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THE CHAMPION BULL RIDER
Once the gate blasts open, the Champion Bull Rider senses only the movement of mighty Bull itself. The Bull Rider may anticipate,
but ultimately he must react to the signals of the Bull in order to stay atop and survive. Trading is very similar – the gate
swings open the moment we open a trade and place our capital at risk. The difference between Bull Riding and Trading is that
as Traders we must also learn to manage our emotions while still atop the Bull. You see, the market is designed to use your
best and worst attributes against you in order to extract your money! Are you successful in your career because you take risks? Are you an optimist? Do you sweat with fear at the thought of losing thousands of dollars when you open a trade and it immediately
moves against you? The most costly mistakes for Traders and Investors occur when we make impulsive decisions based upon our
emotions. In fact, this is the rule - not the exception.
Trading and Investing is a human endeavor, and humans are bound by human nature. It’s simply not possible for us to stop feeling while in a trade. In order to manage our deadly emotions and protect our capital we must trade with clearly defined rules. We must be certain that our trading decisions are based upon simple observation and discernment, applying technical analysis and trading rules with a proven history of consistent success. Here at TheGoldenBull.net, we will employ both traditional and cutting edge tools of Technical Analysis to study the past and present in order to gain insight, perspective, and greater market understanding uncover outstanding investment and profit opportunities for our subscribers – that is Analysis. However, here at TheGoldenBull.net, we Trade based upon clearly defined rules.
As Investors or Traders, all we have is the past and present to guide us. Therefore, we observe only "price action" to best position ourselves for the future. Of course, the future is unknown and impossible to foretell. It is not our goal to predict the future! Our goal is to deploy our capital for the future when risk is within acceptable limits, and under recognizable and preferred circumstances. Since the future is unknown, it is impossible to be correct on every trade, despite our best efforts. However, by sticking with clearly defined rules and proper risk management, over time the rewards will outweigh the risk.
No trading system is perfect for all market conditions. We will employ different momentum trading rules in a market that is trending than in a consolidating market. However, basic charting techniques are generally used to mark important changes in trend. Let's take a look at the Chart below to illustrate. Here, we employ an indicator called “MACD” and some simple trendlines to observe changes in trend. Beginning in September, we observe price surging higher throughout September, with the price bouncing off Trendline Support [green line]. However, by October buyers are running out of steam and prices begin to fall, breaking and closing below Trendline Support. The MACD indicator confirms the breakdown with a downward crossover, generating a SELL signal. As Traders, we would then be in cash or short – not long. Sellers immediately take over price action and drive price lower throughout October. Buyers try lifting the price several times but are met with selling pressure, creating Trendline Resistance [black line]. Finally, on November 9th, price bounces off of its 50-day EMA [moving avg], then breaks and closes above Trendline Resistance. The MACD confirms the breakout with an upward crossover, generating a BUY signal. Traders now go long or remain in cash - not short.
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