Our goal at MarketDeal is to connect you with the top traders and professionals in the industry and create an opportunity to learn from them. Yesterday’s event with Steven Primo was a good example of how we met this commitment, and we’ve already had some good feedback and requests for a video replay of his presentation on, “The Right Way To Trade Tops And Bottoms”.
For your convenience, we have prepared a brief summary of Steven’s key discussion points, and included a link to the video replay of his live presentation.
Steven began his presentation by stressing that there are two key points to remember as you absorb his message on the right way to trade tops and bottoms:
1. There is no such thing as an overbought or oversold condition in the market
2. Never try to pick tops and bottoms
As a former Trade Specialist and Market Maker, Steven has observed that trying to pick tops and bottoms is a consistent losing proposition. For every small move you may profit from, there is an even bigger move against you that tends to wipe out profits and more. This is why many traders either break even, or barely make any profits, while continuing to trade with the same technique. And for this reason, it is important to recognize your inconsistencies, and then target areas for improvement.
To this point, Steven also struggled with consistency early in his career, and achieved a breakthrough when a mentor of his pointed out that he was relying too much on outside conventional wisdom and information that was creating “too much noise”. He learned that by stripping away all unnecessary input, and simplifying his trading technique, that he became more focused and consistent. And for him, this was the key: forget trying to hit home-runs and strive for consistent performance!
Among the many strategies that Steven uses to trade the markets, one of his favorites is using stochastics and a 50 period moving average to spot high quality long entry signals in the stock, futures, and forex markets. This gets at the heart of understanding how to spot tops and bottoms before entering long in the market.
In this example, we see a daily trading chart of AAPL and how a stochastic oscillator shows potential areas to buy and at an oversold area ($520) and sell at an overbought area ($580). Conventional wisdom tells us that these are the best two signals using this technique.
This is how most traders would spot the bottom and the top on this move, and in this case realize a comfortable profit. However, as we continue to watch AAPL prices progress over time, we will see some real examples of where this entry technique was not as successful.
In the next example, we see a set up to go long at $540, $500, and $460. While the entry at $540 initially looks good, it then retraces into a sideways pattern, and many traders would be looking to add to their long position at $500 and $460. The net effect of these follow-on trades would be to wipe any gains from the initial trade at $520 and more.
This is a something that not only happened to Steven Primo on a regular basis, but also has plagued many other traders that have been using this technique to trade tops and bottoms. And, this is not only true in the stock market, but the Forex and Futures markets as well.
If the conventional wisdom does not lead to consistency – something has to change.
To start this change, Steve recommends that we get rid of the notion that a market is “oversold” or “overbought” and the resulting tendency to enter a counter trend trade. Instead, he advises that when we see tops and bottoms, that we should just “go with them”!
In our next example, lets continue to look at AAPL, but now Steve has added a 50 Period Simple Moving Average (50 SMA) to the chart. Using this additional tool, Steve now looks for two conditions to be met before considering a long entry in the market: (1) did the stochastic cross above its signal line, and (2) are prices above the 50 SMA? If the answer is “no” two either of these questions, then Steve would skip the long entry, and in this case avoid several losing trades:
When using this technique, the time frame and market will not matter, the only thing you need to have on your chart are a stochastic oscillator and a 50 SMA plotted. Then, before you pull the trigger on any trade, ask yourself where is price in relation to the 50 SMA?
In this final example, we see how this technique can help you maximize a profitable trade. Here we are examining possible long entry signals in the E-mini S&P 500 (ES) futures market. Conventional wisdom tells us that the circled areas are where the ES is in an “overbought condition” and that a long entry would be foolish. But since prices are above the 50 SMA, not only do each of the green arrows represent a good entry point, but as long as the stochastic remains above its signal line, and prices are above the 50 SMA, it might be a good idea to let the trade ride.
This summary has only scratched the surface of what Steve presented and to learn more and see additional examples of this better way to trade tops and bottoms, we recommend that you watch the replay of Steve’s presentation:
And in response to many questions about what exit strategies he likes to use and other observations onhow to look for solid oppotunities for long entries in markets, Steve has agreed to extended a very special offer on his recent 3-hour webinar entitled, “Secrets of a Stock Exchange Specialist”.
This special offer is packed with great information, knowledge, and experience on the following topics:
- All About Trading Edges
- The Wrong Indicators To Look At
- What Steven Primo Learned From Other Traders On The Floor
- How Simplicity Equals Consistency
- Systems vs Strategy
- Concepts #1 and #2
- Edge #1
- Edge #2
- The #1 Chart Pattern
- 3 Ways For Identifying The Trend
- Using Donchian Channels, Bollinger Bands, and The RSI In Your Trading
- Learn How To Be On The Right Side Of The Trade
- Learn When A Trend Has Changed Direction
- Learn When To Stay Out Of A Trade
- Position Trading
- Learn All Of The Rules Of Steven Primo’s Strategy #1
This is a special, limited time offer available only to TradingPub members and we recommend that you check it out here:
WATCH FULL CLASS WITH STEVEN PRIMO HERE: