Post 14 EWU Observations from a New Student

Hi Jody,

I feel like I’m really becoming able to spot all six of the trade setups. I have been practice trading every morning for two hours, during the last week and a half. That is after having absorbed so much information over the last two months. I’m seeing that each of my paper/demo trades are getting sharper. I find that simply trading for two hours every morning is the perfect start to the morning. It is setting a rhythm.

Now, I have a confession to make. I do have specific rules for the BO-3. Very specific. In fact, I’ve been known to repeat “a description of how to trade the BO-3 with Dave Tillery” over and over again in my office on the white board. And, lately, I’ve been having impromptu orations on the other setups, as well.

In my plans, I also have some very specific things that I expect of myself and at what rate I’ll take on new territory. But the plan is only a week old and it is already out of date. That’s fine. As long as I’m still learning, I have to change the plan consciously until I narrow in on every aspect of the plan. That will take some time as it is several pages long.

One of the statements in my plan regards what has to happen before trading real risk capital. Well, I looked at a trade setup this morning and I said “This is too good to put in Demo account!” I realized that I had reached a moment where the rules for when I trade real money are as arbitrary as a lot that is in my plan and needs adjusting. I was very certain of the setup. Not only that, I’m taking my trade off of the one-minute chart. I’m trading a PW on the one-minute! I’m really trading a BO-3, on the 15 Minute.

“Put me in coach!” I’m ready to play.

“All right, give the kid a bat. Don’t swing for the fences.”

So, I’m trading a 3xETF at $8ish / share. It was the end of wave 2 right at 61% retracement. It looked ripe for a wave-3 on the 15-minute. So, I went down to the 1-minute and there’s a Royal Semaphore. So, I made a limit buy, asking price to come back to my target area, with a tight stop. The entire move lasted an hour and 5 minutes. It moved up 0.74 from 8.01 to 8.75 or 9.2385%. That’s what I love about these 3xETFs! I was in the trade for 1 hour and 29 minutes. I was in at 8.11 and out at 8.60 after it started to pull back, which is 65% of the move, or 5.94%.

That’s a bigger winner than I would normally expect. The third wave extended. The wonderful thing is that I had the confidence to let it run and the wisdom to get out at what was the beginning of wave-4. It did pull back to the Tunnel at the close. I basically traded a long green candle on the hourly.

So, I feel that is evidence that I’m ready. I think I’d be willing to try to see if I could never lose any more on my portfolio than I made on my first trade! That would mean I would have to lose four straight trades to ever make that so, if I kept my risk constant. But, what if I used that as my guidepost? It has more symbolic meaning to me than an artificial raising of risk levels. Does raising my risk level put me at risk of losing all the gains since my original first winning trade? If it does, keep risk constant, if it doesn’t, raise it to where I’m comfortable. Those are the kind of changes that I need to make to my business plan. That has a lot more meaning to me. It’s like setting a stop on risk and letting it run.

So, there I was, trading a PW/FG/BO-1 on the dang one-minute chart.

But, I have to keep myself from getting too inflated over this. It is a really good feeling that I paid for half the course in one trade. But, I’m still some way away from being a true professional. I traded like one, today. Not a seasoned one but a green professional. There are some things I need to rehearse more. But I was very good in my execution, or at least I think I was. My entry was not as smooth as it should have been. I do feel like I crossed through a crucial threshold. I have the advantage that I have made hundreds of trades throughout my life, so I’m comfortable with that aspect of managing a trade and the emotions that come up as you place a trade.

As a side note, I keep a journal while I’m in a trade. At 27 minutes into the trade I wrote “I have no business being in this trade, really.” I had a lot of self-doubt. But I had the conviction that the Wavy Tunnel works. When I go back and review what was happening at that time. I got in 7 minutes too early, I withstood the trade going against me until we found the final Royal Semaphore. As I wrote that statement, price was still coming back off the low. That’s the emotion of the low. I was able to wrestle it to the ground. Of course a PW looks like a BO-3 from the other side. There’s always reason to doubt.

So, now it is on to Harmonics. I’m going to nail that Gartley. I’ll be giving classes in my office, soon.

-dave

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