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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Chart Patterns: After the Buy
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Bulkowski's Farsighted vs Responsive Trading

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/11/2017
24,386 56.87 0.2%
10,371 -31.68 -0.3%
763 4.90 0.6%
6,875 35.00 0.5%
2,660 8.49 0.3%
YTD
23.4%
14.7%
15.6%
27.7%
18.8%
Tom's Targets    Overview: 11/30/2017
24,600 or 23,500 by 12/15/2017
9,900 or 10,500 by 12/15/2017
800 or 750 by 12/15/2017
7,100 or 6,700 by 12/15/2017
2,725 or 2,575 by 12/15/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

 

Lucky Lil

Basket Case Bob has a new girlfriend! Let me tell you about her. Lucky Lil is a successful lawyer that is ready for a change. She is a methodical thinker that plans every step and her farsighted style has served her well in her career. Now, she wants to model that success and apply it to trading, believing that a farsighted approach is best suited for her.

With $300,000 in the bank, she begins working on a business plan because she is starting a new business, the business of trading. During the day, she continues as a lawyer, but in her spare time, she works on her startup company. Once her business plan is completed, she starts to implement it.

She contacts several top traders and asks them for advice. "Which trading strategies work best?" "What resources will I need?" "How can I spend the least amount of time and get the most bang for my buck?" Her questions are numerous, but her patience runs deep.

The traders recommend the usual resources, such as books, seminars, and tapes. She compares the responses from each trader and learns their approach to trading. "Jeff's style works for me, but not Larry's." Like a hearty stew, she boils off the parts she dislikes and keeps what she expects will work for her, building an extensive library of resources and contacts in the process.

She hires a system designer to create a platform of hardware, software, and techniques to implement the trading strategies that her favorite traders suggested, using an approach that fits her style.

When that is done, she hires a trading coach to steer her through the mine fields encountered each day to minimize losses. The coach is there for technical assistance and for emotional support. When she stumbles, she wants a knowledgeable shoulder to cry on. When she succeeds, she wants someone there to share her success with and who encourages her to improve her trading skills.

Putting all of this in place took Lucky Lil 13 months of work and cost her dearly: $100,000, leaving her $200,000 to trade. But during the startup phase of her company, she still practiced as a lawyer and was able to earn $100,000. Now, she was ready to trade for a living.

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A picture of a praying mantis.

Basket Case Bob

Bob is unlike Lil in several ways. Lucky Lil is farsighted, carefully studying her options before taking the next step. Basket Case Bob is the guy sitting at a red light, engine revving, hands gripping the steering wheel, waiting for the light to change. Traffic does not move fast enough for Bob. He is responsive, not planning ahead, but handling situations as they occur.

Bob is very personable, and his people skills allowed him to earn a good living as a manufacturer's representative selling plumbing supplies. Although he likes meeting people, he dislikes the travel time, being stranded on the road, and the long boring hours spent alone in a car driving from one customer to the next. He yearns for a new life, a life as a successful trader.

With $200,000 saved, he decides to quit his job and begins trading from home full time. Whereas Lucky Lil spent months making plans, preparing, testing, and learning her trading skills, Bob is lazy. "Planning is a waste of time," he says. He is disorganized and hates details. With skills crafted over years of dealing with people, he understands supply and demand, fear and greed. He can see those emotions reflected in the charts he stares at each day.

He signed up with a full service broker and took every trade the man suggested. The man's title was as good as his skills: the trades made Bob broker. He lost half his money, $100,000, and then decided on a new approach.

He went hunting for an investment adviser and selected the man with the most polished delivery. "He's a salesman, and so am I," he said. "I understand him. One salesman would never cheat another." That belief cost him the other $100,000.

Looking back over the year it took him to burn though the $200,000, he decided that the solitary life of a trader was not for him. He needed other people to share his feelings. He enjoyed the company of others too much to spend countless hours each day, alone, starring at monitors. Besides, he was broke. He needed a job. He went back to sales.

