine.

The only measure of a market’s characteristic must be an OBJECTIVELY MEASURED one, not anyone’s opinion.

Above is a daily chart of Crude Oil. How do we know if it is a volatile market?

Simple.

We add the volatility indicator to the chart. That gives an objective measurement.

As you can see, volatility is down tremendously on a relative basis. Therefore right now (and the markets continually change), Crude Oil is not a volatile market at all (on a daily chart).

Another example:

Several years ago I had been trading the Euro to the long side. I told many friends in my trading club about the amazing trend in the Euro that lasted for years and years. But others didn’t want to trade it. They stayed with the ES.

Then in December of 2004 several of them said they finally decided to get in on this never-ending up trend in the Euro.

Too late!

By the time the reputation of the Euro as a trending market finally caught on with everyone … the trend ended of course!

Sorry, but here’s the no-hype truth:

  • There are no “simple” answers to trading.
  • To make money trading requires learning a complete trading methodology from a professional.
  • Even after learning a valid trading method, you will still need to go through the school of “hard knocks” to learn from the mistakes of your own experience.
  • All of this takes a lot of time and money.
  • Therefore you better love trading!

That may sound quite daunting, and that’s because I want it to. It won’t sell many trading courses, but I’d rather you knew the truth before you decided if you’re willing to pay the real price of becoming a professional trader.

But there is good news:

If you have the financial and psychological ability to make it through the very steep learning curve, and you come out the other side … then the financial rewards can be staggering!