PART 1:

A funny thing happened at lunch on Saturday. Joining friends from St. Louis who for many years have traded in real estate, I was asked by their guests the usual, "So, what do you do?" Trying to answer so as not to send them running, I answered softly and slowly, "Well...actually...I trade futures and also do some coaching of traders using principles from psychoanalysis."

In studying a chart for any liquid instrument, traders will observe that prices usually move in a series of peaks and valleys. The direction of these peaks and valleys provide us with a lot of valuable information about price action and direction. They also help us in determining the direction of a trend and levels of support and resistance. These valleys and peaks create opportunities for traders to enter or get out of trades. Professional traders always like to buy at support and sell at resistance, since these trades will usually have a much higher probability of success.

The zebras have been buying up all copies of this hot-selling reality book. What a boost to be able to turn around the victim mentality that has beleaguered the zebra community for thousands of years. Hey, it might just work; after all, zebras outnumber lions.

Believe it or not, I spend most of my days “doing nothing”. Yes, there’s a lot to do for RatioTrading (meetings, business calls, etc) and I am always managing my trades accordingly, but in all reality, I really do spend a lot of my time doing nothing.

Yogi Berra had a way of stating the obvious when he said, "If you don’t know where you are going, you will wind up somewhere else."

However, obvious the importance of having a clear plan may be, many traders begin the trading day without any real plan.

Amateurs think trading is about finding the perfect

• Chart pattern
• Indicator
• Moving average
• Trading system
• Market guru

So where is the pot of gold? Look within.

Ancient argument: What determines success in trading?

1. A successful methodology
2. Psychology and discipline

Answer: BOTH!

The weekend edition of the WSJ included Zweig's column on fighting the herd mentality. In many ways it is good article...but it does what all articles and commentary seem to do... in the end it says "get rational." The problem with this is when you feel terrified it is extremely hard to use your analytical mind to overcome that.

Back when I started trading, barely anyone knew what trading was - at least in comparison to now. I mean in Chicago and NYC and a few other "exchange towns" there was certainly a group of people who both knew and profited widely. Nevertheless, before the internet and before broadband data speeds, both the opportunity to trade and the information on how to do it was not very easy to come by.

As traders we often look at the relationship between the movement in one index versus another. We use divergences in expected relationships between the price in futures markets and the cash market prices or between volume and price spikes. We do this in order to gain insight into what the changing relationship may be portending for the movement of the price in the next minute, hour or day. We all understand that it is the nature of the reciprocal action that tells us something about the probability of what happens next - the piece of info we need to take money from the price movement.