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Randy Andy

Randy Andy is a farsighted trader wannabe. He followed the same preparation as Lucky Lil by interviewing top traders, gathering resources such as computers, software, and books, while keeping his day job. He spent countless hours researching trading setups, ones to make money, but also the physical layout of his trading office.

A year went by and he was still adjusting the monitors. When he had it down perfectly, he saw a picture of another trader with larger screens and decided that the layout he had just wouldn't do. He scrapped it all and went with a bank of larger monitors, starring at him like giant eyeballs.

After that, he started searching for a broker to handle his trades. Should he go with a full service broker or a discount shop? He couldn't decide. He listened to other traders, polled the audience in a chat room for suggestions, looked at recommendations from his favorite trading magazines. Another year went by.

Five years later, his office has been re-equipped with new computers, larger monitors, upgraded furniture with the best software that money can by. He is still shopping for a broker, after dumping the last five, still doing research on the best trading techniques, still pondering whether he wants to trade stocks, futures, or options. He hasn't made up his mind if day trading, swing trading, or position trading are right for him.

Randy Andy is a farsighted trader that has yet to trade. He uses the many choices of creating a startup business as an excuse not to move forward. He is using the planning process as a mechanism to avoid trading, to avoid taking risk, and to avoid making decisions.

Smooth Sally

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Friction between their trading styles caused heated arguments between Bob and Lil. He gave her the shove, and she gave him the finger, and the two went their separate ways.

Now, we find that Basket Case Bob has a new girl friend: Smooth Sally. He chose better this time because she is also a responsive trader.

Little bumps along the road of life, like a car accident, would not phase Sally. She is a cool player, letting things ebb and flow naturally. She lives day-by-day, not making long range plans. She knows what she likes and dislikes, has general goals, but no specific timeframe to achieve them. It's like she is going on a road trip by just pointing her car in the direction of the sun each morning and following wherever it leads.

When an opportunity presents itself that intrigues her, she pounces and focuses her energy on making the opportunity work for her.

What makes Smooth Sally different from Basket Case Bob is that she has the uncanny ability to sift through and discard the bad opportunities, the scams, and the bad trades. Bob just trades them all.

Being chatted up in a Chicago bar by a group of floor traders, she asked many interesting and penetrating questions. Just the quality of her questions impressed the men. When she said "I'd like to try that!" one of the other spontaneous and responsive traders said, "Sold!"

She started as a runner and impressed her coworkers immediately. She worked hard, being both fast and efficient. When she made a mistake, she admitted it and learned from it.

Several months later, a trader offered to train her as a broker.

A casual observer would say she has good luck. Those that know her well would say that luck had little to do with her success. It was her hard work and ability to sniff out a winning opportunity that made her successful. Perhaps that is what luck really is, the desire to keep pounding away until the breaks come.

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Trader Types

Farsighted traders are methodical, detail oriented, planning every stage of their trade. Responsive traders prefer to take what comes. They know a good trade when they see it. Which approach to trading, responsive or farsighted, better suits your style? Lucky Lil saved $300,000 and hired a trading coach for support, a programmer to build her trading systems, bought computers, software, and so on, spending $100,000 while still working as a lawyer.

Smooth Sally didn't have a plan because she didn't need one. When an opportunity presented itself, she jumped in and did the best she could, creating opportunities along the way.

Which type of trader are you?

If you are a farsighted trader, one that likes to plan ahead, then be sure to cover all possible contingencies. Reuse the trading plan so the planning process does not overwhelm you by taking too much time to create. Then follow the plan. Clear away any self doubts you may have and trade with confidence. Take each signal as it comes and trade it.

If you are a responsive trader, then learn to listen to the intuitive signals whispered to you in your mind. Learning to hear and trust those voices only comes from experience. Try to determine what works best for you. Make smart trading choices instead of taking every opportunity that comes along.

Both the farsighted and the responsive styles are valid approaches. I use a combination of both. I like to plan my trades but when the voice says sell, I do (well, sometimes). Time and time again, when I ignore that voice, I either cut my profits short or have a loss staring at me.

See Also

-- Thomas Bulkowski

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