Trade to Win - Proven Strategies to Make Money

c02 JWBT016-Busby September 30, 2008 13:33 Printer: TBD

Time Is Money 31

and the opportunity to execute a winning trade may be present. Therefore,

I look for trading opportunities at this time.

The last trade zone of the day comes when the exchanges are nearing

the end of their session. As the day winds down, volume and volatility tend

to increase. Some traders realize that they are on the losing team and de-

cide to cut their losses. Other traders are positioning themselves for the

late afternoon or evening. Others are simply exiting positions because they

are only “day traders” and always move to cash when the pit traders leave

the floor. Regardless of the rationale, volatility tends to increase as the

trading session draws to an end. Therefore, the time from 2:15PMuntil the

CME closes at 3:15PMcentral time tends to be a good time for day traders

in general and for me in particular.

Trade Zone 1 8:30–10:15AM*

Trade Zone 2 12:30–1:30AM

Trade Zone 3 2:15–2:45PM

∗All times are central time.

TIME TO STAY OUT

It is important to know when to enter the market, and it is equally impor-

tant to know when to stay out. In the 1920s, Jesse Livermore, the Great

Bear of Wall Street, studied the financial markets extensively. As a young

boy, he worked in a brokerage house and continuously wrote down stock

prices on a chalkboard. The handwritten chalk prices were traders’ ver-

sion of the current ticker tape. Watching price patterns, Livermore soon

understood the significance of timing when making successful trades. Day

traders are speculators, not investors. Livermore noted that, “Timing is ev-

erything to a speculator.” He continued to state the obvious, “It is never ‘if’

a stock is going to move. It is ‘when’ a stock is going to move and in which

direction—up, down, or sideways” (Jesse Livermore with added materials

by Richard Smitten,How to Trade in Stocks,Traders Press Inc., 2001). By

carefully watching time, I am better able to identify moments that are ripe

for profit taking. Richard Smitten recently passed away. I miss talking with

him about Jesse Livermore and about trading. Smitten once told me that

the basic principles of trading that worked 100 years ago for Livermore still

work today. After attending our school, Smitten commented that I brought

the theories of Livermore into the twenty-first century.