Millionaire TradersQ: When you buy dips, there’s always an enormous danger of
a retrace right back to negative territory after the bounce. How
do you manage your trades? Do you scale out of half, go to break
even? Do you ever allow winners to become losers again?
A: Sometimes. Of course, that’s never the plan and it depends
how far it goes. So if I’m just up a half percent, something that’s
almost down to the noise level, I won’t necessarily cash in. I am a
pattern trader. I’ll watch both the 15-minute chart and one-minute
chart, and I will also watch level two and start to get a feel for it. It
takes a lot of experience to do this, to get a feel for when the stock
is running out of momentum. Once they are quieting down and
people get a bit nervous, I basically want to get out immediately at
that point. But I do use scaling a lot, both in and out.
Q : Do you use any indicators to help you? Or is just pure
observation of price action?
A: Both. I do believe in a lot of indicators. If you’re in a trading
range, the stochastics work great. Also RSI. And I follow the moving
averages —the 5, 10, 20, and 100. I use that on a daily chart and
also use it on a five-minute chart. To find extreme oversold levels
I have found MoneyFlow works the best.
Q: So you use all those diagnostics to help you make your deci-
sion?
A: That is correct. But also experience seeing what works and
what doesn’t work and developing a feel for it. If the position starts
to make you feel uncomfortable, then to me that’s an indication
that your mind is picking up something that’s dangerous.
Q: When you are talking about feel, it sounds like your primary
diagnostic is the level two. You really watch price, you’ve obviously
watched action over and over, for thousands of hours.
A: That’s correct.